on march 15, china longyuan power held its meeting of the board of directors at which the fy2010 performance report was released. at that moment, xie changjun was fully content with the great harvest.
because the company had created a new miracle in the past year.
all the wind farms have made profits
the profit of china longyuan power in 2010 had greatly surpassed what was predicted by the market at the beginning of its ipo. the reason that the company had made such a high profit lies in the fact that it had made each wind farm profitable through reducing the cost, increasing electricity output as well as maintaining the utilization hours.
december 10, 2010 is the date of the first anniversary of its successful ipo. xie changjun attended the news conference held on that day and patiently answered various questions proposed by the media across the country.
the media’s focus is: how much profit had the company made in 2010? at the conference, xie changjun could hardly contain his excitement and he told all the media in a positive tone that the 2010 profit of the company would greatly surpass what was predicted by the market at the beginning of its ipo --- rmb1.77 billion yuan.
the fy2010 performance report released by the company had proved his remarks at the news conference. “our profit in 2010 has been rmb3.2 billion yuan, ranking first in china guodian corporation, among which the net profit of rmb2 billion yuan is attributable to our parent company.” xie changjun is quite content with this performance.
subject to various factors, wind farm’s profitability has almost become a platitude. the moment the high profit was reported, the market concern about the company in turn had shifted from the amount of the company’s profit to its approaches to this high profit. in terms of its project reserves, it was not very difficult for the company to realize a high increase speed of its installed capacity. however, xie changjun believed it really important to expand the scale of the enterprise. yet the expansion should be restricted within certain bounds. “we desire to do a good and detailed job of a 2 million mw wind project so as to make all the wind farms profitable after they are launched into production.” it is easier said than done “to make all the wind farms profitable”.
the first problem to be solved is to lower the construction cost of a wind farm.
due to a series of the new energy policies executed in china, especially the stimulating plan of wind power, the domestic installed capacity of wind power has always kept the trend to double increase each year since 2005. by the end of 2010, the accumulated installed capacity connected to the grid in china had reached 31,070mw, representing a double increase each year for five consecutive years.
the rapid development as a flying rock contributed to the prosperity of manufacture sector of wind power equipments. according to the incomplete statistics, there are roughly 90 manufacturers of whole wind power machine, 50 fan manufacturers, and 100 manufactures of wind turbine tower, which occupies over 85% of the market share of the dominant 1.5-2.0mw wind turbines. at the same time, the western manufacturers also set up many factories in china so as to narrow the cost gap between them and their competitors. in 2008, vestas, the no. 1 global manufacturer of wind power equipments, had build a manufacture base of small and medium sized wind turbines in inner mongolia where there were the richest wind resources and its market had been impacted most seriously.
generally 70% of the initial investment of the wind power operators goes to the procurement of the whole wind turbines. and in terms of the routine cost, two largest expenditures, i.e. interest and depreciation, are related to it.
“we have controlled our equipment cost and reduced construction cost through design optimization and packaged tendering of the main equipments.” said xie changjun to the reporter. in 2010, we had completed 67 wind power projects and 2 pv project tendering, which represented a 136.4% increase compared to the amount of 2009 and the procurement price of the main wind power equipments had been lowered by 18% compared to last year. and in 2010, the average cost of the 34 wind power projects launched by the company had also been reduced to rmb8,295 yuan/kw, representing a 10.2% decrease compared to 2009.
secondly, we had increased the electricity output of wind farms. our electricity output of wind power in 2010 had reached 10.1 billion kwh.
“wind farms can make no profit until wind turbines start to run,” said xie changjun.
besides, china longyuan power had made some profit from scientific and technological progress.
just as xie changjun has always believed that wind power development is a complicated process which requires a great amount of preliminary work and operation adjustment. the company has professional wind measuring teams, unique ability of micro site selection as well as the perfect management after the completion of projects. therefore, its 2010 average utilization hours of the wind turbines had reached 2,217 hours and average utilization rate of the equipments was 98.28%, which were respectively higher than the national averages.
the gradually mature external conditions have also contributed to the high speed increase of the company’s profit.
in july 2009, the national development and reform commission (ndrc) issued the notice on policy to improve grid-connected power pricing for wind power, which substituted the past tendering price and approval price by the unified regional pricing. it divided the wind resources in china into 4 regions, giving the following prices respectively: rmb0.51 yuan/kwh, rmb0.54 yuan/kwh, rmb 0.58 yuan/kwh and rmb0.61 yuan/kwh. since november 2009, the government further enhanced the additional standard of the renewable resources price from rmb0.002 yuan/kwh to rmb0.004 yuan/kwh. supported by the policies, since august 2009, the average grid-connected price of the approved projects of the company had been enhanced to rmb0.567 yuan/kwh, which was rmb0.005 yuan higher than the price before.
