Chinese wind turbine exports on the horizon

CHINA: It could be said to have started back in 2008, when ten 1MW turbines from Chinese manufacturer Baoding Huide were installed at a project in Texas, US.

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Next, Changzhou New United was reported to have exported a demonstration 1.5MW turbine to the US in summer 2009 and, later that year, A-Power emerged from relative obscurity, announcing a deal to supply 600MW of turbines to Cielo’s West Texas wind project — ahead of any meaningful sales volume in China.

More recently, three 1.5MW Goldwind turbines were erected in Minnesota by May 2010.
Goldwind, Sinovel, Envision Energy, Guodian and Windey have all announced the opening of US offices or expanded US sales efforts.

Other Chinese wind turbine manufacturers will follow Sinovel’s aims to generate 30% of turnover in export markets in the foreseeable future.

And Goldwind and Mingyang are planning international listings partially aimed at internationalising their presence.

In a show of commitment to export markets, eight Chinese manufacturers made their international debut of sorts at the American Wind Energy Association 2010 Windpower Conference & Exhibition in May.

This focus on US exports may be a sign of things to come.

Yet the US has recently become a buyer’s market and some companies, such as Danish blade manufacturer LM Glassfiber, have trimmed down operations.

Korean and Japanese firms are also vying for a piece of the US wind market and, while this market is large, Chinese manufacturers will find business there very different from at home.

They are likely to face much work in demystifying the risks that financiers will see in using what will be seen, initially, as untested product.

That is unless bigger-picture influences disrupt the status quo.

Billion dollar question

Following a summer in which the US trade deficit has continued to grow — almost half linked to a surge in US consumption of Chinese goods and services — President Barack Obama’s top economic adviser Laurence Summers has been dispatched to Beijing as the debate about the Chinese currency and global imbalances is resurfacing.

Over the years, China has amassed foreign currency reserves all over the world — $2.5 trillion at the end of March — with a significant amount in US Treasury bills, $776.4 billion.

A recent article from the Chinese newspaper People’s Daily suggests that, among other things, the funds should be used "to purchase large-scale machinery and electrical equipment and sophisticated technologies, and to make strategic asset investment or to join investment holding companies, focusing on high growth investment opportunities where potential returns will exceed the cost of capital".

Power connections

Perhaps the wind industry will represent a channel in which to diversify some Treasury and cash holdings into US infrastructure investments.

Already leading Chinese state-owned power companies, including Datang and Guangdong Nuclear, are known to be looking for US partners and development opportunities for wind and solar power, and these companies are likely to source equipment from the Chinese firms with which they are most familiar.

Scheduled international listings of the wind subsidiaries of Datang and Huaneng later this year may accelerate the development and financing of international projects.

But past Chinese investment in US energy infrastructure has not been without its hitches. Last November China Investment Corp, the country’s sovereign wealth fund, put $1.58 billion into independent power producer American Energy Systems, but failed to invest a planned $571 million in subsidiary AES Wind this summer.

The deal is said to have faltered on questions about US policy support for renewable energy.

Politics could easily derail investment plans, too, as happened in 2005 when US Congress rejected a bid from the China National Offshore Oil Corporation for US offshore oil firm Unocal on strategic grounds.

It remains unclear to what degree US regulators will accept ownership by Chinese State-Owned Enterprise (SOE) of energy-related infrastructure.

On one hand, the growth in dollar reserves and Treasury holdings may make it more difficult to turn down, but the approaching US elections in an era of economic woe at home could easily see China as a scapegoat in political rhetoric that is harmful to trade and bilateral relations.

Other destinations

The US is by no means the only destination of Chinese capital.

Investment in developing nations presents an opportunity that China is keen to expand.

For wind power producer Longyuan Power, South Africa is the focus of international development plans.

The company is likely to find financial backing through the China-Africa Investment Fund, launched in 2005 by China to support profit-driven investment opportunities on the continent.

This fund has invested in 27 projects in Africa, enabling total input of about $3.6 billion by Chinese firms. The upcoming deals, said to be not solely focused on natural resources, will work with SOEs and other Chinese firms.

Beyond Africa, investment models are emerging in which leading SOEs will be able to access funds through the state-owned commercial banks or through China’s sovereign wealth fund.

For direct Chinese wind turbine exports, trade in developing countries already includes Chinese energy and infrastructure systems with some prominence.

The list of Chinese companies or their related groups that have already exported power infrastructure equipment and heavy equipment is long, including: Dongfang Electric, Shanghai Electric, Tianwei, Dalian Heavy, Xiangdian Group and CSR Zhuzhou.

The list of the countries to which they export is equally broad, spanning Southeast Asia, Central Asia, the Middle East, Africa and Europe. All these companies will be familiar with special finance facilities, and some already have successful working relationships with the power sector players in these countries.

Success in the US market may be important for brand development, but for the Chinese wind turbine manufacturers, export ambitions will inevitably take on a distinctly global flavour.  

Sebastian Meyer is director of research and advisory for Azure International Technology Development

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