What's new
　　Huaneng’s domestic power plants recorded power output and salesvolume of 84.7bn kWh （-18.5% YoY） and 80.7bn kWh （-17.9% YoY） in1Q20. Average tariff rose 0.11% YoY to Rmb422.4/MWh. Directpower sales reached 26.1bn kWh, accounting for 33.3% of totalpower sales （-6.3ppt YoY）。
　　Comments
　　Huaneng’s 1Q20 power output volume fell 18.5% YoY, as powerconsumption slowed due to COVID-19, and the firm had higherexposure to thermal power as well as central and eastern China.
The firm’s power output saw the sharpest decline in Hubei（-37% YoY）， Henan （-33% YoY） and Guangdong （-33% YoY）， whileit maintained double-digit growth in Guangxi （+82% YoY） andYunnan （+59% YoY）。
Power output from alternative energies improved in 1Q20,driven by higher installed capacity and priority access to thepower grid, with that of wind power and solar power up 15%and 14%. Meanwhile, output of coal-fired and gas-firedgenerators declined 20% and 4% YoY due to COVID-19 andcompetition from other power sources.
　　Rising power tariff and falling coal prices to offset the negative fromlower power volume; 1Q20 earnings to likely drop slightly. 1Q20average tariff rose 0.11% YoY, and we estimate power tariff （excl. tax）rose 3% YoY given the lower VAT rate. In addition, we expect unit fuelcost to decline 6% YoY in 1Q20, given the falling coal prices （spot coalprice down 7% YoY）。 We expect positives from power tariff and coalprices to offset the negatives from falling volume, and estimate that1Q20 earnings may drop slightly by 4%.
　　Valuation and recommendation
　　We keep earnings forecast unchanged. Huaneng A-shares are tradingat 0.7x 2020e and 0.7x 2021e P/B, and H-shares at 0.4x and 0.4x P/B.
　　Maintain OUTPERFORM on A-shares and H-shares with TPs atRmb8.29 （1.4x 2020e and 1.4x 2021e P/B with 96% upside） andHK$6.00 （0.9x 2020e and 0.9x 2021e P/B with 119% upside）。
　　Risks
　　Lower-than-expected decline in coal prices; falling power tariffs.