Asia Utilities/Renewables

POWER & UTILITIES

EQUITY RESEARCH

FY11F earnings preview

February 27, 2012

Best year after us - take profit on defensive; look for recovery and policy-driven plays
Take profit on defensive names Asia utilities' FY11 results season kicked off last week by ASEAN countries. So far the results were stronger than expectations; however, we see that a challenging environment remains for 2012F amid a potential export-driven slowdown. Nevertheless, markets like HK, Indonesia, the Philippines, Thailand, Australia and New Zealand are defensive plays, in our view, given the attractive regulatory regimes with the fixed return on asset base and immediate fuel cost pass-through. However, the market is gradually taking on risk in anticipation of a recovery in 2H, in our view; this does not provide a positive backdrop for defensive utilities. Thus, potential underperformance of HK, Indonesia, the Philippines, Thailand, Australia and New Zealand utilities is likely for the rest of the year. We recommend that investors take profits in these markets. Key themes for 2012: utilities tariff reforms and climate change policy On the contrary, "utilities tariff reforms" in China and Korea will be a key topic for 2012 and we expect strong earnings recoveries in China IPP and Kepco amid rising tariffs, falling interest rates and lower commodity prices. The other big theme in Asia is "climate change policy"; we believe those high CO2 emission countries (eg, China and India) will strengthen their efforts to cap CO2 and energy intensities by introducing more favourable policies towards clean energy - natural gas and renewables. Therefore, we believe natural gas distributors, nuclear plays and wind farms should benefit on their moves to diversify from coal, while coal producers should face a slowing demand growth. In contrast to the market, we are optimistic on the development of Nuclear and third-generation technology in China. Despite the recent solar rally, we affirm that this sector is likely to take another year to consolidate and recover. Thus, we believe now is a good opportunity for investors to take profits on solar.
Research analysts AEJ Power & Utilities Ivan Lee, CFA - NIHK ivan.lee@nomura.com +852 2252 6213 ASEAN Power & Utilities Daniel Raats - NIHK daniel.raats@nomura.com +852 2252 2197 India Power & Utilities Anirudh Gangahar - NFASL anirudh.gangahar@nomura.com +91 22 4037 4516 Australia Power & Utilities David Fraser - NAL david.fraser@nomura.com +61 2 8062 8418

Korea Power & Utilities Keith Nam - NFIK keith.nam@nomura.com +82 2 3783 2304 China Power & Utilities Joseph Lam, CFA - NIHK joseph.lam@nomura.com +852 2252 2106 Alan Hon - NIHK alan.hon@nomura.com +852 2252 2193 Asia Solar Nitin Kumar - NSL nitin.kumar@nomura.com +65 6433 6967

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.

Nomura | Asia Utilities/Renewables

February 27, 2012

Stocks for action

Fig. 1: Model Portfolio
Company Ticker Rating Price target Price 10 P/E (x) 11F 12F 10 P/B (x) 11F 12F Yield (%) 10 11F 12F (Local $) (Local $) Top Buys China Coal Energy CPID Huaneng Power China Resources Gas BJ Enterprises Shanghai Electric* Beijing Enterprises Water Perusahaan Gas Negara* Glow NTPC* Power Grid* Top Sells China Gas Xinjiang Goldwind Canadian Solar* JA Solar LDK Solar JSW Energy* Reliance Power* Meralco 384 HK 2208 HK CSIQ US JASO US LDK US JSW IN RPWR IN MER PM Neutral Reduce Neutral Neutral Reduce Reduce Reduce Reduce 3.32 3.50 3.40 2.00 2.60 65.00 136.00 134.10 3.70 5.12 4.02 1.94 5.97 63.05 119.15 269.00 18.2 4.4 1.8 1.2 2.7 13.9 41.8 20.1 30.7 12.6 na 10.2 na 12.3 39.3 16.1 18.5 15.2 na na na 7.3 34.6 15.9 3.0 0.8 0.3 0.3 0.8 2.2 2.0 4.7 2.1 0.8 0.3 0.3 0.6 1.8 1.9 3.9 1.8 0.8 0.4 0.4 0.7 1.5 1.8 3.4 0.4 9.1 na na na 1.4 na 1.5 0.6 3.2 na na na na na 2.2 0.7 2.6 na na na na na 2.4 1898 HK 2380 HK 902 HK 1193 HK 392 HK 2727 HK 371 HK PGAS IJ GLOW TB NTPC IN PWGR IN Buy Buy Buy Buy Buy Buy Buy Buy Neutral Buy Buy 12.25 2.97 6.37 14.46 58.60 4.70 3.00 3,900 62.00 206.00 120.00 10.04 1.95 4.94 11.20 48.55 4.25 2.04 3,600 54.00 183.70 114.30 15.2 12.5 15.7 22.1 21.8 16.5 16.0 12.7 17.5 19.0 22.5 10.2 14.6 32.7 18.4 19.3 13.3 18.6 14.7 17.3 17.1 19.6 8.5 6.2 8.1 16.0 16.4 11.9 14.4 14.3 10.4 16.7 17.6 1.5 0.7 1.1 3.6 1.6 1.7 2.4 6.3 2.3 2.4 3.0 1.3 0.6 1.1 3.1 1.5 1.5 1.7 5.2 2.2 2.2 2.5 1.2 0.6 0.9 2.7 1.4 1.4 1.5 4.6 1.9 2.1 2.3 1.8 2.7 4.7 0.7 1.4 1.8 na 4.3 3.4 2.4 1.5 2.6 2.7 1.6 1.1 1.6 2.3 na 4.7 3.6 2.4 1.8 3.1 6.1 6.2 1.2 1.9 2.5 na 4.3 4.1 2.5 2.1

