Our less bullish stance since December remains out of consensus While the market seems confident of a sector earnings recovery, we think it will grow more cautious in terms of scale. 1Q09 results may improve from 4Q08, but the improvement from 1Q08 seems less obvious given still resilient coal prices and far worse utilization. Though IPPs are benefiting from two tariff hikes in 2008, they are still burdened by much higher interest expenses and depreciation. For FY09, we think it looks very difficult for IPP earnings to beat bullish market expectations and valuation is unattractive.

Coal price negotiation – stability requires more than just a contract

Too early to call a power demand rebound; not significant anyway

We still think sector risk/reward is not attractive; Sell Huaneng

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