JPMorgan's cautious view on China's thermal power utilities is primarily due to the anticipated removal of the electricity price floor, which is expected to lead to further declines in on-grid electricity prices starting in 2027. This situation is likely to compress profit margins for the companies involved. Additionally, there is significant uncertainty regarding the government's plans to improve the capacity tariff mechanism, including its strength, timing of implementation, and whether it will be adequate to counterbalance the decline in basic electricity prices. Consequently, the earnings outlook for thermal power plants has become unfavorable, leading to downside risks for market earnings forecasts and dividend predictions.