seize more money or keep rolling development
the enthusiasm shown by the capital market to the wind power concept had created the ipo miracle of china longyuan power. different with many companies which had been overheating in the market just due to their new energy concept, china longyuan power realized its rolling development relying upon the fund it had raised through its successful ipo in 2009.
the moment we see its amazing achievements presented at the first anniversary after it was listed in hkse, we can’t help recalling the splendid performance of its 2009 ipo.
since the foundation of the limited corporation on july 9, 2009, its road to success might be described as smooth and easy. china longyuan power submitted 28 documents and the a1 form to china securities regulatory commission (csrc) and hkse respectively; at the beginning of november, it was approved by csrc and passed the hearing held by hkse; from november 23 to december 3, it implemented the global roadshow and sold its stocks; the world famous morgan stanly and united bank of switzerland were responsible for its ipo plan.
good market response reflected its 16 years’ accumulated operational experience and new value was added to its experience reserves in the market. its investment value was widely recognized by the international capital market.
on december 10, 2009, china longyuan power was successfully listed in hkse and raised rmb17.7 billion yuan, which set up several records, such as the largest amount of fund raised through overseas ipo and the highest p/e ratio of the chinese power enterprise, the eighth largest ipo of the world and the largest ipo of the global energy industry since 2009 as well as the second largest ipo among the renewable energy enterprises of the world since 1999. in terms of the closing price --- hkd8.93 yuan per share, on the first day after its ipo, its total market value reached hkd63.8 billion yuan, ranking third among the global wind power enterprises. in addition, it was listed into hang seng china enterprises index, hang seng mainland 100 index and morgan stanley china index.
zhu yongpeng, chairman of china longyuan power, seemed to be very calm at the ipo ceremony because he was fully confident about its good reputation over the years in the industry and he believed that it could be expected that its stock price might have a bright prospect.
the enthusiasm shown by the capital market to the wind power concept had created the ipo miracle of the company.
different with many companies which had been overheating in the market just due to their new energy concept, china longyuan power realized its rolling development relying upon the fund it had raised through its successful ipo in 2009.
“wind power industry is a capital-intensive industry. its entry with low capital cost made the company skillful and flexible in the development of wind power as well as easier to create excellent projects.” in 2010, its newly installed capacity and holding installed capacity of wind power reached 2,050mw and 6,560mw respectively; 2,380mw wind power projects had been approved and the newly added reserves of wind power was 18,260mw. although btm hasn’t released the statistics, undoubtedly china longyuan power will hold its first position stably in asia and its world ranking is hopefully to rise from the fifth in 2009 to the fourth. xie changjun expects that the installed capacity of the company will possibly surpass 10,000mw by 2012 and its global ranking is expected to rise by one.
the good prospect of the company had won the long-term interest of many international organizations including morgan stanley and daiwa institute of research. in 2009, daiwai institute of research had expected optimistically that from fy2010 to fy2012 the compound annual growth rate (cagr) per share of the company would be 36% and from fy2009 to fy2012, the cagr of the attributable installed capacity of wind power would be 33%.
however, there are still some uncertainties in the high speed development of china longyuan power in the future.
firstly, there might be some changes concerning the cdm. in 2010, the company had successfully registered 30 cdm projects as well as obtained 1.14 million tons of ver emission reduction, whose total profit had reached rmb 392 million yuan.
because no consensus concerning the emission reduction mechanism after the expiration of the kyoto agreement has been reached among countries and after its expiration, if the cdm can’t last, this profit will not exist any longer.
of course there are some opportunities in the domestic market because the government is planning to work out a clean energy quotas mechanism concerning the traditional generation mode. according to this mechanism, to sell quotas to the traditional power enterprises is likely to be another opportunity.
secondly, due to the change of the value-added tax policy, local governments will propose more demanding cooperative conditions to wind power investors and operators. at present, local governments are responsible for the approval of the wind power projects below 50mw. as excellent wind power resources are reducing, competitions will become increasingly fierce. worse still, western industry giants, such as iberdrola, have entered the chinese market and consequently the development and operational cost of wind power projects is likely to increase further.
in spite of the uncertainties, to xie changjun, the direction of wind power industry has been quite clear, namely operational efficiency is bound to take the place of resources as the main driving power of the industry. “this change will be beneficial to the company. it is said that the basic resources of the company helped it occupy the leading position of wind power in energy industry. i think this can only represent its past instead of its future.
