SDIC Power Holdings Sees 14.75% Drop in Q2 2026 Generation Despite 8.29% Rise in Tariffs

Hydropower Output Decline Leads to Overall Generation Drop in Q2

During April to June 2026, SDIC Power Holdings generated 32.451 billion kWh, marking a notable 14.75% year-on-year decline, with on-grid energy dropping 15.15% to 31.456 billion kWh. This sharp reduction was primarily due to diminished hydroelectric output at major hydropower plants. Specifically, the Yalong Hydropower Station in Sichuan experienced a 31.87% year-on-year generation decrease to 134.64 billion kWh, while the Xiaosanxia Hydropower Station in Gansu saw a 5.01% drop to 11.06 billion kWh. Overall, hydropower generation fell 28.22% to 161.59 billion kWh in Q2 2026.

The company linked these declines to unfavorable rainfall patterns reducing water inflows in the basins of these plants. Yalong Hydro and Xiaosanxia stations faced notably low water inflow during the quarter. This weather-driven challenge is significant for SDIC, given hydropower's substantial role in its generation mix. Conversely, the Dachaoshan Hydropower Station in Yunnan recorded a slight 0.31% year-on-year increase, benefiting from increased upstream water releases dedicated to power generation, highlighting complex interdependencies within China’s hydroelectric network.

Renewable Energy Growth Offsets Hydropower Weakness

Despite the steep drop in hydropower output in Q2 2026, SDIC’s renewable energy segment showed strong growth, partially offsetting overall generation declines. Wind power generation rose 6.35% year-on-year to 19.14 billion kWh, while solar power surged 37.62% to 24.57 billion kWh. Capacity additions during the quarter reflected this renewable focus, with 400,000 kW of new solar and 65,000 kW of wind capacity commissioned. This expansion aligns with the company’s strategic shift towards low-carbon energy and China’s broader energy transition goals.

The significant solar generation increase indicates multiple projects became operational during this period. Wind power growth was driven by successive commissioning of wind farms across SDIC’s operating regions. By the end of Q2 2026, SDIC controlled 47.66 GW of installed capacity: 21.30 GW hydropower, 13.07 GW thermal (including waste-to-energy), 8.39 GW solar, 4.21 GW wind, and 0.69 GW energy storage. This diversified portfolio enhances operational stability while capitalizing on renewable demand growth.

Tariff Increases in H1 2026 Reflect Marketing and Policy Advances

Despite generation challenges, SDIC achieved tariff improvements in the first half of 2026. The average on-grid tariff for H1 2026 was RMB 0.366/kWh, up 3.68% year-on-year. In Q2 alone, the average tariff reached RMB 0.379/kWh, an 8.29% increase year-over-year. These gains stemmed from enhanced electricity marketing and optimized trading strategies, alongside higher capacity payments following new coal-fired power capacity pricing policies in regions where SDIC operates thermal plants.

Capacity payment increases highlight policy recognition of thermal capacity’s role in grid stability. For investors, tariff improvements help offset volume declines, supporting revenue despite lower generation. However, tariff momentum could face pressure if market reforms prioritize competitive pricing or if coal capacity utilization improves, reducing scarcity value for thermal generation.

Thermal Power Shows Regional Variations and Project Impacts

SDIC’s thermal power generation displayed mixed results across regions in H1 2026. Total thermal generation reached 224.05 billion kWh, a slight 0.66% year-on-year increase, indicating relative stability amid broader challenges. The Meizhouwan Electric Power plant in Fujian saw a 16.36% decline to 52.20 billion kWh, mainly due to the handover of the Meizhouwan Phase I Build-Operate-Transfer (BOT) project at June 2025’s end, excluding it from current stats.

Conversely, Huaxia Power in Fujian grew 17.44% to 30.80 billion kWh, boosted by the July 2025 start of its No. 5 Unit. Guangxi’s SDIC Qinzhou Second Power surged 57.15% to 22.63 billion kWh, while Qinzhou Electric Power declined 6.22% to 41.09 billion kWh, reflecting regional dispatch differences. Guizhou’s SDIC Panjiang thermal operations rose 16.54%, supported by higher electricity consumption, outbound transmission, and participation in spot market trials. These regional disparities highlight the impact of provincial dispatch systems on plant utilization.