Note: Ratings and Price targets are as of the date of the most recently published report (http://www.Nomura.com) rather than the date of this document. Priced as of 24-Feb-12 market close. Complete record on request. For changes in the portfolio over time, see http://go.nomuranow.com/research/globalresearchportal/getpub.aspx?pid=497004 Source: Bloomberg, Nomura research Note:* PT under review

Nomura | Asia Utilities/Renewables

February 27, 2012

FY11 earnings preview

Fig. 2: Upcoming results announcements
Ticker TSL US AGK AU 2 HK JASO US 967 HK YGE US PGAS IJ EDC PM 6 HK CSIQ US STP US 1038 HK 1193 HK 3800 HK 6244 TT 1083 HK 1133 HK 3 HK 836 HK 270 HK LDK US 902 HK 1065 HK 2380 HK 658 HK 2208 HK 2727 HK 1171 HK 991 HK 1088 HK 916 HK 2688 HK 757 HK 1071 HK 1898 HK 371 HK 1072 HK 392 HK 1393 HK 639 HK 3452 TT Com pany Trina Solar AGK AU equity CLP Holdings JA Solar Sound Global Ltd Yingli Green Perusahaan Gas Energy Development Pow er Assets Holdings Ltd. Canadian Solar Suntech CKI China Resources GCL Poly Motech Industries Tow ngas China Harbin Pow er Hong Kong & China Gas China Resources Guangdong Investment LDK Huaneng Pow er Intl Tianjin Capital China Pow er Intl China High Speed Xinjiang Goldw ind Shanghai Electric Yanzhou Coal Mining Datang Intl China Shenhua Energy China Longyuan ENN Energy Solargiga Huadian Pow er Intl China Coal Energy Beijing Enterprises Dongfang Electric Beijing Enterprises Hidili Industry Shougang Fushan E-Ton Solar Tech Reporting date 2/23/2012 2/24/2012 2/27/2012 24 to 29 Feb 2/28/2012 2/29/2012 March Early March 3/7/2012 3/7/2012 3/8/2012 3/8/2012 3/13/2012 10 to 15 March 12 to 15 March 3/16/2012 3/16/2012 3/19/2012 3/19/2012 3/19/2012 13 to 23 March 3/20/2012 3/22/2012 3/23/2012 3/23/2012 3/23/2012 3/23/2012 3/24/2012 3/26/2012 3/26/2012 3/26/2012 3/27/2012 3/28/2012* 3/28/2012 3/28/2012 3/29/2012 3/29/2012 3/30/2012 End of March End of March 4/20/2012* Period 4Q11 1H12 FY11 4Q11 FY11 4Q11 FY11 FY11 FY11 4Q11 4Q11 FY11 FY11 2H11 4Q11 FY11 FY11 FY11 FY11 FY11 4Q11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 2H11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 4Q11

