China’s state grid corporation has been one of the largest electricity companies. It is the largest of China’s two state-owned electric operators. But, being the largest company in china, it is not listed on the stock exchange. Isn’t this absurd? Well, after reading this article, you will know the reason why China’s State grid corporation stocks aren’t listed and also the company’s business model. Let’s check it out.
History Of China State Grid Corporation
China’s state grid corporation is one of the largest companies in the world. It is the biggest power transmission and distribution company in the world. The state grid corporation has its headquarters in Beijing. It is the world leader in investment in the power sector. The state grid corporation finances, constructs and also runs the grids for mainland China. It is one of the largest companies in the world. Also, it is the biggest power transmission and distribution company in the world. China’s state grid provides power to 1.1 billion people in different areas. It includes 26 provinces of China. In 2016/2017, the number of employees was 927,839 employees. As of February 7, 2022, the China state grid corporation’s current stock price is ¥19.47. Slowly and steadily the stock prices are also following the trend.
Journey And Growth
Does the question arise as to who started China’s state grid corporation? When did this corporation come into existence? Well, for that we need to dive deeper into their journey. China’s state grid came into existence on December 29, 2002. But the history started way back in 1986. China had decided to reform the country’s power sector in 1986. In the third and final stage i.e in 2002, the State Council of the People’s Republic of China decided to pass a law on this. They had constructed a plan so that reformation happens in the power sector. China state grid corporation got divided into two parts; five generation groups and four accessorial business companies.
Electrical shortages forced the government to implement power cuts in 2003, and this trend continued throughout the early 2000s. This resulted in 6.47 gigawatts generation capacity. In the early years, the State grid corporation noticed 1 trillion Yuan losses from 2002-2005. In January 2009, the State Grid Corporation of China completed the first 1,000-kilovolt current power line between Northern Shanxi and Central Hubei.
The Business Strategy of China's State Grid Corporation
The company’s business model has been pushing the economy of China to a greater extent. China’s State Grid Corporation is the world’s largest electric utility company. It is a state-owned company in china. Thus, it transmits and distributes electricity in China and the global market. It is the second-largest company in the world. Forbes has ranked State grid as 2nd largest company between the years 2016-2018. The business model of the state grid is as follows;
This is one of the main strategies of China’s state grid. State grid tries to transmit their energy to different countries. SGCC has tried to reach as many countries as possible. According to China’s Going Out policy, SGCC is expanding in various countries. These countries include Malaysia, the Philippines, Ethiopia, Brazil, Africa, etc. The goal of SGCC is to provide electricity to remote areas of Europe till Brazil. The SGCC has signed a loan contract of $1 billion USD. This contract says that they will construct a dam of 700 km in Ethiopia. Thus, this dam will get connected to the national grid. Therefore, the company’s this business model has also contributed lot to the economy.
Green power has been a plus point for China state grid corporation. SGCC has decided to increase the use of non-fossil fuels in the primary energy consumption. Thus, they assume it to increase to 20% by 2025 and 25% by 2030. The company does this through an increase in the use of wind, solar, and hydropower. However, the main aim of the State grid is to provide energy to as many people as they could. Thus, they are also working on a carbon neutralizing plan. Also, they are using solar power to reduce costs.
China’s state grid works for providing services to the people. It is a state-owned company. These state-owned companies have a primary aim of providing services rather than earning profit. Therefore, the government owns many companies in China. China has 109 companies on the Fortune Global 500 list, but only 15% of them are privately held. Chinese governments also have a huge stake in the company’s business model. Thus, it has boosted the state corporation of china’s stock prices.
SGCC is the largest utility company in the world, generating some 57% of the power generated in China. They are also the second-largest company in the world in terms of revenue, after Walmart. SGCC has a good team of researchers in their company. In 2011, they had applied for 5760 patents and now the patents number has increased to 21,055 patents in 2020. They are many advancements in the technology sector. Their one such patent includes a Random rolling scheduling method for power systems based on the Newton method. Others include Fire extinguishing systems for lithium batteries and other electronic devices. This has been an important strategy for the company’s business model.
Who Are The Competitors Of State Grid?
Now that you know a lot about China’s state grid company’s business model, let’s look at who all are the competitors of SGCC. The Competitors of SGCC are quite a few, but still, the competition is high. Let’s look at the competitors of China’s state grid.
China Petroleum & Chemical Corp
China Petroleum & Chemical Corp (CPCC) is a company that engages in the exploration and development of crude oil and natural gas. Thus, the State council started this company. Thus, they also operate in the export and import business. It is also known as Sinopec Limited. Sinopec got started in February 2000. They also got listed on the Shanghai stock exchange in June 2001. The revenue was basically reported as $305.2B.
China Southern Power Grid Co Ltd
China Southern Power Grid Co Ltd (CSPG) is a private company. State Council has started this company in 2002. When SGCC got started even CSPG got founded. CSPG operates the power grid business. The company basically invests in, builds, and manages power networks. They transmit energy to various power plants and that goes directly to the consumer. It has its headquarters in China. In 2020, the company had total revenue of 578 billion yuan. In 2018, they bagged three deals. The value of the deal then was $1467 million. But in 2020, they got just one deal. Therefore, the value of their deal was China Southern Power Grid may acquire a 10% Stake in Abu Dhabi National Energy.
CPFL Energia is another competitor of SGCC. They operate in many parts of energy generation. Thus, they also generate and distribute energy to plants. CPFL has a 13% market share in this segment. José Balbino de Siqueira and Manfredo Antônio da Costa started the CPFL in November 1912. But the interesting fact is that State grid has a 94.5% share in this company. Thus, State grid becomes the owner of the company in 2017. They are operating in an area of 208,300 km², with 9.6 million customers.
