Sights set on expansion as Goldwind plan China Huaneng Group IPOs

CHINA: Goldwind and China Huaneng Group prepare for international expansion in the face of a changing domestic market.

Goldwind wants to expand its turbine manufacturing base in Juiquan
Goldwind wants to expand its turbine manufacturing base in Juiquan

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Two of the biggest players in China's wind energy sector are poised to launch flotation plans in a bid to ramp up capacity and move into overseas markets.

China Huaneng Group, the country's largest power generation company, and leading turbine manufacturer Goldwind, are both preparing initial public offerings (IPO) designed to raise capital to finance planned expansion.

Goldwind has confirmed that it wants to be listed on the Hong Kong stock exchange after a shareholders meeting in September 2009 endorsed the issue of shares to the value of CNY247 million ($36 million). The shares will not exceed 15% of Goldwind's stock equities.Goldwind is already listed on China's Shenzhen stock exchange. It is worth CNY28.78 billion (US$4.2 billion).

Goldwind president Wu Gang says the company's bid to go public is a major component of its global expansion strategy. "Issuing shares is a first step in our international market-oriented change," Wu says. "Entering the Hong Kong market will improve our management level and corporate governance at a faster rate."

Meanwhile, Huaneng has confirmed that it is also planning to list its wind power unit on the stock exchange. A company official for Huaneng New Energy, responsible for the group's renewables business, refused to confirm on which stock exchange it intends to float, but earlier media reports suggested that it could be Hong Kong in a share issue worth US$1-1.5 billion. Sources indicate that the company may also sell shares in Shanghai.

But the anonymous official says a Huaneng IPO is certainly on the cards this year. South China media last month reported that the company had hired Goldman Sachs, Morgan Stanley, China International Capital Corp and Macquarie Group to arrange the offer.

The move forms part of Huaneng's strategy to expand its wind operations. By the end of 2008 it was China's third-largest wind operator, behind Longyuan and Datang, with more than 1.4GW of installed capacity.

Previously, Huaneng chief engineer Kou Wei said the company wanted to increase the proportion of wind energy in its generation capacity by a big margin, an ambition that would be greatly advanced in the event of the Chinese government confirming widely anticipated plans to increase its 2020 wind power target from 100 to 150GW.

At present, Huaneng largely invests in wind and hydropower through the operations of Huaneng New Energy. Among its projects, Huaneng New Energy has invested in Shantou Nan'ao wind farm, Huaneng Fuxin Wind Farm and Huaneng Leting Wind Farm.

In addition, Huaneng International, a listed company and a subsidiary of Huaneng Group Corporation, has also invested in wind farms in Inner Mongolia and Jiangsu Province. In January, Huaneng International announced a plan to raise CNY10.31 billion ($1.5 billion) on the Shanghai and Hong Kong stock exchanges. Of this, CNY4 billion ($585 million) will be used to purchase four wind farms totalling 550MW in Gansu and Hebei provinces.

Goldwind's global expansion plans come in the face of intense competition in the domestic market. Until 2008, the company held the largest market share in the Chinese wind power market until it was replaced by Sinovel.

New options

Wu says that the Chinese market will remain Goldwind's priority over the next two or three years while the company explores new opportunities abroad. "It takes time to explore the international market," Wu adds. "We need two or three years to learn and grow up."

However, according to board secretary Cai Xiaomei, Goldwind is planning to begin work on some overseas projects this year. "We will steadily advance towards the international market," she says. "Priority will be given to the United States, Australia and Europe."

The company has already made some moves into new markets. In April 2008, Goldwind spent EUR41.2 million purchasing 70% stock equities from Vensys Energy, a German direct-drive turbine producer. Then in August last year, Tian Run USA, an offshoot of Goldwind, invested $10.5 million to purchase the UILK wind farm in the US state of Minnesota. In January, three sets of 1.5MW turbines were put into operation and connected to the local power grid at UILK, Goldwind's first project in the US.

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