Equity Stakes

Equity Stakes

Figures converted from Chinese yuan (CNY) at historical FX rates — see data/company.json.fx_rates for the rate table. Ratios, margins, and multiples are unitless and unchanged.

Outside its four operating businesses, TBEA carries a $0.74bn book of equity stakes — mostly power-sector holdings and private funds. In FY2025 that book produced $0.22bn of pre-tax fair-value gains, almost all from marking a single newly-listed holding, Huadian New Energy, to market after its July-2025 IPO [1] [2]. The gains are real and liquid, but non-cash, non-operating, and now a recurring source of reported-earnings volatility.

What the portfolio holds

The stakes sit in two accounting buckets. The larger — $0.71bn of "other non-current financial assets," up 41.1% from $0.48bn a year earlier — is measured at fair value with changes running through profit [3]. A second, much smaller bucket of $0.03bn is designated fair-value-through-OCI, so its marks bypass the income statement entirely [4]. The through-profit bucket is what moves reported earnings.

Source: FY2025 Annual Report, Note VII.19 Other non-current financial assets [5].

Two of the holdings are exchange-listed and therefore marked at quoted prices: Huadian New Energy (600930.SH) at $0.36bn and CSG Energy (003035.SZ) at $0.07bn, together $0.43bn [6] [7]. The remaining $0.28bn is unlisted — a $0.10bn Southern Power Grid dual-carbon private-equity fund, $0.06bn in Shougang's electromagnetic-materials arm, $0.05bn in China Huadian's finance holding, $0.04bn in Shanghai Nuclear Engineering, and a tail of smaller strategic and venture positions [8]. These are held at model or transaction value, so they carry the fair-value risk of any unlisted mark. The common thread is adjacency to TBEA's own grid, power, and materials businesses rather than a financial-trading book.

One listing did most of the work

The $0.22bn of fair-value and disposal gains booked in FY2025 is not a diversified return on a $0.74bn book. Nearly all of it came from one position. TBEA's technology-investment subsidiary held pre-IPO shares of Huadian New Energy at a cost of $0.14bn; when Huadian listed on the Shanghai main board on 11 July 2025, that stake was re-marked to the closing price and rose to $0.36bn — a single-year gain of $0.21bn [9] [10]. The CSG Energy stake added $0.01bn [11]. The income statement's fair-value-change line swung from a $0.03bn loss in FY2024 to a $0.23bn gain in FY2025 on the strength of that one revaluation [12].

Because it is a revaluation of a pre-existing holding rather than a sale, the gain is entirely non-cash. TBEA sold none of the position — a 12-month lock-up runs to July 2026 — so no cash entered the business, and the group's own cash-conversion arithmetic (Cash Conversion) is unaffected by it [13]. Against the gain, TBEA also booked a deferred-tax liability that rose to $0.06bn, reflecting the tax that would fall due if the mark were ever realised [14].

A recurring source of earnings noise

Classified as non-recurring, this line has swung widely across years: a $0.01bn gain in FY2023, a $0.02bn loss in FY2024, then the $0.22bn gain in FY2025 [15]. On a group that earned $0.85bn attributable in FY2025, a line that can move by hundreds of millions of dollars in either direction is a meaningful distortion to any single year's reported result.

Source: FY2025 Annual Report, non-recurring profit-and-loss items, FY2023–FY2025 [16].

Net of tax and minorities, non-recurring items totalled $0.20bn in FY2025 — about 24% of attributable profit — and this fair-value line was the bulk of it [17]. That is the same $0.20bn adjustment that separates TBEA's ~19x reported multiple from the ~25x recurring multiple set out in the Sum-of-the-Parts. The point this chapter adds is where it comes from: not a diversified investment yield, but the mark on one newly-public stake. Now that Huadian trades daily, that $0.36bn position will re-price with its share price every reporting date — the gain that lifted FY2025 can as easily reverse into future periods.

Separately from these marks, TBEA's investment-income line carries $0.10bn of gains on disposing long-term equity investments and $0.01bn of equity-method income — a recurring, if lumpy, contribution that sits alongside the portfolio but is distinct from the fair-value revaluations [18].

The value and the noise

The evidence supports a measured, two-sided read. The value is real: the two listed stakes cost $0.17bn and are worth $0.43bn, a $0.26bn cumulative unrealised gain in liquid, quoted securities, with further unrecognised value plausible in the unlisted holdings [19] [20]. At $0.74bn the portfolio is roughly 7% of attributable equity and 4.6% of market value — a modest cushion, not a needle-mover on the valuation. The strongest fact against reading it as hidden value is that it is a poor guide to operating performance: a book that swings the reported result by hundreds of millions of dollars on one listing makes headline earnings and the ROE built on them noisier than the operating businesses deserve, and none of the FY2025 gain is cash.

Source: FY2025 Annual Report, Notes VII.18–19 and non-recurring items; values in $bn [21] [22].

What would change the read is monetisation. The Huadian lock-up expires in July 2026; a post-lock-up sale would convert paper value into cash and validate the mark, while a decline in Huadian's share price before then would reverse part of the gain straight through profit [23]. Either way, the operating engines described elsewhere in this report — grid, coal-and-power, and polysilicon — remain the substance of the case; the equity stakes are a real but secondary asset, best stripped out of any single year's earnings before judging the operating businesses.