focusing on the strategy of “greatly developing the new energy resources to achieve business transformation” formulated by the china guodian corporation, longyuan power has made positive efforts in promoting the development of the renewables, clean energy and the cdm projects in recent years. it has so far registered 137 projects in the un, with the installed capacity reaching 7322.55mw. this has made it come out at the top in the domestic power industry in this regard for four consecutive years. as of june 17, 2012, its return on equity posted a register of rmb 1.95 billion yuan. longyuan power has held a safe lead in the domestic power industry in various indicators ranging from the number of projects it has developed to the gains it has realized, thus becoming a domestic leading enterprise setting foot in the cdm international market.
keen sense of market and forward-looking strategic vision
the clean development mechanism (cdm) is a flexible mechanism for the developed and developing countries created by the kyoto protocol to reduce the greenhouse gas emissions. that is, to fulfill the emission reduction obligations under the kyoto protocol, the developed nations can reduce their greenhouse gas emissions or purchase the greenhouse gas emission credits from other nations to fulfill their own obligations. since the first cdm project in the world was successfully registered on november 18, 2004, the cdm international market has expanded gradually and witnessed substantial development. this means that cdm has been widely recognized as a flexible market mechanism which can effectively combined the developed and developing countries to deal with the climate changes together.
in 2005, our country set foot in the cdm market. the cdm project developed apace in our country because of the huge market of the greenhouse gas emissions and government’s correct guidance and support. the expected annual emission reductions of the registered projects, certified emission reductions approved by eb (un climate change executive committee), and the number of cdm projects successfully registered in eb all top on the list across the world. this indicates that our country has taken the lead in the cdm market in the world.
actually, opportunity comes when it has not been recognized in the market. in 2005, when the international cdm market opened its arms to china, most industry insiders in our country took the result with a pinch of salt and held that it was just a political show directed by the western countries. however, the leading figures of the longyuan power were all blessed with decades of working experiences in the power industry and a very deep understanding of the greenhouse gas emission market resulting from the thermal power. they realized that it was a potential market opportunity. subsequently, they promptly organized and convened the special sessions, personally made in-depth investigation of the real situation of the carbon market, and established the office specializing in tracking studies on the cdm market. in 2008, china guodian corporation called on its branches to shift their focus to the development of new energy resources so as to achieve the business transformation. longyuan power thus began to have a hand in this field. by virtue of the forward-looking strategic vision, it knew that efforts must be made to pool the resources and bring the joint force into play. given this, it took the lead in establishing the longyuan carbon asset management company domestically to conduct specialized operation, adopt the centralized management of the renewable energy projects under longyuan power, and package the projects before making them available in the international market.
rigorous business cooperation and good cooperative mechanism
rigorous business cooperation is embodied in the improvement of transaction efficiency and prevention of transaction risk. to improve the transaction efficiency, longyuan power gives full scope to its advantage in the large number of projects. it puts several projects into operation after packaging them together and makes concerted efforts in negotiation and sales to fight for the dominance of the transaction. longyuan power loves to save for a rainy day. it always negotiates with the potential buyers in advance and tries to reach an agreement on the cooperation framework and contract templates so as to reduce the uncertainties as much as possible. when the project goes into the stage of specific implementation, the amount of time spent on marketing will be greatly reduced. the working efficiency is thus improved significantly.
as to the prevention of transaction risk, longyuan power pays much attention to whether the buyer is qualified and strong enough. it only chooses those with a good reputation in the market and a strong ability in performing contracts as the cooperative partner, in particular those end-buyers related to the government and energy companies. it never establishes any cooperative relationship with the intermediary buyers which are mostly speculative and quite weak. in the negotiation with the buyers, longyuan power always works hard to promote our own contract templates and carefully chooses the words used in the contract terms especially relating to the core interests of our rights and obligations with a view to maximizing the transaction security.
thanks to the rigorous business cooperation, longyuan power has sold more cdm projects than its counterparts. its cdm projects were performed much better than those of its counterparts. since the second half of 2011, the carbon market witnessed a sharp drop of more than 70 percent and quite a few buyers didn’t fulfill their contracts as scheduled. these made a large number of enterprises suffer a lot. despite this, the cdm projects under longyuan power were all basically performed as usual. no obvious breach of contracts occurred. the gains created by the cdm projects were guaranteed to the hilt.
good cooperation mechanism plays a significant role in protecting the common interests of the chinese enterprises. as the market participants continue to increase, the cdm rules are also being modified from time to time. new problems are emerging. many of them are actually the common problems for the chinese projects. longyuan power has long attached great importance to establishing the cooperation mechanism with the government, doe and other enterprises in this sector and jointly analyzing and addressing the common problems that the chinese projects are confronted with. the issue of electricity price which had been pending for two years finally witnessed some breakthroughs due to the concerted efforts made by the governmental organizations and the relevant industry alliance. a batch of chinese projects agreed to adopt the “reference price for the electricity” and successfully registered in the eb.
scientific management system and devoted executive group
scientific management system serves as the foundation of success. in order to improve the management level of cdm projects, longyuan power worked out and promulgated the cdm project management approach and work procedures in succession, making the cdm operation control much clearer. based on the operational characteristics of cdm, efforts were also made to invent a new management system to develop the templates and determine the critical points in a unified manner. this successfully lowered the error probability and accelerated the development pace. moreover, the responsibility system was introduced in practice. a competition mechanism was formed among the workers. everyone’s work performance can be collected together and compared in the system platform in real time, which greatly stimulated the enthusiasm of the employees in work and significantly improved the work efficiency.
a devoted executive group is a guarantee of success. in the early days of the management company, a set of fairly high and strict standards had been put in place for the employees working here. when communicating with the european buyers, the executive team of cdm has to overcome the problem of jet lag. usually, they have just two or three hours overlapping with the working time of their european partners. to speed up the work progress, they often talk with them at around 10 o’clock at night through the online video. in this way, all the important issues can be responded and solved in a timely manner. during the on-site inspection, our workers actively collaborate with the validation personnel of doe. it is this dedicated executive team that uses their work efficiency to tell us what the spirit of guodian corporation is. it is estimated that one-month reduction of the audit time means another gain of 1 million yuan. data shows that the audit time that doe spent on the single project of longyuan power was shortened from 18 months in 2007 to 7 months in 2011, the shortest in this sector in our country.
just as the famous poet li bai in the tang dynasty once wrote: “a time will come to ride the wind and cleave the waves, and i will set my cloud-white sail and cross the sea which raves.” in october 2011, the ndrc released the circular on carrying out the pilot work of carbon emissions trading and approved seven provincial cities as the first batch of pilot cities for carbon emissions trading in our country. the purpose was to implement the requirements of gradually establishing the domestic carbon emissions trading market according to the “12th five-year plan”. undoubtedly, the domestic cdm business will have new opportunities for development. under the guidance of the national policy, longyuan power will as always firmly seize the opportunity and utilize the market mechanism to achieve our country’s goal of containing the greenhouse gas emission in 2020 at a lower cost and accelerate the transformation of economic growth and upgrading of industrial structure.