China – Power firms ramp up wind energy spending

In the latest move aimed at taking a slice of the green energy pie, Huaneng New Energy Industrial Co, the soon-to-be listed unit of China Huaneng Group, plans to invest 6-billion-yuan into offshore wind farm projects in Jiangsu province, where the government is set to unleash its largest ever offshore wind farm with a combined capacity of 1,000 MW.

Competing with Huaneng for wind energy assets are China Huadian Corp, China Datang Corp, China Guodian Corp and China Power Investment Corp, the country’s top power producers.

The State-owned power producers are also bidding for China’s 13 solar power pilot projects with a total capacity of 280 MW.

"Wind farm operation is a huge, long-term investment," said Jiang Qian, chief industry analyst with China Investment Consulting. "Only firms with abundant funds, such as the State-owned power producers, have the financial might to make such investments."

Meanwhile, Huaneng Group Corp and Datang Corp are planning to float shares of their renewable energy units in Hong Kong this year in offerings that could raise over $2 billion.

Huadian New Energy is also planning a listing in Hong Kong next year, according to its general manager of Fang Zheng. The adjustment of power structure is partly a strategy to diversify risks and offset losses from the production of thermal power.

Wind power assets of China Longyuan Power Group, the Hong Kong-listed new energy unit of China Guodian, increased by 57.8 percent over the first six months of this year while its profit doubled from a year earlier.

By contrast, Guodian Power Development, the listed arm of China Guodian, which focuses on thermal power generation, reported a loss during the same period.

"New energy business is now the largest revenue contributor of Guodian," said Fang Tao, spokesman of Longyuan, the largest wind farm operator in Asia.

Longyuan said it aims to increase its wind turbines capacity to 6,500 MW this year, hoping to become one of the top three wind power producers in the world by 2012.

The company has already signed agreements with 17 provinces and cities to exploit their abundant wind resource potential in future. This is expected to take its reserve power capacity to 45,700 MW.

Power producers, meanwhile, have vowed to scale back their thermal power businesses, which still form the largest part of their portfolios.

Thermal power accounts for 88 percent of Huaneng Corp’s total installed capacity, but the company said it would increase the share of green power to 35 percent by 2020. Some industry experts have however voiced doubts about the profitability of the new energy business.

"Wind turbines and solar power generation are still costly and it’s hard to make money based on current tariffs," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. Lin said he believes thermal power will continue to dominate the portfolio of power producers for a long time to come.

By Liu Yiyu, China Daily, www.chinadaily.com.cn