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Analysis: Goldwind set to continue dominance in Chinese market

CHINA: China's wind power sector appears to be emerging from a difficult two years. In 2013, it installed more than 16GW, a 24.5% rise on the previous year, with Goldwind retaining its position as the number one supplier with 22.4% of the market.

However, it is easy to forget Sinovel that was in the same position in 2009. Now it is trying to fight off smaller players such as Ming Yang and Envision.

It appears that Goldwind is keeping an eye on growth. Recently Goldwind president Wu Gang said: "Like long-distance running, a wind-power player should see quality and sustainability as priority." He believes such an approach can bring long-term value to both customers and the company itself. Radical change appears unlikely.

Wu's opinion was echoed by energy sector analysts, who describe the company's approach as "moderate". "Goldwind hasn't made any major or strategic mistakes, that's why it got through the market recession in 2012," said a senior analyst at China Investment Consulting.

Goldwind's diversified market policy also guarantees its leading position. As early as 2010, when China's wind power market saw the end of its golden days approaching, the company had already started its transition from wind power equipment manufacturer to solutions provider.

Diversification

In 2005, Goldwind set up subsidiary Tianyuan New Energy, a turbine service provider, to enter this lucrative sub-sector. Tianyuan has now become the leader in the service market, according to Goldwind's 2013 mid-year report, which said that its service income is up by 28.71%, with more than 10,000 maintained turbines.

This pre-emptive move gives Goldwind an advantage in this growing sector, as China's turbine service market is estimated to reach CNY 100 billion ($16 billion) in 2020.

At the same time, the company is investing in its build-own-operate-transfer offering as another diversification. In its early stage, Goldwind got involved in wind farm development to accumulate talent and experience.

According to its 2013 mid-year report, the gross profit rate in Goldwind's wind farm division reached 65.84% — much higher than those of turbine sales (16.14%) and service (12.19%). An unnamed Goldwind executive said: "During 2011 and 2012, Goldwind sustained the cash flow and survived the hard times though a build-operate-transfer model. Now we will continue the business for that reason."

In its 2013 mid-year report, the company said it sold 45 2.5MW turbines and 366 1.5MW turbinesin the first half of 2013. This compares to the 2012 H1 the figures of 13 and 460. The total capacity of 2.5MW units accounted for 16.99% in 2013, a big leap from 2012's 4.51%, indicating the higher-capacity turbine replaces the lower one in sale, which ismore profitable as the 2.5MW machine has a higher profit margin.

The company's rivals appear unlikely to mount a serious challenge to Goldwind in 2014. Second-placed United Power installed 9.2% of 2013 capacity, over 2GW less than Goldwind.

Unless China's wind power market suffers some major problems, such as large-scale curtailment or unfriendly policies, which is unlikely so far, Goldwind looks unlikely to suffer a similar decline to Sinovel in the near future.

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