Note: *Bloomberg estimates Source: Nomura research

Nomura | Asia Utilities/Renewables

February 27, 2012

Fig. 3: Reporting dates and forecasts of upcoming results for Asia ex-Japan stocks
Company Ticker Reporting currency Rating Price Target (Local $) 57.3 65.2 16.5 38.6 2.88 6.37 2.31 2.97 17.8 38.1 12.3 17.1 6.11 5.27 2.20 3.40 7.00 3.40 2.60 2.00 1.10 2.50 3.90 5.30 2.40 3.00 1.00 4.40 1.80 29.1 4.16 14.5 3.32 58.6 4.69 7.40 3.50 4.70 30.5 9.40 35,000 52,000 37.0 39.0 4Q11 4Q11 91 -154 -32 5918* NM NM NM -14% 0.00 0.00 0.00 168 Reporting Est. Net Profit for the period period (Local $mn) 8,541 9,648 5,295 7,466 7,738 1,588 1,687 103 624 4,873 1,775 45,675 10,391 9,042 826 2,508 13,688 -58 -18 -31 -190 -39 -10 256 1,255 146 2,558 723 419 253 988 1,345 543 1,190 2,939 3,008 730 2,698 876 1,435 3,269 3,174 1,015 2,486 y-y (%) 17% -4% 9% 48% 17% -38% -50% -39% -6% -1% -27% 20% 39% 26% 23% 25% 27% NM NM NM NM NM NM 48% -61% NM 5.7% 41% 45% -7% 21% 32% 46% 71% 5% 77% -47% 49% -62% -20% 17% 23% -1% 13% Est. DPS for the period (Local $) 2.20 2.48 0.45 1.66 1.70 0.04 0.07 0.00 0.04 0.27 0.08 0.92 0.21 0.54 0.07 0.03 0.35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.09 0.00 0.07 0.10 0.07 0.32 0.04 0.10 0.53 0.50 0.14 0.05 0.13 0.11 0.08 0.16 0.14 0.13 Announcement date Management Bloomberg Power Assets Holdings Ltd. 6 HK CLP Holdings 2 HK Hong Kong & China Gas 3 HK CKI 1038 HK Hong Kong utilities average Datang Intl 991 HK Huaneng Power Intl 902 HK Huadian Power Intl 1071 HK China Power Intl 2380 HK China Resources Power 836 HK China power average China Shenhua Energy 1088 HK China Coal Energy 1898 HK Yanzhou Coal Mining 1171 HK Hidili Industry 1393 HK Shougang Fushan 639 HK China coal average Suntech STP US Canadian Solar CSIQ US Trina Solar TSL US Yingli Green YGE US LDK LDK US JA Solar JASO US Solargiga 757 HK GCL Poly 3800 HK China solar average China Everbright 257 HK Guangdong Investment 270 HK China Water Affairs 855 HK Beijing Enterprises Water 371 HK Hyflux Limited HYF SP Sound Global Ltd 967 HK Tianjin Capital 1065 HK China water average ENN Energy 2688 HK Towngas China 1083 HK China Resources Gas 1193 HK China Gas 384 HK Beijing Enterprises 392 HK China gas average China High Speed 658 HK China Longyuan 916 HK Xinjiang Goldwind 2208 HK China wind average Shanghai Electric 2727 HK Dongfang Electric 1072 HK Harbin Power 1133 HK China equipment average Korea Electric Power 015760 KS Korea Gas 036460 KS Korea utilities average E-Ton Solar Tech 3452 TT Motech Industries 6244 TT Taiwan solar average Indonesia Perusahaan Gas PGAS IJ Glow GLOW TB Electricity Generating EGCO TB Ratchaburi Generating RATCH TB Thailand power average Tenaga Nasional TNB MK YTLP YTLP MK Malaysia utilities average Philippines Energy Development EDC PM Adani Power ADANI IN JSW Energy JSW IN Lanco Infratech LANCI In NTPC NTPC IN PGCIL PWGR IN Reliance Power RPWR IN India utilities average India coal Coal India COAL IN Australia AGK AU equity AGK AU HKD Buy HKD Neutral HKD Reduce HKD Neutral CNY CNY CNY CNY HKD Neutral Buy Buy Buy Buy FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 4Q11 4Q11 4Q11 4Q11 4Q11 4Q11 2H11 2H11 3/7/2012 2/27/2012 3/19/2012 3/8/2012 3/26/2012 3/20/2012 3/28/2012 3/23/2012 3/19/2012 3/26/2012 3/28/2012 3/24/2012 End of March End of March 3/8/2012 3/7/2012 2/23/2012 2/29/2012 13 to 23 March 24 to 29 Feb NA 10 to 15 March 3/7/2012 2/27/2012 3/15/2012 3/8/2012 3/28/2012 3/29/2012 3/30/2012 3/30/2012 3/19/2012 3/2/2012 4/12/2012 3/27/2012 3/29/2012 3/29/2012 3/8/2012 3/9/2012 2/23/2012 2/17/2012 3/16/2012 2/22/2012 3/28/2012 3/19/2012 FY11 Net Profit Nomura (Local $mn) 8,541 9,648 5,295 7,466 1,588 1,687 103 624 4,873 45,675 10,391 9,042 826 2,508 -140 -22 -3 537 -10 7 315 4,805 Consensus (Local $mn) 8,928 9,787 5,851 7,674 1,713 1,681 -112 577 4,909 46,127 10,274 8,846 668 2,224 %diff. -4% -1% -10% -3% -7% 0% NM 8% -1% -1% 1% 2% 24% 13% (+, -, inline) In line + In line In line In line + In line In line + + In line In line + In line In line Likely earnings surprise

CNY Neutral CNY Buy CNY Reduce CNY Neutral HKD Buy USD Neutral USD Neutral USD Buy CNY Neutral USD Reduce USD Neutral CNY Reduce HKD Neutral HKD Buy HKD Neutral HKD Neutral HKD Buy SGD Reduce CNY Buy CNY Reduce CNY HKD HKD HKD HKD Buy Neutral Buy Neutral Buy

