China's wind turbine OEMs enjoy installation-dash bounce

Manufacturers see revenues and order uplift as developers race to beat phase-out of subsidies

China’s turbine OEMs are having a bumper 2019 thanks to an installation dash to beat the phase-out of subsidies in the world’s biggest wind market, Recharge analysis shows.

Third-quarter financial reports show significant year-on-year growths in revenues and turbine sales for leading manufacturers. Of China’s top-10 wind OEMs by 2018 rankings, three are listed in Shanghai or Hong Kong stock exchanges, and five are business branches part of public-traded companies.

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The three listed groups, Goldwind, Ming Yang Smart Energy (MYSE), and China Windey announced two-to-three digit revenue growths in the first three quarters of 2019.

Goldwind —the frontrunner of the Chinese market in installed capacity— notched up 24.7bn yuan ($3.5bn) revenues in the first nine months of 2019, up 39% on last year. Third-placed MYSE earned 7bn yuan with a 59% year-on-year growth.

But both were overshadowed by the financial leap of Windey, the sixth-placed of 2018. The onshore-only turbine supplier registered a 127% year-on-year revenue growth in the first three quarters, with a total 1.2bn yuan.

Windey's earnings during July-September quadrupled that in the same period last year, a clear sign of the booming onshore turbine market right now.

United Power, Shanghai Electric Wind (SEW), Dongfang Electric Wind (DEW), XEMC, and CRRC Wind belong to their listed mother companies and do not make public separate financial results regarding the turbine business.

Most of their parent groups reported major increases in revenues and sales this year, and attributed the upward trends to the surging demand in the wind power market in their filings, Recharge analysis showed. United Power, for example, reported 39% year-on-year growth in turbine sales.

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Envision, “runner-up” in the market last year, has so far stayed a private company and did not release its quarterly results. But in October the firm issued a press release stating 6bn yuan earnings from turbine sales the first six months, up 40% from last year, showing the same momentum.

The revenue boosts among the Chinese firms reflects a current wind installation dash linked to the rapid changes applied to renewable feed-in tariff ( FiT) schemes in the country.

Last year, Beijing announced it would scrap the long-standing feed-in tariff mechanism that supports the wind sectors with a fixed on-grid power premium. According to the revised rule, new wind projects from 2019 onward are required to compete on price in regional project allocation, in which the regulator also introduces price caps that will be lower every year, Recharge previously reported.

Starting from 2021, officials in Beijing said, new onshore wind prices will be completely stripped of subsidy and reach “grid parity”. The offshore wind zero-subsidy timeline was not announced, but many in the industry suspect the intention of Beijing is to set the date around 2022.

Regional governments sped up project approvals last year to help wind developers to avoid the upcoming shift to competition, with Beijing adding fuel to the fire with a rule requiring onshore and offshore projects approved last year to achieve grid connection by the end of 2020 and 2021, respectively, to be entitled to the premium fixed feed-in tariff.

The twist spurred developers into a frenzy of construction and procurement to meet the deadlines.

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In the first nine months this year, China collectively held tenders encompassing 49.9GW of turbine sales, marking a massive 108.5% YoY increase, a report of Shanghai stock exchange revealed.

OEMs easily scored double-digital growth in new turbine contracts, as company filings show.

Goldwind , Envision, and MYSE all reported double-digit capacity contracts in the pipeline —15.5GW, 18GW, and 11GW by June this year and still rapidly expanding.

The installation dash also triggered surging turbine prices in the market, as suppliers struggle to cater for the demand.

In September, the average price for 2.5MW turbine—a mainstream product in China’s onshore market— reached 3,898 yuan/kW, up 17% from the bottom point of last year, analysts at Shanghai Securities revealed.