According to the Zhitong Finance APP, Huayuan Securities released a research report stating that the collaboration between waste incineration power generation companies and IDC brings a win-win situation. Data centers can meet policy requirements for reducing energy consumption and mandating the use of green electricity, improving cash flow for waste incineration companies, and even increasing profits through waste heat reuse. The Jing-Jin-Ji hub, Yangtze River Delta hub, and Guangdong-Hong Kong-Macao Greater Bay Area hub have relatively scarce wind and water resources, and may choose biomass power generation (including waste incineration power generation) to meet green electricity supply demands. If waste incineration power generation companies provide power and cooling to IDC, while profits increase, the cash flow of the companies is expected to improve, reducing impairment risks and potentially bringing about a revaluation of the companies.
<h2>The main points of Huayuan Securities are as follows:</h2>
Event: Recently, the Longwan District People's Government signed a strategic cooperation agreement with Zhejiang Weiming Environmental Protection Co., Ltd. This strategic cooperation focuses on &#34;intelligent computing empowerment and green transformation,&#34; accelerating the deep integration of artificial intelligence and the environmental protection industry by building a system of &#34;one center, one laboratory, one benchmark, and multiple scenarios.&#34; Huayuan Securities believes that this cooperation is another practice of empowering intelligent computing for waste incineration companies with the support of local governments, following the Shanghai Pudong Environmental Dawn project.
Strong demand for data centers to reduce PUE and increase the proportion of green electricity
In July 2024, the National Development and Reform Commission released the &#34;Special Action Plan for the Green and Low-Carbon Development of Data Centers,&#34; proposing requirements to reduce PUE and mandating the use of green electricity: 1) Regarding PUE reduction, the document states that by the end of 2025, the average power usage effectiveness (PUE) of data centers nationwide should be reduced to below 1.5, and for newly built and renovated large and super-large data centers, the PUE should be below 1.25, while the PUE of national hub node data center projects must not exceed 1.2; 2) Regarding the use of green electricity, the renewable energy utilization rate of newly built data center projects should be increased year by year, guiding the collaborative layout of new data centers with renewable energy generation, with the goal that by the end of 2025, the proportion of green electricity in newly built national hub node data centers exceeds 80%.
Affected by the above policies, the difficulty in approving data center projects lies in energy consumption indicators, with national hub nodes facing greater pressure. Generally, over 40% of energy consumption in China's data centers is used for heat dissipation and cooling, leading to high cooling costs for companies. Currently, the main ways to reduce PUE are to improve cooling systems or optimize equipment and data center operation management.
The collaboration between waste incineration and IDC meets multiple advantages such as green electricity, reduced PUE, and stable power supply
Taking the Pudong Dawn Intelligent Computing Center project as an example, this project received approval for energy consumption indicators from the Shanghai Municipal Economic and Information Commission on May 15, 2023, and construction is scheduled to start in July 2024, with plans to be operational by October 2025. The project features include: 1) Direct supply of green electricity: The waste incineration power plant has a 2000 tons/day waste incineration project that directly supplies the intelligent computing center, avoiding electricity sale restrictions due to shared ownership; 2) Waste heat resource cooling: Utilizing waste heat resources such as steam and hot water, along with supporting lithium bromide units, and future introduction of LNG phase change cooling, significantly reducing PUE; 3) Proximity to load end: The project is located in Pudong New District, close to the computing power demand area, helping to reduce latency;
4) Stable Power Supply: Waste incineration power generation provides a stable power supply.
Waste incineration power generation is more suitable for regions such as the Yangtze River Delta and the Pearl River Delta (matching with national computing power hub nodes)
According to the planning layout of &#34;East Data West Calculation,&#34; among the 8 national computing power hub nodes, the Chengdu-Chongqing hub and Guizhou hub have abundant hydropower resources, while the Inner Mongolia hub, Gansu hub, and Ningxia hub have rich wind and solar resources. The Beijing-Tianjin-Hebei hub, Yangtze River Delta hub, and Guangdong-Hong Kong-Macao Greater Bay Area hub have relatively scarce wind and water resources, and may choose biomass power generation (including waste incineration power generation) to meet green electricity supply needs.
The business model shifts from ToG to ToB, and the cash flow of waste incineration power generation business is expected to improve, bringing value reassessment to enterprises
Historically, accounts receivable defaults have been a core factor affecting the cash flow of waste incineration power generation enterprises. The accounts receivable of waste incineration power generation enterprises mainly come from national subsidies, provincial subsidies, and overdue waste treatment fees. Taking China Everbright International as an example, as of the end of June 2024, the company had accounts receivable and notes amounting to 19.5 billion yuan, severely dragging down the company's cash flow. If waste incineration power generation enterprises provide power and cooling for IDC, while profitability increases, the cash flow of enterprises is expected to improve, reducing impairment risks and potentially bringing value reassessment to enterprises. Additionally, AIDC has demands for electricity and cooling, and besides waste incineration, heating companies and power companies also have cooperation potential.
Target Aspects
It is recommended to pay attention to Shaoneng Co., Ltd. (000601.SZ), Junxin Co., Ltd. (301109.SZ), Wangneng Environment (002034.SZ), Yingfeng Environment (000967.SZ), Yongxing Co., Ltd. (601033.SH), GRANDBLUE ENV (600323.SH), Sanfeng Environment (601827.SH), Jingneng Heat (000593.SZ), Lianmei Holdings (600167.SH), and CHANT GROUP (002616.SZ), among others.
Risk Warning
Policy advancement may fall short of expectations, and project implementation progress may be lower than expected

002616

601827

600323

Huayuan Securities released a research report stating that the collaborative cooperation between waste incineration power generation companies and IDC will lead to a reassessment of corporate value. Data centers meet policy requirements, reduce energy consumption, and mandate the use of green electricity, improving the cash flow of waste incineration companies and even increasing profits through waste heat reuse. This cooperation is another practice supported by local governments and aligns with the national requirements for the green and low-carbon development of data centers

Zhitong

CHANT GROUP

Sanfeng Environment

GRANDBLUE ENV

Environment Protection

SHAONENG

WANGNENG

EB ENVIRONMENT

INFORE ENVIRO

Green Electricity

Huayuan Securities: The synergy of waste incineration and IDC is expected to bring about a revaluation of corporate value