-267 -48% -39 -43% -13 -76% 18 NM -114 -91% -242 -103% 254 24% 5,113 -6%

FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11

Reported 3/19/2012 4/2/2012 March Y/E 3/29/2012 4/2/2012 Reported 2/28/2012 3/5/2012 3/22/2012 3/26/2012 3/27/2012 3/26/2012 3/16/2012 3/16/2012 3/13/2012 3/16/2012 March Y/E 3/30/2012 4/2/2012 3/23/2012 3/26/2012 3/23/2012 3/23/2012 3/29/2012 3/16/2012 Reported Reported NA 12 to 15 March 2012 4/20/2012 3/15/2012 3/30/2012 3/15/2012 3/27/2012 3/26/2012 3/30/2012 3/20/2012

2,558 723 419 253 1,345 543 1,190 2,939 730 2,698 876 3,269 3,174 1,015

2,659 722 408 276 1,275 564 1,141 2,907 780 2,423 803 3,174 3,127 1,088

-4% 0% 3% -8% 5% -4% 4% 1% -6% 11% 9% 3% 2% -7%

In line In line In line In line In line In line In line In line In line -

CNY Neutral CNY Buy CNY Reduce CNY CNY CNY KRW KRW Buy Buy Neutral Buy Buy

TWD Reduce TWD Reduce

433 -329

433 -875

0% -62%

IDR THB THB THB MYR MYR

Buy Neutral Buy Buy Neutral Neutral

3,900 62.0 110 41.0 6.60 2.28

FY11

March 3/30/2012 Reported Reported Reported Reported Reported

5918*

6410*

-8%

PHP Buy INR Neutral INR Reduce INR Buy INR Buy INR Buy INR Reduce

7.20 115 65.0 30.0 206 120 136

FY11

6,633

-8%

0.11

Early March 3/22/2012 March Y/E March Y/E March Y/E March Y/E March Y/E March Y/E

6,633

4,609

44%

INR AUD

Buy Buy

398 17.5 1H12 235 4% 0.30

March Y/E 2/24/2012 2/24/2012 482 487 -1% +

Notes: *Amount in bn units Source: Bloomberg, company data, Nomura estimates

Nomura | Asia Utilities/Renewables

February 27, 2012

Hong Kong utilities: Strong 2011 driven by overseas acquisitions, upcoming risk on HK SOC earnings
HK utilities outperformed the market significantly in 1H11 (except HKCG), due to the flight to defensive names as a favourable regulatory regime (guaranteed 10% ROA) allows the names to sail against macro headwinds such as rising interest rates, fuel costs and inflation. The weakening USD also supports overseas earnings. However, they have started to underperform since Dec 2011 when the debate on electricity tariff hikes in HK became intensified and investors started to become aware of the risk of their HK earnings (a potential lower capex for 2014-18 and changes on scheme of control (SOC) return post 2018 both of them will be discussed from 2013, and we expect increasing public pressure from this year). We expect the utilities to post strong results for 2011 driven by overseas acquisitions, especially by our favoured companies PAH and CKI. However, we expect momentum to slow and they may underperform the market from 2012 as CLP, PAH and CKI have already attained our price targets, valuations becoming stretched and increasing risks on their HK earnings which may induce a de-rating given HK still accounts for more than 40% of their total earnings. As well, the market is gradually taking on risk on expectations of a recovery in 2H11, which does not provide a positive backdrop, in our view. This is unless they can maintain their acquisition pace, however, after a busy 2011, we believe they should take a rest this year to digest and repair their balance sheets. Meanwhile, we will be watching HKCG, as its upstream new energy business is expected to report a first-time FY profit in 2011 results.

China IPPs: A turnaround story in 2012F

China IPPs experienced a significant earnings decline in 2011, by -0.6 to -49.6%, per our estimates, due to the rising fuel cost (spot coal price up 10.2% and blended contract coal price up 3% in 2011) and interest rate hikes (up 75bps in 2011), which was partially offset by a 9.7% tariff hike announced in 2011 (with 6.5% granted effective on 1 Dec 2011). In 2012F, we expect IPPs earnings to be more than doubled, based on: 1) The full year impact of the 9.7% tariff hike announced in 2011; together with another potential tariff hike of 5% likely to occur in July 2012 due to lowering CPI, current low black spread and potential utilities price reform, in our view; 2) Unit fuel cost to change slightly (-1.4% to +4.9%) due to a 4% decline in spot coal price and a 6.2% increase in blended contract price in 2012F; 3) An interest rate decline of 25bps in 1Q12F; and 4) A stable utilization rate and 8.1% growth in installed capacity for 2012F. Overall, we expect tariff hikes to be a multi-year theme due to low inflation and Beijings target to implement tariff reform by 2014-15F. With power tariff reform and fuel cost relief, we prefer Huaneng and CPID as our top Buys, given Huanengs traditional coal-fired IPP nature and CPIDs bigger leverage to tariff hikes and recovery in hydropower generation in 2012F.

