China Energy Engineering ranks first in terms of order decline in its third-quarter financial report, green ammonia has become a key highlight, and none of the five major centrally-administered power SOEs have delivered an easy financial performance.

Cycle game among central SOEs in the construction sector, China Energy Engineering is under pressure to restructure its business and seeks to break the deadlock.

Energy Foresight notes that the most memorable figure in China Energy Engineering's 2026 Q3 financial report may be the 33.29% year-on-year decline in newly signed contracts, a drop that is far larger than that of the other 8 major central SOEs in the construction sector. However, when the income statement, balance sheet and cash flow statement are put together, this "first place" in terms of decline is actually the least important indicator.

Looking at the specific data, China Energy Engineering's attributable net profit for the first three quarters stood at 2.616 billion yuan, down 17.13%, which is not the sharpest decline among central SOEs in the construction sector; the net cash flow from operating activities was -20.343 billion yuan; accounts receivable rose from 85.435 billion yuan at the start of the year to 101.188 billion yuan, growing against the trend by 18.44% against the backdrop of a 4.42% drop in operating revenue.

The "decent performance" on the income statement is achieved by contracting scale reduction; the pressure on the balance sheet and cash flow statement is the real current situation of this company.

When comparing the Q3 reports of PowerChina and five major power generation central SOEs, a clearer picture emerges: in this cycle, the "good-looking" indicator on one line of the financial statements almost always corresponds to a "poor-performing" indicator on another line. No company is truly in a safe zone.

01

Cut contracts to safeguard profits

The cost falls on accounts receivable and cash flow

The 33.29% drop in orders of China Energy Engineering is partially a result of its own initiative. In this regard, the company stated in its semi-annual report that it "undertakes engineering projects prudently", and the proportion of spot cash business contracts has risen from 85.6% to 99.1%. The adjustment targets non-energy engineering: newly signed contracts in the engineering construction sector dropped by 35.96%, the decline in urban construction was even more significant, and comprehensive transportation projects were almost frozen.

In the same period, newly signed contracts for energy, electric power and water conservancy business reached 527.047 billion yuan, accounting for more than 80% of the total. The total profit of this sector increased by 14.54% year-on-year, and its profit contribution rate rose by 11.43 percentage points. Newly signed contracts for hydrogen energy and energy storage increased by 179.28% and 30.02% respectively.

China Energy Engineering replaced a batch of contracts that might turn into receivables with a batch of projects closer to its core energy business. This logic makes sense, but the cost of this replacement does not lie in the newly signed contract line, but in the already accumulated assets.

Accounts receivable exceeded 100 billion yuan, with a growth rate of 18.44%, which is more than 20 percentage points higher than the operating revenue growth rate. Cutting new contracts can prevent receivables from continuing to expand from new projects, but cannot resolve the slowdown in payment collection of existing projects. The operating cash flow was -20.343 billion yuan, and there are non-cash items and working capital occupation of more than 22.9 billion yuan between this figure and the attributable net profit of 2.616 billion yuan. Profits are still there, but cash has not come back.

PowerChina provides a different reference. Its newly signed contracts only decreased by 10.67%, with a total amount of 807.981 billion yuan, nearly 150 billion yuan more than China Energy Engineering; newly signed contracts for urban construction and infrastructure even achieved a positive growth of 5.98%. However, its attributable net profit fell by 37.68%, and the single-quarter figure in the third quarter was only 833 million yuan, down 59.23% year-on-year, with a gross profit margin of only 11.18% and financial expenses of 10.792 billion yuan. Comparatively speaking, companies with more orders have suffered a steeper decline in profits.

China Energy Engineering exchanged orders for business structure optimization, moving the pain to the contract signing end and cash flow end; PowerChina retained orders to bear the profit pressure, leaving the pain on the profit end. There is no distinction between good and bad for these two kinds of pressure, but the smaller profit decline of China Energy Engineering does not mean its situation is better - it just placed the cost in a different position.

02

The take-or-pay clause for green ammonia is real

But 600,000 tons of production capacity cannot be digested by only one single ship

Two weeks before the release of the Q3 report, at the anchorage of Zhoushan, 1000 tons of green ammonia from Songyuan "Green Hydrogen No.1" of China Energy Engineering was pumped into the ammonia-powered bulk carrier Mineral Europa under Belgium's CMB.TECH through the bunkering ship Shengha Yongle.

This event was repeatedly reported as "the world's first ship-to-ship bunkering", but the detail with real commercial significance lies in the contract structure, that is, this bunkering deal of China Energy Engineering corresponds to the official implementation of the world's first take-or-pay sales contract for green ammonia in ocean shipping.

The take-or-pay clause means the buyer has to make payment even if it does not take delivery of the goods. It is not an intentional procurement of a demonstration project, but a binding commercial order.

