China responds to global wind turbine shortage -- Private company in Guangdong seals 900 MW deal for supply to United States

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The first export of utility-scale Chinese wind turbines to the West has begun with the shipment of two 1.5 MW machines to the United States, the first of at least 200 of the same model bound for America this year. The shipments herald a framework deal between China's Mingyang Wind Power Technology Co and renewables developer GreenHunter Energy for the supply of 900 MW of wind turbines to North America by 2012. GreenHunter, of Grapevine, Texas, is a recently founded holder of renewable energy assets. Mingyang Wind Power, with headquarters in Guangdong province, is one of four subsidiaries of the privately owned Mingyang Electric Group Company, founded in 1993.

"The first two turbines are going to be taken to north-eastern Montana and tested to make sure everything works the way it's supposed to," says GreenHunter's founder and CEO, Gary Evans. From Seattle, where the turbines are due to arrive soon, they will be transported by truck to the Valley County Wind Project. "That's the first project and we'll probably put twenty turbines there," says Evans.

A total of 72 Mingyang turbines are being shipped to Montana this year, where Wind Hunter, a GreenHunter subsidiary, has land leases on four sites with a combined capacity of nearly 550 MW. It also has a land lease in New Mexico for a 300 MW site and another in California for 225 MW, where wind measuring has yet to begin.

Mingyang reports a sales price of CNY 720 million ($98.4 million) for the 108 MW of turbines, which it says cost 20% less to make than products produced by its competitors at home and abroad. The company will set up a division in the US to service and maintain the turbines. GreenHunter has pledged about $10 million for a 6.3% equity interest in Mingyang Wind Power, pending Chinese government approval.

Just one Mingyang turbine is in operation -- a test machine assembled in August and installed in October on the East China Sea coast. "We drove something like ten hours to get there from Mingyang's headquarters. It was an interesting trip to say the least. The turbine is sitting there all by itself," says GreenHunter's Stephen Wiley. Mingyang refers to the prototype as the first stage of the Xuwen Yangqian wind farm at Zhanjiang, for which it has an order for 33 further turbines.

The technology

Mingyang developed its turbine together with German company Aerodyn, a wind turbine design consultancy that has been in business since the early 1980s. The machine is described by Mingyang as a variable speed, pitch controlled model. It is the first Chinese developed, megawatt-scale wind turbine to be ready for commercial deployment overseas. Unlike turbines made in China under licence deals with established companies -- such as Repower in Germany or Windtec in Austria (owned by American Super Conductor Corp) -- Mingyang is not restricted by the terms of a licence agreement from selling its turbine into markets outside China.

The machine is being type-certified as a production series model by Germany's Germanischer Lloyd (GL). "Turbine certification is a three-part process and they are probably somewhere between 50-75% through that," says Wiley.

Aerodyn is collaborating on wind turbine production with a number of Chinese companies. A 2 MW model with Aerodyn input has just been installed in Inner Mongolia by China Huaneng Group (page 10). The Chinese are not alone in picking Aerodyn technology. French nuclear company Areva bought the rights to Aerodyn's most publicised design to date: the Multibrid 5 MW offshore turbine, a prototype of which has been running on land in Germany since 2004.

Mingyang, as a multi-discipline engineering company, says it has made all the components for the 1.5 MW machine, barring the tower. These include the gearbox and the blades. It adds, however, that the Chinese content of the machine will rise from 75% to 85% this year, suggesting that some parts have already been brought in from overseas.

The background

Wind turbine research was started by Mingyang back in 2000 and today the company describes itself as a manufacturer and service provider of wind power equipment. A sister company to Mingyang Wind Power is dedicated to the development of wind power generator control systems in collaboration with China's massive Longyuan Electric Power Group Corporation, already a major owner and developer of wind plant. The Mingyang group is involved in power electronics, intelligent electrical appliances and power transmission equipment.

"The chairman of Mingyang decided to get into the turbine business in 2001. This was a very calculated, methodical process they went through. If we had not stepped up to the bar, I believe there were other very well-known companies that were willing to take our place," says Wiley, who was recently brought in by GreenHunter to oversee its wind start-up. Wiley spent the last two-and-a-half years with Spanish wind firm Gamesa after 15 years in natural gas generation for Calpine and Reliance Energy, among others.

"It took a lot of hard work to eventually get that turbine agreement signed. Mingyang was very sensitive to who they were going to send these turbines to. They understand the significance of this contract, exporting to the US and all the issues we've seen between other Chinese products and the US marketplace," says Wiley. For his part, Mingyang's chairman, ChuanWei Zhang, says: "I truly believe that the business relationship between GreenHunter and Mingyang is a new milestone of wind energy development and co-operation between two countries."

A reputation

GreenHunter was formed by Evans after he sold Magnum Hunter Resources, an oil and gas company he started in 1985 with $1000 and sold in 2005, as public traded company, to Cimarex Energy for $2.2 billion. "As a result of that he has quite a reputation in the capital markets," Wiley says. "We believe he will be able to access that reputation to get us the capital we need to move forward."

Evans remains a principal in Global Hunter Holdings with "entities active in both direct capital investments and investment banking activities for numerous high growth Chinese-based enterprises." Mingyang and GreenHunter connected while Evans was in China on unrelated business.

GreenHunter's modest asset base to date comprises its wind project land leases, a potential stake in Mingyang, a former waste oil refinery in Houston it is converting into a biodiesel refinery, and a biomass power plant in El Centro, California. GreenHunter's goal is to offer a portfolio of diversified renewables assets as a publicly traded company and it was heading for a New York Stock Exchange listing at the start of this year.

The ChinA connection

Mingyang is planning a fast ramp-up of its wind business and has secured a CNY 200 million ($27 million) line of credit from the Agricultural Bank of China. From the single manufacturing facility where it assembled the 1.5 MW prototype, the company is planning a series of additional factories, including a CNY 360 million ($49 million), 37,000 square metre assembly hall at the Mingyang Industrial Park in Zhongshan Torch Development Zone. The factory is being built in partnership with the biggest energy developer in Guangdong province, Yuedian Group, which has scored one of the central government's wind farm concession contracts.

A further CNY 300 million is being invested in two wind turbine blade technology companies in south and north China, a wind turbine parts company and a wind turbine assembly company in north China's Xi'an City. From next year Mingyang Wind Power plans to produce 2.5 MW and 3 MW machines as well the 1.5 MW model.

Annual production capacity is planned to increase from 450 units to at least 1000 units by 2010. Around two-thirds of its turbine capacity will stay in China, it says. The company reports domestic orders for 600 MW of the 1.5 MW model, a figure it was expecting to hit 1000 MW by the end of last year, with major state utilities among the customers. As well as the build-out at Xuwen Yangqian, site of the single prototype, it expects to be supplying 132 units for wind farms in Inner Mongolia and Jilin (page 10) in the short term.

Even so, Wiley says that availability of turbines for export was the overriding factor in GreenHunter's decision to opt for a Chinese supplier. "So far everything has been as good as or better than expected," he says.

"Will there be hiccups? I'm certain there will. But the fact is that Aerodyn and GL have been intimately involved in this process and will continue to be intimately involved -- and the Chinese are just so impassioned with coming out with a very, very good turbine." He adds: "We did our due diligence and came away impressed." Evans believes the turbines are "world-class" and will compete favourably with turbines from established manufacturers in the US and Europe.

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