China coal: Strong earnings growth became a history

Given average spot coal price rose 10% in 2011, despite key contract price was frozen, coal companies are expected to report robust earnings growth of 20-39% for 2011, with highest forecast EPS growth from China Coal (+39%), followed by Yanzhou (+26%) and Shenhua (+20%). In 2012, we expect average Chinese spot coal price to fall by 4% and key contract price to rise by 5%. This should put the coal companies ASP to remain flat for 2012F. This, together with a likely less robust production and volume sales growth for 2012 due to slowing demand growth for coal as a result of economic slowdown and increasing power generation from non-coal fired alternatives, as well as a 5-6% rise in production costs. We expect sector earnings to rise by a slower 13% for 2012F (vs 28% for 2011F). Thus, we have turned Neutral on the sector and would only prefer China Coal, given less exposure on spot and high visibility on production growth. We expect Shenhua to be range-bound between HK$32-38, while we expect Yanzhou to hit HK$17.10 again this year.

Nomura | Asia Utilities/Renewables

February 27, 2012

Asia solar: LDK US (Reduce); 6244 TT (Reduce)

Solar stock prices have outperformed the market YTD-12F on the back of rush orders from Germany and the US in 4Q11F as developers looked to lock in projects before subsidy changes from Jan-12. However, the sharp decline in ASPs through 4Q11 will see most solar companies continuing to report losses despite demand growth. While channel inventories declined in 4Q11, high utilizations currently could lead to further inventory escalation in 1H12. Furthermore, macroeconomic concerns remain, coupled with the expected subsidy cuts in Germany from April-12F and the US ITC investigation overhang. Top Reduces LDK Solar (LDK US); and Motech (6244 TT) LDK Solar: We remain concerned about LDKs liquidity issues with its net debt to equity at 227.1% in 3Q11. We also remain concerned on cost structure improvements coming in slower than expected, potential sharp market share loss in the wafer business to GCL and weak end-market demand likely hurting module sales. As such, we see rapid deterioration in the company's financial health with LDK potentially coming under pressure. Motech: Motech has a healthy balance sheet and strong backing from TSMC (which has a 20% stake in the company). That said, we do not believe Motech has any meaningful advantages in terms of costs or business model vs. its China-based peers. We see losses continuing through FY12~13F and view Motech as overpriced compared to its peer group.

China water: Prefer quality play in light of slower growth than before
In our view, key investment themes in 2012F for the water and environmental sector are: (1) As wastewater treatment (WWT) build-out during 11-15F (42mn tons/day) is slower than 06-10 (68mn tons/day), focus on WWT plays with competitive edge on: a) rural development; b) upgrade projects; c) being an industry leader in the consolidating space; (2) Avoid tap water as privatisation is slowing as profitability of state-own water utilities improves due to continuous tariff hike; (3) The number of waste-to-energy (WTE) plants is expected to more than double by 2015F; (4) Non-traditional water source (Recyclewater and desalination) are expected to experience stronger-than-industry capacity growth and; (5) Focus on quality plays with a strong track record in delivering capacity growth. In light of the above, Beijing Enterprises Water (371 HK, Buy) remains our top pick due to its (1) exposure to the potential desalination development in Caofeidian; (2) its strong project pipeline secures earnings growth ahead; (3) being a clear industry leader in WWT which has already started getting projects through acquisition during 11 and (4) good track record in capacity growth. We also like China Everbright (257 HK, Buy) and Sound Global (967 HK, Buy), largely due to their respective exposure to WTE and rural WWT. We expect strong (y-y growth) FY11 results on our preferred plays, Beijing Enterprises Water and Sound Global, largely due to capacity expansion and increasing projects execution. For China Everbright, FY11 results were reported earlier in February, which came in at HKD801mn, up 30% y-y.

China gas: Strong volume growth story continues

Solid 2011 results are expected, given strong gas volume growth across the sector, benefiting from strong gas demand with rising gas supply in China. In 2012, we look for the strong volume growth story to continue, with a possibility for gas cost pass-through to resume, given an expected downward trend of CPI in 1H12. Heading to 2012, our top sector pick remains CR Gas and Beijing Enterprises. For CR Gas, with the visible growth opportunities from the parents asset injection and potential new projects from local governments (such as Shanghai, Guangzhou, Dalian, Hefei, Lanzhou and Changchun), we see the stock to continue its outperformance vs market in 2012. For Beijing Enterprises, we believe it is a recovery story in the sector, with

Nomura | Asia Utilities/Renewables

February 27, 2012

continuous improvement in fundamentals, coming from: i) strong gas consumption growth in Beijing per the Beijings 12th Five Year Plan; ii) improvement in transmission margin with volume picking up; and iii) potential resumption of gas cost pass through amid the CPI pressure relieves.

