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Eric Ng

The mainland's wind power turbine industry is headed for a major consolidation, with fewer than 10 out of more than 100 manufacturers likely to survive the shake-out.
The warning comes from China High Speed Transmission Equipment Group chairman Hu Yueming, who heads one of the country's largest suppliers of equipment.
The State Council said late last month there were signs of overcapacity in the emerging wind power equipment sector and ordered banks not to lend to projects deemed redundant or of low quality.
Hu said this is an 'entirely correct' policy because the number of turbine makers now exceeded 100, compared with only a handful a few years ago. 
He added that 'even 10 may be too many for China'.
The country's installed wind power capacity has more than doubled in each of the past four years.
But Hu stressed that overcapacity is seen only in the manufacturing of turbines, not in transmission gears, which the company produces for the turbine makers.
'There are only a few companies in the transmission gears segment, and these products are still in short supply,' he said, adding that transmission gears are one of the most technology-intensive components of a wind turbine.
China High Speed supplies about 13 turbine makers, which together account for 98 per cent of the entire market's supply.
'A few industry giants will certainly emerge, and in order not to miss the opportunity to supply to them, we have covered more than just the biggest players,' said Hu.  
Fewer than five companies are engaged in making transmission gears used in wind turbines on the mainland, and globally only a few major companies are in the same business, he said.
China High Speed posted a 0.7 per cent year-on-year rise in first-half net profit to 254.41 million yuan (HK$288.76 million). Excluding non-recurring gains and losses related to convertible bonds and equity swaps, net profit surged 37.8 per cent to 333.32 million yuan.
The company's shares dropped 6 per cent yesterday to HK$16.86.
Morgan Stanley, a counterparty of China High Speed's equity swap, issued a research note saying the interim results were 10 to 15 per cent below its forecast on significantly higher than expected interest expenses, fewer wind gearbox shipments and a lower than anticipated increase in profit margin. 
But an analyst at a Southeast Asian brokerage said shipments were in line with earlier company guidance, adding the management indicated second-half borrowing needs and interest expenses would fall.
The analyst and DBS Vickers Securities analyst Dennis Lam both said the fact profit margin rose less than expected despite lower raw material costs was a concern. Price cutting by turbine makers would put pressure on gearbox makers, they said.



Wind power turbine makers head for industry shake-out