the company’s future lies in its effort to deepen the understanding of wind power development as well as its focus on quality, profit, scientific and integrated plan, and comprehensive development.”
sail to the seas
through the construction of rudong intertidal pilot wind farm, china longyuan power had understood the offshore wind farm construction. by no means, it is neither simply the extension of the inland wind power, nor the graft of ocean engineering. the wind power design, construction, project management and operational maintenance of offshore wind power were essentially different with the inland wind power and ocean engineering.
in addition to the high speed development, the company had also made a surprising zero breakthrough in 2010. on september 28, 2010, jiangsu rudong 30mw intertidal pilot wind farm affiliated to the company was completed and launched into production, which was also the first intertidal wind farm of the world. this zero breakthrough is just compliant to the industry saying that 2010 is the beginning year of the offshore wind power.
“jiangsu rudong project lies in the intertidal zone, which is 3-7 kilometers away from the external beach surrounding rudong port. its total installed capacity is 32mw and it is composed of 9 types of 16 pilot prototype turbines provided by 8 manufacturers, whose total investment is rmb500 million yuan.” although in many professional occasions, xie changjun had conservative view on the development of the offshore wind power, yet in real practice, the company had never been timid in the competition of the offshore wind power projects. just one “national holiday” after jiangsu rudong project was successfully connected to the grid, the company made another progress in the offshore wind power --- china released her first round of the chartered tendering projects of the offshore wind power. the company became the successful bidder of the chartered wind power project, namely the 200mw jiangsu dafeng intertidal wind farm and the successful bid price was rmb0.6396 yuan/kwh.
“the trend of the wind power in the future lies in the offshore wind power. while maintaining our leading position in the field of the inland wind power, we attach great importance to the development of the offshore wind power and place it at a strategic new height. therefore, in the hope of seizing the commanding height in the future competition, we have actively carried out the diversified development strategy with the offshore and inland wind power going forward side by side,” said xie changjun.
offshore wind power projects are close to load centers and thus they have the relative cost advantages concerning power transmission and assimilative capacity. according to the initial results concerning the detailed survey and evaluation of the wind resources in mainland china released by china meteorological administration (cma), the potential development volume of the wind resources at the height of 50 meters on the land is about 2.38 million mw; in the offshore areas whose depth ranges from 5-25 meters, the potential development volume of the wind resources at the height of 50 meters is roughly 0.2 million mw. however, due to high cost, redundant procedures at the preliminary stage of the project, difficulties of site selection and project construction, although the offshore wind power looks beautiful, it is not smooth to swim in this blue sea of wind power at all.
“through the construction of rudong intertidal pilot wind farm, we have a keen understanding of the offshore wind farm construction. by no means, it is neither simply the extension of the inland wind power, nor the graft of ocean engineering. the wind power design, construction, project management and operational maintenance of the offshore wind power are essentially different with the inland wind power and ocean engineering.” to xie changjun, many factors have greatly increased the preliminary cost of the offshore projects, including lack of the standards and practices concerning the domestic offshore wind power; no regulations and rules to abide by in design and construction; and redundant approval procedures because of the ocean issues in the approval process of the offshore wind power projects. he hopes that relevant departments of the country would optimize the approval procedure concerning ocean issues as soon as possible so as to create good external conditions for the offshore wind power development.
continue to take the lead
in the past ten years, china longyuan power had always taken the lead and had laid the preliminary foundation of the wind power brand --- china longyuan power. in the coming ten years, the company will accelerate the speed to build a world-class new energy listed company and continue to take the lead.
wind power industry is a capital-intensive industry. the company’s success in the capital market plays the exemplary role to other new energy enterprises.
the new energy subsidiaries of each energy group look for the channel for their ipo so as to solve the financing issue. following china longyuan power, more and more state owned wind power enterprises chooses to be listed in hkse. the new energy subsidiaries affiliated to datang and huaneng all decided to implement their overseas ipo. prompted by capital powers, wind power industry has entered an integration period during which the strong and large enterprises will become stronger and larger. in this critical period, can the company still take the lead? “the company is sure to develop wind power projects by running the inland and offshore wind power together.” xie changjun said that the construction of some wind power bases at ten million mw grade including zhangjiakou of hebei, west and east of inner mongolia, west of jilin, jiuquan of gansu and hami of xinjiang will be significant to the scale development of wind power.
we can learn much from the european countries about the construction of the offshore wind farm, for they have started scale development and have grasped mature technologies. cost and investment are the main problems to be studied further and it is imperative to accumulate the experience concerning the survey, design and installation of the offshore wind farms so as to gradually realize the scale operation of the offshore wind farms.