China wind farm: 916 HK (Buy)

Our China Longyuan FY11 earnings forecast stands at RMB 2,698mn (~11% above consensus). Per operational data from the company, while FY11 coal power generation volume is largely in line, wind power depicts softer y-y utilisation, due to weaker-thantrend 4Q wind resources and continued grid curtailment. Thus, we believe there may be downside risk to our forecasts, factoring in sub 2000hr utilisation for FY11 (as the data suggests), we estimate our core EPS could be around 10pct heavy. Nevertheless, off-trend wind resources in FY11 are by definition transitory, and factors (CDM, curtailment and liquidity) which saw the stock de-rate last year (-16.0%) are improving. We see value in Longyuan, which trades at 1.4x P/B and not far off its wind power capacity replacement cost. Reiterate Buy.

China power equipment: Favours 3G nuclear exposure / avoid wind equipment plays
Our expected 1H12 nuclear project approval resumption announcement by the State Council would act as key catalyst for companies with nuclear exposure, in our view. We continue to like Shanghai Electric (2727 HK, Buy), due to its: (1) 3G nuclear equipment exposure; (2) integrated value chain within nuclear island equipment fabrication; (3) less exposure to wind equipment in comparison with its peer, Dongfang Electric (1072 HK, Buy). Easing material cost (benchmark HRC price down 10% over 2H11) will not materially improve 2H11s but may improve FY12s operating environment, in our view, as power equipment has a long product-cycle nature. We expect in-line results from SEG, largely due to its on-track production execution. We see slight downside to our Dongfang Electrics and Harbin Electric (1133 HK, Neutral)s FY11F earnings forecast due to their respective exposure to weak wind equipment sales and one-off investment loss. For pure wind equipment plays, we expect China High Speed (658 HK, Neutral) and Goldwind (2208 HK, Reduce), to report weak FY11F results due to: (1) continued fall in wind equipment ASP; (2) downward gross margin trend and (3) poor sales volume. Into 2012F, we do not expect a drastic improvement in light of our expected sluggish domestic wind equipment demand. Our reduce call, Goldwind, also has overhang due to rare earth material cost in 2H12F.

ASEAN utilities: PGAS IJ (Buy), EDC PM (Buy)

Perusahaan Gas Negara Our FY11F profits forecast of IDR5,918bn is c.8% below consensus on account of a more pensive stance on the groups piped gas supply outlook (FY11F:785mmscfd distribution volume) and a strengthening (5%) IDR relative to the US$. Although we believe there may be downside risk to consensus earnings expectations, we note that the post Aug 2011 sell-down in PGNs stock after BP Migas announcement that it intended to broker more robust upstream gas prices has seen the stock detach from its near-term earnings outlook. We believe PGN has both the cost-plus pricing mandate and, importantly, pricing power to defend its distribution margins should this materialise. We concede that the stock has rebounded considerably (+64%) from its local minimum of IDR2,200/share in Sept 2011, and in that sense our high conviction reflation theme may no longer have legs; however, we believe the markets post-3Q11 concentration with potential earnings erosion has completely diverted focus away from what we regard as perhaps the most attractive secular, fundamental growth story in the ASEAN power and utilities space. Wedged monopolistically between easing piped gas supply dynamics and what we see as outstaying natural gas demand fundamentals, and with

Nomura | Asia Utilities/Renewables

February 27, 2012

~50% excess distribution capacity, we see PGN as the ideal conduit through which to gain exposure to what we believe will be a marked lift in Indonesias domestic natural gas penetration over the medium term. To the extent that the company can insulate margin, more market-aligned upstream piped gas prices and the groups pending (2HFY12F) migration to an LNG supply paradigm bode well for unlocking the volumedriven growth potential inherent in the business. We reiterate our Buy call. Energy Development Corporation Energy Development Corp (EDC) is in for a challenging FY11 (and for that matter 12QFY12) relative to published consensus earnings expectations, in our view, given the recent news of Bacmans (~10% of consolidated capacity) rehabilitation delays from previous guidance of 4Q11 to managements most recent 3QFY12F goalpost. Aside from the obvious foregone earnings, to the extent that EDC has contracted out Bacmans capacity, the delay has left EDC short spot market tariffs over 1HFY12, and even though management argues that there is sufficient slack in the portfolio to meet the vast majority of the companys contract obligations over this period, such a strategy may lay claim to lucrative ancillary market income streams. That being said, we believe EDC remains one of the most compelling growth stories in the ASEAN power space. Despite Bacmans delays which should arguably be viewed as a deferral of earnings tariff reversions at the Palinpinon-Tongonan will, in our view, support a healthy FY12F earnings growth rate, while the (eventual) recommissioning of Bacman, together with a healthy (c.25%) domestic greenfield development pipeline over the coming 4-6 years, bode well for the business earnings growth trajectory over the medium term. We would advise investors to look at any weakness post the companys 4QFY11-1QFY12 as an opportunity to accumulate.