Installed Capacity Growth Focuses on Solar and Wind

In Q2 2026, SDIC prioritized renewable infrastructure, adding 465,000 kW of installed capacity—400,000 kW solar and 65,000 kW wind—demonstrating a clear strategic emphasis on variable renewables. This aligns with China’s energy sector trends and positions SDIC for long-term low-carbon growth. By quarter-end, total controlled capacity reached 47.66 GW, with hydropower at 21.30 GW, thermal at 13.07 GW, solar at 8.39 GW, wind at 4.21 GW, and energy storage at 0.69 GW.

Though energy storage represents just 1.4% of total capacity, it signals growing focus on grid flexibility. SDIC’s diverse asset base offers operational agility and multiple revenue streams amid China’s evolving electricity market. However, increasing reliance on renewables exposes the company to revenue volatility tied to wholesale energy prices, unlike thermal assets benefiting from capacity payments. Investors should monitor capital discipline and tariff realization on new renewable projects amid rising renewable penetration and potential pricing pressures.

Geographic and International Diversification Balances Portfolio

SDIC operates a geographically diversified portfolio across Chinese provinces and abroad. Within China, it holds significant hydroelectric assets in Sichuan and Yunnan, thermal plants in Tianjin, Guangxi, Fujian, and Guizhou, and expanding renewable resources across regions. The Yalong Hydropower Station is the largest single asset by capacity and generation, underscoring Sichuan’s strategic importance. Yunnan’s Dachaoshan benefits from regional water availability, while Guangxi’s thermal and renewable plants participate in unified balancing and emerging spot markets.

Internationally, SDIC’s C&G Environmental Protection facility in Thailand contributed 0.40 billion kWh in H1 2026, up 2.79% year-on-year. Though a small share of total generation, it provides geographic diversification and Southeast Asian market exposure. This multi-region, multi-technology portfolio mitigates weather-related risks, as seen in H1 2026 when hydropower weakness was partly offset by thermal and renewable growth. However, geographic diversity also adds operational complexity and exposure to varying regulatory and market environments.

H1 2026 Performance Demonstrates Resilience Amid Challenges

For January to June 2026, SDIC generated 70.358 billion kWh, an 8.70% year-on-year decline, with on-grid energy down 8.88% to 68.503 billion kWh. Hydropower fell 17.43% to 394.52 billion kWh, mainly due to a 20.01% drop at Yalong Hydro to 343.94 billion kWh, reflecting rainfall shortages. Thermal generation grew modestly by 0.66% to 224.05 billion kWh, while wind and solar expanded 6.54% and 37.47%, respectively.

The significant renewable growth combined with tariff gains shows SDIC’s ability to manage operational challenges and leverage favorable market conditions. Maintaining thermal growth and renewable capacity deployment indicates disciplined management. However, ongoing hydropower weakness and increased dependence on weather-sensitive renewables subject to wholesale pricing represent a notable shift in earnings risk that investors should monitor closely.

Policy Environment and Capacity Payments Support Tariff Gains

SDIC’s tariff improvements in H1 2026 reflect evolving Chinese electricity market policies recognizing the value of dispatchable and flexible capacity. The company highlighted higher capacity payments following new coal-fired power capacity pricing policies in regions with thermal plants. These payments acknowledge thermal generation’s essential grid stability role beyond energy delivery, providing compensation separate from energy-only pricing.

Capacity payments are crucial for SDIC’s thermal portfolio, which comprises 27% of installed capacity and supports grid reliability amid growing renewables. This policy framework may help sustain tariff floors and mitigate renewable oversupply pressures. However, capacity payment mechanisms remain subject to regulatory changes. Potential reforms, expanded renewable capacity, or shifts toward energy-only pricing could impact thermal asset economics. SDIC’s strategic positioning to benefit from these policies is key for long-term earnings stability.

Operational Risks and Forward-Looking Challenges

SDIC’s Q2 2026 results highlight operational risks warranting investor attention. Water availability is a critical vulnerability for hydropower assets, with rainfall deficits significantly limiting output. Climate variability remains an uncontrollable risk, though geographic diversification offers some mitigation. Upstream hydropower operations affect downstream performance, creating interdependencies that may restrict optimization. Regional dispatch policies, such as Guangxi’s unified balancing system, impose generation scheduling variability beyond company control.

The Meizhouwan Phase I BOT project handover illustrates project-specific risks from contractual transitions causing generation volatility. Renewable expansion introduces revenue variability tied to wholesale prices, potentially compressing margins if overcapacity develops. Thermal asset utilization depends on provincial dispatch and national policies, with risks of decline if coal phase-out accelerates. These challenges underscore SDIC’s earnings sensitivity to external factors including weather, regulatory shifts, and market competition.