The joint venture company formed by the three partners, named Repower North (China) Wind Equipment, expects the first 2 MW turbines to come off the production line early next year, says He Zhanjun of NHIC, a large engineering and manufacturing enterprise owned by the state. The turbine assembly facility is located in Batou in the huge Inner Mongolia Autonomous Region, the windiest region in China and where Honiton has all of its planned projects.
Repower owns 50.01% of the joint venture and claims to be the first foreign wind turbine manufacturer to have a controlling interest in a Chinese wind turbine production facility. NHIC owns 33.34% and is contributing factory buildings, employees and equipment, while Honiton has 16.65%, secured with a cash investment. The registered capital of the joint venture is approximately $12.7 million, and the total investment about $38 million.
Honiton says it is finalising a preferred client agreement which will see up to 50% of the joint venture's production made available for Honiton's sites at a highly discounted price. "This agreement paves the way for Honiton to ensure that it has access to the supply of turbines well into the future, despite the current global shortages," it says.
The Chinese government requires that 70% of the content of turbines be made in China for projects to qualify for power purchase contracts. NHIC, which already supplies rotor shafts to Repower, will also manu-facture all steel and cast parts for the turbines. "Thereby we raise the supply security in times of a massive component bottleneck," says Repower's Pieter Wasmuth.
A factory in Batou stands ready, says He Zhanjun, set to produce around 400, 2 MW turbines a year by the end of 2008. Annual sales could reach CNY 5.8 billion ($732.7 million), with annual profits expected to be around CNY 480 million ($60.6 million). Repower chairman Fritz Vahrenholt claims that the strong winds will allow wind power to be generated for just $0.038-0.050/kWh and that the region's strong transmission network will lead to 40% of the Chinese joint venture's production being installed there. The local government is aiming for 5000 MW of wind power in Inner Mongolia by 2010.
Honiton, preparing for a listing on the London Stock Exchange's Alternative Investment Market, has five 300-600 MW wind farms under development in phases in Inner Mongolia (projects under 50 MW do not require approval from central government). Closest to construction is the 49.5 MW first phase of a project known as Bailingmiao, which is fully permitted and thus qualifies for a 25 year power purchase contract with the local state electricity company. The contract pays CNY 0.548/kWh ($0.07/kWh) for 30,000 hours of full load production, or about 12 years of operation. After that what is termed the general market price for wind generated electricity will apply. The first phase plant is due online within two years.
"Honiton is keen to control its development timeline and turbine technology. And so this new development increases the scope of the company to more of a vertically integrated wind energy producer," it says. "Rather than allow the turbine supplier to control foundation and balance-of-plant construction, Honiton's local outsourcing of construction will save the company millions of dollars in cost reductions and grant it more control over the construction process," it says.