Australian IPPs: We forecast AGK will report 1H12F NPAT of A$235mn

In October 2011, at the AGM, AGK guided the market to a FY12 underlying profit NPAT of A$470-500mn. Nomura forecasts FY12F reported NPAT of A$482mn. We see the potential for a weaker first-half, given the reduction in wind farm development fees, lower contribution from retail given the mild winter that was experienced on the Eastern seaboard of Australia in the 1H and a lower contribution from merchant energy given low wholesale electricity price through the period. Key points to watch for in the 1H results will be: Evidence of retail electricity customer growth in New South Wales (NSW) (Nomura forecasting AGL will have grown electricity retail customers to over 500,000 at 1H12F). The company is targeting 800900,000 electricity customers in NSW by FY14F. Evidence of a reduction in churn in AGLs other gas and electricity retail and small and medium enterprise (SME) markets. News on when and if AGL will receive NSW Government approval to proceed with the 500-750 MW Dalton gas-fired peaking generator and the Tomago gas storage facility. An update on recent press speculation (confirmed by the company) that they are considering options for their future investment in Loy Yang A power station. Update on coal seam methane and gas reserves and development options. Updates on impact on generation assets given the introduction of a carbon tax from 1 Jul 2012.

Nomura | Asia Utilities/Renewables

February 27, 2012

Appendix A-1
Analyst Certification
We, Ivan Lee, Daniel Raats, Anirudh Gangahar, David Fraser, Keith Nam, Joseph Lam, Alan Hon and Nitin Kumar, hereby certify (1) that the views expressed in this Research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.

Issuer Specific Regulatory Disclosures

The term "Nomura Group Company" used herein refers to Nomura Holdings, Inc. or any affiliate or subsidiary of Nomura Holdings, Inc. Nomura Group Companies involved in the production of Research are detailed in the disclaimer below.

Issuer name Motech Industries China Longyuan Power AGL Energy Energy Development Corp LDK Solar Perusahaan Gas Negara

Ticker 6244 TT 916 HK AGK AU EDC PM LDK US PGAS IJ

Price TWD 60.5 HKD 6.42 AUD 13.67 PHP 5.30 USD 5.97 IDR 3,600

Price date 24-Feb-2012 24-Feb-2012 24-Feb-2012 24-Feb-2012 23-Feb-2012 24-Feb-2012

Stock rating Reduce Buy Buy Buy Reduce Buy

Sector rating Not rated Not rated Not rated Not rated Not rated Not rated

Disclosures

A9

A9

Nomura Securities International Inc. makes a market in securities of the issuer.

Previous Rating
Issuer name Motech Industries China Longyuan Power AGL Energy Energy Development Corp LDK Solar Perusahaan Gas Negara Previous Rating Neutral Neutral Not Rated Neutral Neutral Not Rated Date of change 25-Oct-2011 12-Dec-2011 10-Jan-2011 22-Aug-2011 25-Oct-2011 15-May-2009

AGL Energy (AGK AU)

Rating and target price chart (three year history)

AUD 13.67 (24-Feb-2012) Buy (Sector rating: Not rated)

Date 07-Feb-11 10-Jan-11 10-Jan-11 Rating Target price 17.50 Buy 17.85 Closing price 15.01 15.22 15.22

For explanation of ratings refer to the stock rating keys located after chart(s)

Nomura | Asia Utilities/Renewables

February 27, 2012

Valuation Methodology Our A$17.50 target price is based on discounted cashflow valuation assuming a risk free rate based on the 10-year Australian bond rate of 5.5%. Key assumptions used in the discounted cash flow valuation include a WACC of 9.3% based on a 0.70 asset beta and 20% target debt to enterprise value, and a real long term growth rate of 1.0%, discounted back to FY12. Risks that may impede the achievement of the target price Risks that may impact on our target price include churn-out of retail customers to competitors, electricity supply and price, gas supply and price, deliverability of owned or controlled coal seam methane assets, water volumes in hydro assets, coal seam methane development environmental concerns, any introduced emissions trading scheme or carbon tax and lastly AGL may be seen as a potential source of funding for a TRUenergy IPO.
China Longyuan Power (916 HK)
Rating and target price chart (three year history) Date 12-Dec-11 12-Dec-11 18-Mar-11 09-Sep-10 01-Apr-10 29-Jan-10 29-Jan-10 Rating Buy Neutral 7.60 8.50 Reduce 9.50 Target price 7.40 Closing price 5.65 5.65 7.90 8.16 9.14 9.60 9.60

HKD 6.42 (24-Feb-2012) Buy (Sector rating: Not rated)

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our PT of HKD7.40 is based on three-stage DCF valuation, assuming a WACC of 7.5% and 2.5% terminal growth rate Risks that may impede the achievement of the target price Key downside risks to our view are weaker-than expected medium term utilisation on account of grid connectivity and curtailment bottlenecks
Energy Development Corp (EDC PM)
Rating and target price chart (three year history) Date 22-Aug-11 22-Aug-11 12-Apr-11 12-Apr-11 17-May-10 29-Apr-10 05-Feb-10 05-Feb-10 Rating Target price Buy 7.20 Neutral 7.30 6.40 6.20 Buy 5.90 Closing price 5.80 5.80 6.71 6.71 5.10 5.40 4.65 4.65

PHP 5.30 (24-Feb-2012) Buy (Sector rating: Not rated)

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our PHP7.2 DCF-based target price assumes a WACC of 9.5% and a terminal growth rate of 2%. The cashflows are discounted back to FY11F.