Recent Ventures And Future Plans
SGCC has acquired many countries in the past few years. The State Grid Corporation of China (SGCC) has 49% acquisition of Oman Electricity Transmission Company (OETC) on March 11, 2020. State-based Nama Group was the owner of the company. SGCC will use its expertise in the field of technology and grid management. Since 2008, SGCC has successively acquired stakes in firms in the Philippines i.e in NGCP, 40%. In Portugal, they have acquired 25% in REN. Thus, in Australia, they acquired 46.56% of ElectraNet, 60% of SGSPAA, and 19.9% of AusNet. Whereas in Hong Kong, they have HKEI, a 21% stake. In other countries like Italy (CDP Reti, 35%) and in Brazil (CPFL, nearly 85%). While in Greece, they have a 24% stake in IPTO and Oman i.e in OETC they have a 49% stake.
SGCC’s future plans include using OpenStack and software stored in the company. OpenStack is a set of software tools for building and managing cloud computing platforms for public and private clouds. They are also thinking to deploy more than 1000 nodes in each of the states it serves. SGCC expects to have over 50,000 nodes across the company within 5 years. Thus, it makes it the world’s largest production OpenStack environment for the electricity industry. On the software-defined storage front, SGCC intends to upgrade Ceph. Ceph is an open-source software storage platform that implements object storage on a single distributed computer cluster. It provides 3-in-1 interfaces for object, block, and file storage. Sage Weil created Ceph as part of his study. They also are thinking to implement a database cloud and improve the storage network’s quality of service. Thus, this company’s business model is spreading wide across.
Number Of Patents of China's State Grid Corporation
State Grid Corporation of China got founded in 2002 and Xin Baoan is the chairman of the company. As of October 2021, State Grid Corporation of China has a market cap of $19.365 billion. SGCC has 209009 patents in total, 129830 of which have basically granted. More than 66 percent of these 209009 patents are active. China has filed the most patents, followed by the United States of America and Europe, which seems reasonable given that China is the largest market for SGCC, with annual revenue of $0.42 trillion in 2020. These patents are part of 205607 distinct patent families. There are currently 139233 active patents out of a total of 209009 patents. There are 69776 inactive patents of SGCC worldwide.
As per Patent families, there are 67,996 inactive patents. In total there are 1,37,611 active patents of SGCC available. China’s state grid is one of the top companies to register their patents. In 2021, SGCC filed 5972 patents to the Patent office.
Shift Towards Carbon Neutrality
On March 1, 2021, the State Grid Corporation of China (State Grid) released an action plan for peaking carbon dioxide emissions and achieving carbon neutrality. They want to build clean energy plants all across China. According to the action plan, SGCC wants to create clean energy plants that will boost the construction of smart power grids across the country. Thus, it will increase cross-regional energy transmission. The company wants to build a global energy network. It will improve the main power grid in Northwest and Northeast China. And also speed up the construction of main power lines of the high-voltage alternative current (AC) projects in Southwest China’s Sichuan area. They also want to make it a safe and highly efficient energy plant. They also want to create and support power grids for wind and solar energy generation.
SGCC is trying to reduce carbon emissions and manage its capacity. China’s state grid has also launched various plans where they will use wind, solar, fire, water to create energy in their plants. The company will set up a full carbon emission management system. Also, they will develop emerging carbon businesses, and build green and low-carbon brands. Thus, this will reduce the carbon emissions in the country.
Stock Prices Of State Grid
You might be thinking, then why isn’t SGCC listed on the stock exchange? Well, no one knows. But, SGIC got listed in 1998. This is because SGIC has been a part of SGCC. State Grid Information & Communication (SGIC) got founded on Jan 5, 1997. For trading publicly, they listed SGIC on the Shanghai stock exchange. The State grid corporation of China’s stock price has been fluctuating very much in recent years. The current stock price of SGCC is ¥19.06. If we convert it into dollars, the price comes out to be $3. When the company got listed, the state grid corporation (SGIC) stock price was ¥4.0373 as of April 30, 1998. Slowly, the prices started rising high. It was on October 30, 2021, that the state grid corporation stock price reached ¥21.65.
The interesting part is that, during the covid 19, the prices weren’t affected much. But, the major fall was basically observed on December 31, 2020. The state grid corporation price was ¥13.24. In the past one month, the prices are dropping down massively.
Analysis And Interpretation Of The Company
The financials of China’s state grid corporation are doing well in the past few years. The revenue of SGCC as of February 2021, was $386,617.7million. There was 0.7% as compared to last year. Whereas the profits recorded were $5,580.4 million. Thus, there was a decrease of 30%. The number of assets was $666,088.5 million. While talking about the equity value, was $279,373.1 million. SGCC has planned to invest 501.2 billion yuan in power grid projects in 2022. This will boost the share prices of the company. Also, China’s state grid has switched to green power and they have been a partner of the Winter Olympics. These Winter Olympics are going to be held in China from 4-20 February 2022. Thus, this will empower the revenue streams for SGCC.
The State Grid Corporation of China, whose total assets reached $1.1 trillion in 2011, operates much like a state within a state. In the intervening years, the company has become ever more powerful, especially in the energy sector. In 2014, the State Grid Corporation of China was the fourth most profitable company in the world, according to the ranking of Fortune 500. Carbon Neutrality has added a lot of value to the company’s business model. china’s state grid has acquired many patents. The state grid corporation’s stocks are not so pretty stable. Along with that, they have also done investments in various companies globally. In the upcoming future, the SGCC will take on various projects and create a top position in the world. It has a bright future ahead of it and is continuing to grow.