Investor Presentation_ China Energy and Batteries

Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the China Energy and Batteries sector, particularly the Energy Storage Systems (ESS) and PetroChina [1][3]. Core Insights and Arguments 1. Improved Economics for ESS: The economics of Energy Storage Systems are improving, with a new era of long-duration ESS anticipated. This is expected to enhance the attach rate and duration hours, making them more competitive with China's benchmark on-grid tariff [9][11]. 2. Arbitrage Opportunities: Renewable energy trading is creating arbitrage opportunities for ESS, particularly during periods of low solar and wind generation, which leads to spikes in power tariffs [15]. 3. Battery Degradation Impact: Battery degradation is a significant concern that could negatively affect the economics of ESS. Control over degradation is crucial for maintaining favorable economics [17][19]. 4. Forecast for ESS Deployment: The annual incremental deployment of ESS in China is projected to increase by 23% CAGR from 2025 to 2030 [26]. 5. PetroChina's Gas Business: PetroChina is positioned as a low-cost gas producer, with upstream costs maintained between Rmb0.7-0.9/cm (approximately US$3.1/mmbtu). This cost structure supports its role as a price-setter in the gas market [35][36]. 6. Gas Demand Growth: China's gas demand is expected to grow at a CAGR of 7-8% heading into 2030, driven by mandatory peak carbon targets [36]. 7. Gas Price Reform: The gas pricing scheme for PetroChina includes significant price hikes of 18.5% for residential and industrial users during peak seasons, with a shift towards more unregulated pricing [64]. 8. Retail Engagement Strategy: PetroChina aims to increase its retail exposure to 40% by 2035, which is expected to enhance margins [61]. Additional Important Insights 1. Deflationary Cycle for Gas Import Costs: The cost of imported gas is entering a deflationary cycle, which is expected to benefit PetroChina's margins [40][43]. 2. Sensitivity to Oil Prices: PetroChina's earnings per share (EPS) and dividend per share (DPS) are highly sensitive to fluctuations in oil prices, with projections indicating varying yields based on different Brent price scenarios [53]. 3. Battery Prices and Exports: The conference also touched on trends in battery prices and exports, highlighting the competitive landscape for battery manufacturers in China [74][78]. This summary encapsulates the key points discussed during the conference call, providing insights into the current state and future outlook of the energy and battery sectors in China, particularly focusing on the dynamics of ESS and PetroChina's strategic positioning.