“as its dominant business, the company will accelerate the development speed and increase the installed capacity of the wind power rather than stop it. we have a plan, which is very splendid and compliant to the state plan. we hope we can occupy certain proportion of the total national installed capacity of wind power. however, i am not sure about the exact proportion. therefore, in addition to construction, we also consider some works concerning merger and acquisition”, said xie changjun to the reporter.
apart from wind power, the company has put pv power on the agenda. in 2010, the two pv projects including yangbajing in tibet and ge’ermu in qinghai were launched into production successfully, which made the company’s zero breakthrough in the field of pv power. actually as early as 2003, the company had done a great amount of works concerning the investigations and the reserves of design technologies of pv power. in 2010, three pv power projects in qinghai, tibet and gansu, whose total installed capacity was 40mw had been approved. besides, the company was also active in promoting the development of geothermal power, tidal power and biomass power.
in addition to the domestic market, the company participated actively in the development of the overseas markets. “we are currently developing five potential wind farms, whose planned development volume is 1,600mw in total.
at present, we have installed wind measurement towers in all these wind farms and the longest wind measurement period has reached one year.” at the same time, the company had contacted over 20 potential projects successively in the us, hungary, canada and some european countries so as to seize the proper opportunity to make major breakthroughs.
the idea of running the enterprise through multiple approaches had helped the company take the leading position always in new energy industry. standing at the transitional place of the ending year of “the 11th five-year plan” and the beginning year of “the 12th five-year plan”, xie changjun holds his ambition: “in the past ten years, china longyuan power had always taken the lead and had laid the preliminary foundation of the wind power brand --- china longyuan power. in the coming ten years, the company shall accelerate its work to build a world-class new energy listed company, continue to take the lead, stick to the development, create the operation idea of “taking the lead in profitability, social commitment and environmental protection” and we are sure to build the great brand “china longyuan power” which is compliant to the demands of the industry, the country as well as the time.”
[reporter’s notes]
the pilot of this wind power investor and operator which was founded in 1993 has a unique habit --- he always brings a map with him. he is extremely familiar with all the regions in china which are rich in wind resources. in his office, there is also a map on which all of the company’s wind power projects had been marked with different colors. although it is only the personal habit of the company’s leader, it still reflects the overall view of the enterprise.
initially this company was only a state owned company which is engaged in the investment and operation of thermal power plants as well as the transformation of making them cleaner. as the open and reform policy was continuously carried out to a deeper level, in 2002 a significant turning point in the company’s development history appeared --- the 144mw wind power assets, which formerly affiliated to the system of the national grid corporation, were transferred to china longyuan power. the process of this resources allocation led the company to the road to the largest wind power investor and operator. in 2006, it firstly implemented its wind power development strategy. it set up six major wind power bases in 11 provinces in china which are rich in wind resources, including inner mongolia, xinjiang and northeast so as to start scale development and operation. the successful overseas ipo in 2009 is the significant node which escorted its leap-forward development.
just as what xie changjun said, the basic resources possessed by china longyuan power helped the company take the leading position in energy industry. however, it only represents the history of the company. the future of china longyuan power can only lies in the present.
[anecdote of the ipo]
narrowly attended the interview with the ipo investors in time
over the years, being a man of technology, “on-site investigation” has become xie changjun’s “routine” in developing projects.
“the on-site investigation on november 11, 2009 was the toughest in the past years.” because most of the wind power projects were in the rural and remote areas, he couldn’t reach there in a day. with the development of the company, he was so busy that he felt he couldn’t deal with the projects that were increasing each day.
“at that time, the place i visited was yumen wind farm in gansu, we could arrive there if flight is available. however, in winter there is no flight at all. after landing in lanzhou, i had to take an overnight train.” on november 11, 2009 xie changjun was designated by zhu yongpeng, general manager of china guodian corporation, to escort the leaders from the central government to make investigations. however, he had to leave for shanghai to attend the interview with the company’s ipo investors in shanghai before 3:00pm on november 12. the flight had to be ceased due to the heavy snow and the investigation planned for the morning was put off till the afternoon. “i was in great trouble after seeing the leaders off. there was no flight and worse still, i could catch the train.” the snow was falling heavily and the road was so slippery and covered with thick ice. he and his colleagues found two cars in emergency and after a whole night’s consecutive, they arrived at the airport. however, the flight boarding time had passed.
“fortunately the flight was delayed more than one hour. so we narrowly arrived at the meeting in time and we even had no time to wash our face. the first thing we did at the meeting was to make immediate apology to our investors.” after more than one year, xie changjun still can hardly control himself when speaking of this.(source：china electric power news，19 march, 2011 ）