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Risks that may impede the achievement of the target price We view 1) faster-than-anticipated progress in securing foreign new-build projects and 2) additional asset acquisitions (notably Unified Leytes PPA) as the key upside risks to our call. Significant discontinuities in the Philippines regulatory environment while in our view a remote possibility would be the key downside risk.
LDK Solar (LDK US)
Rating and target price chart (three year history) Date 25-Oct-11 25-Oct-11 05-Aug-11 07-Jun-11 15-Nov-10 27-Nov-09 12-Mar-09 Rating Target price Reduce 2.60 7.00 8.00 14.00 8.00 4.50 Closing price 3.16 3.16 5.60 7.10 12.31 7.61 4.04

USD 5.97 (23-Feb-2012) Reduce (Sector rating: Not rated)

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology We use the FY12F P/BV of global peers to value the company and apply a 25% discount to this to reflect macro concerns and LDKs stretched balance sheet for a target FY12F P/BV multiple of 0.3x. Our FY12F BVPS of USD8.84 gives us a target price of USD2.60. Risks that may impede the achievement of the target price Upside risks to our target price include: 1) Stability in macroconditions with improvements in available financing which will also help LDK to successfully execute on its IPO listing; 2) Ground-breaking cost reductions helping LDK to push its profitability curve ahead of peers
Motech Industries (6244 TT)
Rating and target price chart (three year history) Date 25-Oct-11 25-Oct-11 05-Aug-11 28-Apr-11 15-Nov-10 15-Nov-10 27-Aug-10 30-Apr-10 03-Sep-09 03-Sep-09 23-Apr-09 01-Apr-09 Rating Target price Reduce 39.00 87.00 111.00 Neutral 119.00 97.00 97.50 Reduce 58.70 94.90 94.89 Closing price 60.30 60.30 74.80 100.87 104.35 104.35 111.30 97.72 78.00 78.00 71.69 69.60

TWD 60.5 (24-Feb-2012) Reduce (Sector rating: Not rated)

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology We use the FY12F P/BV of Greater China peers to value the company and give Motech a 50% premium due to its strong balance sheet and stake-holding by TSMC. Our target price of TWD39 is based on peer average FY12F P/BV of 0.8x and book value of TWD47.77 Risks that may impede the achievement of the target price Upside risks to our target price include: 1) Stability in macroconditions with improvements in available financing; 2) Faster capacity closures of higher cost peers helping improve supply-

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demand balance; 3) New project financing models finding success; and 4) Ground-breaking cost reductions helping Motech to push its profitability curve ahead of peers.
Perusahaan Gas Negara (PGAS IJ)
Rating and target price chart (three year history) Date 12-Sep-11 22-Apr-11 08-Nov-10 05-Nov-09 01-Sep-09 10-Jun-09 15-May-09 15-May-09 Rating Target price 3,900.00 4,800.00 5,100.00 4,300.00 4,000.00 3,900.00 Buy 3,300.00 Closing price 2,800.00 3,925.00 4,425.00 3,650.00 3,425.00 3,125.00 2,450.00 2,450.00

IDR 3,600 (24-Feb-2012) Buy (Sector rating: Not rated)

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our IDR 3,900 DCF-based target price assumes a WACC of 9.5% and a terminal growth rate of 3%. The cash flows are discounted back to FY12F. Risks that may impede the achievement of the target price Key downside risks to our view include a continued strengthening of the IDR relative to the USD, weaker-than-anticipated realised gas distribution flows, an inability to protect distribution margins from higher gas costs, and government interference in gas supply contracts.

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Important Disclosures
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Distribution of ratings (US)

The distribution of all ratings published by Nomura US Equity Research is as follows: 35% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 11% of companies with this rating are investment banking clients of the Nomura Group*. 59% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 2% of companies with this rating are investment banking clients of the Nomura Group*. 6% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 0% of companies with this rating are investment banking clients of the Nomura Group*. As at 31 December 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.

Distribution of ratings (Global)

The distribution of all ratings published by Nomura Global Equity Research is as follows: 47% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 40% of companies with this rating are investment banking clients of the Nomura Group*. 43% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 45% of companies with this rating are investment banking clients of the Nomura Group*. 10% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 21% of companies with this rating are investment banking clients of the Nomura Group*. As at 31 December 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.

Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America
The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to target price defined as (fair value - current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as discounted cash flow or multiple analysis, etc. STOCKS A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, target price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including, but not limited to, when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company. Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura Disclosure web page: http://go.nomuranow.com/research/globalresearchportal);Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system in Japan and Asia ex-Japan
STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc. A 'Buy' recommendation indicates that potential upside is 15% or more. A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%. A 'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company.

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Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies. SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.

Target Price
A Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

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