Business Assignment

Wind is power, esp. in China.

There are five reasons why we should invest in China’s wind power industry.

First of all, China has the largest wind installed capacity in the world and its capacity is still growing:

Currently, China’s wind installed capacity is over 90 GW. By contrast, India has just over 20 GW. And China’s wind installed capacity has been increasing quickly in order to reach its ambitious goal of having 1000 GW by 2050. Last year, China led the world with about 16 GW increase in wind capacity.

Secondly, Chinese gov’t strongly support wind energy development with large investment and subsidies:

Gov’t’s Twelfth Five-Year Plan brings a clear message that China will continue to push and give strong support for the development of wind power: The new wind installations on the list will be total 27.60 GW, more than the 20 GW that had been widely expected.

Chinese gov’t also has world’s largest wind power investment: representing 37% of G-20 countries’ investment. It’s totally $27.2 billion in 2012, while India just invested in 5 billion.

Gov’t provides very generous subsidies to wind power industry, such as the Renewable Energy Power Generation Price Subsidy: last year, they just released the fourth batch list of price subsidy to more than 300 wind power generation projects.

In 2011, the Chinese government introduced a new management regulation to address the mismatch between the grid and wind farm planning and improve the quality of the turbines and wind farm management.

Lastly, evidence shows that wind power industry has very strong asset financing capacity: Wind energy was the leading sector for asset financing globally, attracting $72 billion in 2012. China led all G-20 members in clean energy asset financing, attracting about 43 percent of all G-20 financing of this type.

As you see, the wind power industry in China has huge growth potential, so we suggest to put part of our investment in Chinese wind power companies’ equities.  

The first stock I recommended is Xinjiang Goldwind.

Xinjiang Goldwind is a growing second-largest wind turbine manufacturer. It has been expanding quickly. Since 2011, Goldwind has started its global expansion, seeking to increase revenues from oversea sales. In only the year 2011, it expanded its businesses into Canada, and some emerging markets in South America and Africa.  Now, it is in the development of a new 10MW offshore turbine as it wants to keep pace with developments among European manufacturers.

It also has good tech innovation: Goldwind created a new turbine, which does not need a gearbox but instead has a "direct drive" system designed to be cheaper to maintain. It significantly reduced its costs.

Besides, Goldwind is assumed to benefit most from China’s fourth installment plan of wind power projects, since the new plan included 400MW to be solely developed by the Goldwind.

Its good Performance in stock market is also one of the reasons: its stock rebounded quickly since 2012 and did well in the past year. Its one-year return is + 121.91%, according to the bloomborg.

The second stock I recommend to buy is Huaneng Renewables Corp. (958)

It is a renewable energy company in China with a primary focus on wind power generation. In 2011, the Company installed 27 new wind power projects with total installed capacity of 1,400 megawatt.

Revenues increase by about 58% year-on-year to Rmb 2.87 billion last year. This increase is partly because of the government’s curtailment of new wind power projects as a way to deal with grid congestion. Huangneng Renewable was able to increase its capacity utilization and power output as a result.

It also improved its management by introducing a pilot wind power assets finance integration system in 2012. The company has taken management standardization as an important work.

Just like Goldwind, its stock price has also increased quite quickly in past five years, with one-year return of + 92.54%

We also Hydro power

Let’s move forward to the next growing renewable power industry in China – hydro power.

We do think China’s hydro electricity industry is worth to invest in. There are several reasons.  

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