Source: Fortune
Summary
China is investing heavily in its power grid to reduce reliance on imports and absorb more renewables. State-owned grid operators are issuing record amounts of bonds to finance growth, with yields near historic lows. The country aims to spend 5 trillion yuan on electricity networks over the next five years. The investments are part of a plan to ensure energy security and stability, amid disruptions in the Middle East. China’s grid operators, such as State Grid and Southern Power Grid, are set to spend nearly 1 trillion yuan this year, with investment expected to keep rising.
Our Reading
The numbers tell one story. China’s grid operators are on a bond-selling spree, with State Grid issuing a record 754.5 billion yuan of bonds domestically last year. The company’s average annual bond issuance could reach 1.2 to 1.4 trillion yuan over the next five years. State Grid’s robust balance sheets leave room for additional leverage, but questions remain over how the company will pay back its record debt loads. The rush to fund power infrastructure has allowed State Grid to regain its title as China’s largest bond issuer. The company’s investments highlight the central role of grids in Beijing’s strategy to move energy from remote western regions to industrial heartlands. China’s shift toward green energy is the right strategic move, but the path to market reforms remains unclear.
Author: Evan Null
