Facing downward pressure on its performance, Xinjiang energy giant Tebian Electric Apparatus (600089.SH) has announced a significant investment plan of over 10 billion yuan. On March 31, Tebian Electric disclosed that its subsidiary, Tianchi Energy, will invest 17.04 billion yuan to construct a coal-to-natural gas project with an annual output of 2 billion cubic meters, drawing attention from the market.
According to a performance forecast released by Tebian Electric, the company’s operational outlook for 2024 appears bleak. It estimates that the net profit attributable to shareholders for 2024 will be between 3.9 billion and 4.3 billion yuan, representing a year-on-year decline of 59.81% to 63.55%. The net profit, excluding non-recurring gains and losses, is projected to be between 3.6 billion and 4.1 billion yuan, down 60.58% to 65.38% compared to the previous year.
Researcher Yuan Jingmei from China Research Institute explained in an interview that the decline in Tebian Electric’s performance is attributed to two main factors. First, the price of polysilicon has fallen below production costs and remains low, leading to significant losses in its polysilicon business. Second, the declining sales price of coal in the region has reduced profitability in its coal operations. Given this context, the investment in the coal-to-natural gas project can extend the industrial chain of the coal business, optimize its structure, and enhance the overall efficiency of coal utilization. It also aims to create new profit points, boost profitability, and increase industrial resilience.
The financial report indicates a downward trend in Tebian Electric’s net profit in recent years. In 2023, the company achieved revenue of 98.206 billion yuan, a year-on-year increase of 1.76%, while its net profit was 10.703 billion yuan, down 32.75% year-on-year. As it enters 2024, the challenges to the company’s performance have intensified. In the first three quarters, the company recorded revenue of 72.341 billion yuan, a 1.79% year-on-year decline, and a net profit of 4.297 billion yuan, down 54.17% year-on-year.
Yuan Jingmei pointed out that the losses in the polysilicon business are a crucial factor in this decline. Due to an imbalance in supply and demand along the photovoltaic industry chain, polysilicon prices have remained below production costs since April 2024, significantly impacting Tebian Electric’s overall performance. Furthermore, the drop in coal sales prices has also exacerbated the downward trend in profitability. Additionally, the company has made a provision for impairment of 1.474 billion yuan related to scrapped fixed assets in the polysilicon business and 675 million yuan for the impairment of assets at four solar power stations in Xinjiang and Gansu due to high curtailment rates and adjustments in electricity pricing.
On January 17, 2025, Tebian Electric announced that it expects a net profit attributable to shareholders for 2024 to be between 3.9 billion and 4.3 billion yuan, reflecting a decrease of 59.81% to 63.55% year-on-year, with net profit (excluding non-recurring items) projected between 3.6 billion and 4.1 billion yuan, down 60.58% to 65.38% year-on-year. The company attributed this expected decline primarily to the significant drop in polysilicon prices and coal sales prices, anticipating a total impairment provision of 2.149 billion yuan. The company aims to continue promoting innovation and cost control to achieve sustainable, high-quality development.
In light of the pressures on its performance, Tebian Electric has decided to increase its investment in the coal-to-natural gas project. On March 31, 2025, the company announced that its subsidiary, Tianchi Energy, will invest 17.04 billion yuan to establish a coal-to-natural gas project with an annual capacity of 2 billion cubic meters. As of the time of this report, efforts to reach Tebian Electric for comments had not yielded a response.
Tebian Electric noted that the Xinjiang Uyghur Autonomous Region has included the integrated construction of major coal bases such as Jundong and Hami in its 14th Five-Year Plan, promoting the development of a coal-to-oil and gas strategic base, and orderly advancing the modern coal chemical industry. The coal-to-gas project aligns with national and regional development strategies and is in an area encouraged for development by the government. Yuan Jingmei mentioned that Tebian Electric possesses abundant coal resources in the Jundong area, with reserves exceeding 12 billion tons and an approved production capacity of 74 million tons per year. This project can leverage its coal resource advantages for clean and efficient utilization, enhancing the value-added of coal.
The project is also consistent with the national plans for coal-to-oil and gas strategic base construction under the 14th Five-Year Plan and aligns with relevant plans in the Xinjiang region. It is expected to enhance the country’s self-sufficiency in oil and gas and ensure energy security. According to Yuan Jingmei, several coal-to-natural gas projects have already commenced operations in the country, including Datang Keqi Phase I and II, Xinjian Qinghua, Zheneng Xintian, and Inner Mongolia Huineng Phase I and II, with total capacities reaching several billion cubic meters, most of which are operating at full capacity and the overall industry profitability remains strong.
It is noteworthy that the coal-to-natural gas industry continues to expand rapidly this year. On March 22, the National Energy Group commenced the coal-to-natural gas project in Jundong with an annual capacity of 2 billion cubic meters in the Xinjiang Jundong Economic and Technological Development Zone. According to Yuan Jingmei, domestic coal-to-natural gas enterprises can currently be classified into three tiers based on their operational status. The first tier includes operational companies such as Datang Energy Chemical, Guanghui Energy, and Inner Mongolia Huineng. The second tier comprises companies under construction, such as Su New Energy and Shenhua Coal-to-Oil Chemical. The third tier includes proposed enterprises, such as Huaxing New Energy and Inner Mongolia Mining.
While the current level of competition in the industry is relatively low, there are many coal-to-gas projects in the planning stage in China. As these projects move forward and commence operations, industry competition is likely to intensify. The coal-to-natural gas project that Tebian Electric is investing in is planned for a three-year construction period, with production expected to commence in the fourth year at 80% of capacity and reach full production by the fifth year. The project is anticipated to convert 5.7974 million tons of raw coal annually, producing 2.05428 billion Nm³ of natural gas per year, of which 840 million Nm³ will be converted to liquefied natural gas (LNG) at 58267.2 tons per year, along with by-products such as coal tar, crude oil, benzene, and ammonium sulfate.
Yuan Jingmei believes that as the government places increasing emphasis on clean energy, coal-to-natural gas, as a vital component of clean energy, will receive more policy support and market attention. By 2029, the capacity is expected to exceed 10 billion cubic meters annually.