The economic feasibility is also supported by calculation. The unit production cost of green ammonia in the second phase of the Songyuan project is more than 10% lower than that of the first phase. After the completion of the first and second phases, the total annual output of green ammonia will reach 600,000 tons. With the cost curve moving downward and the production capacity curve rising, what the long-term agreement locks in is not just an environmental protection label, but a priced variable in the future compliance cost.

However, the problem of consumption on the demand side cannot be avoided. As of September 2026, there are about 50 ammonia-fueled ships that have been ordered globally. Adding the ships with ammonia-fuel reserved design, based on the calculation that all of them sail with ammonia as the main fuel, the demand for ammonia fuel by the end of 2028 is about 900,000 tons. If all the 600,000 tons of production capacity from the first and second phases of the Songyuan project are put into the marine fuel market, it will account for more than 60% of this forecast demand.

However, orders for ammonia-fueled ships have basically stagnated since July 2025, and there were zero new ammonia-fueled ship orders globally in the first quarter of 2026. The marine fuel scenario is growing, but its growth speed and certainty are not enough to undertake 600,000 tons of production capacity alone. The statement that the second phase of the Songyuan project "has signed long-term supply agreements with many international enterprises" points to directions outside marine fuel, including chemical raw materials, fertilizers, and entering the green fuel markets of Europe, Japan and South Korea through trade channels.

The Zhoushan bunkering event proved that "the product can be sold", while the 600,000-ton production capacity needs to answer the question of "can it be sold continuously at a favorable price". The gap between these two things is far larger than the distance of one pioneering bunkering operation.

03

The power generation side is supported by capacity electricity price

But no company has avoided profit decline

Looking through the five Q3 reports of power generation enterprises is critical to understanding the choice of China Energy Engineering.

Specifically, Huaneng Power International recorded an attributable net profit of 7.822 billion yuan, down 47.29%; Guodian Power Development recorded 3.961 billion yuan, down 41.55%; Huadian Power International recorded 3.908 billion yuan, down 39.29%; Zheneng Electric Power recorded 1.446 billion yuan, down 76.79%; Datang International Power Generation recorded 6.388 billion yuan, down 4.83%.

Four of the five companies saw a sharp decline, and Datang only had a smaller decline, which cannot be regarded as growth against the trend. The claim that "the power generation side is safer because of the capacity electricity price" cannot stand in front of this set of data.

The capacity mechanism is indeed playing a role. Looking back, Sinolink Securities previously judged that the profit proportion from the capacity mechanism of Huaneng Power International, Huadian Power International, Guodian Power Development and Datang International Power Generation was 63%, 123%, 53% and 76% respectively. By 2026, the capacity electricity price for coal-fired power in most provinces has been raised to 165 yuan per kW per year, and the annual capacity electricity fee for a 1 million kW unit is about 165 million yuan.

This fund is not settled according to the generated electricity, and the unit can get the payment even if it generates less power. But the capacity electricity price only supports the bottom line of fixed cost recovery, and cannot offset the impact of declining power generation volume and falling electricity price on the income statement.

Huaneng Power International's single-quarter attributable net profit in the third quarter was 1.236 billion yuan, down 77.84% year-on-year. The capacity mechanism makes the profit base of the power generation side more stable than that of the engineering side, but it does not change the downward trend of profits, it only compresses the fluctuation range.

The engineering side does not have this mechanism. The -20.343 billion yuan operating cash flow of China Energy Engineering, the 80.9% asset-liability ratio and 10.792 billion yuan financial expenses of PowerChina are two manifestations of the same type of pressure: The profits and cash flow of central SOEs in the engineering sector are almost completely exposed to the project progress and payment collection speed, with no institutional income to hedge risks.

China Energy Engineering's move to put green ammonia into take-or-pay contracts, and promote the coordinated operation of energy storage and power calculation to commercial operation, is essentially creating a "second income statement" of engineering sector version for itself. This statement already has relevant accounts, but its scale is far from enough to change the overall situation of the whole financial report.

China Energy Engineering has chosen a more advanced adjustment path than PowerChina, cutting contracts at the signing end, promoting green ammonia into commercial contracts, and putting cash flow pressure on the table. The five Q3 reports of power generation enterprises show that even with institutional buffers such as the capacity mechanism, no company can get through this cycle easily. The problem of China Energy Engineering cannot be avoided by the narrative of "second growth curve": whether the speed of its operating cash flow turning back from -20.3 billion yuan can catch up with the speed of green ammonia and energy storage changing from "commercial operation" to "stable profit". The Q3 report points out the direction, but does not give the answer.

This article is from the WeChat Official Account "Energy Foresight", written by Wang Mengjiao, authorized for release by 36Kr.