National Development and Reform Commission

State firms win solar power bids

PUBLISHED : Friday, 17 September, 2010, 12:00am
UPDATED : Friday, 17 September, 2010, 12:00am

The central government is allowing state-owned enterprises to build solar farms at prices widely considered to be unprofitable, leaving private companies out in the cold.

Analysts said companies were eager to fight for early-entrant advantages and to fulfil clean-energy-generation obligations handed down by the state. Beijing was happy with the losses, they said, because it wanted to expand the nascent solar power sector by driving down costs.

Private firms lack strong financing from state banks, and the operating scale to absorb any losses.

The 21st Century Business Herald reported that the National Development and Reform Commission (NDRC) had awarded all 13 projects to enterprises owned by the central government, all at power prices lower than 1 yuan (HK$1.15) per kilowatt-hour of output - widely seen as the minimum break-even point.

China Power Investment Group, parent of China Power International Development, won seven projects, in Qinghai, Henan, Gansu and Xinjiang. The winning bids range between 72.9 fen and 99.1 fen per kWh.

China Huaneng Group, parent of Huaneng Power International, has bagged two projects in Gansu and Ningxia, at 78 fen and 98 fen, while China Guodian Group secured two in Inner Mongolia at about 88.5 fen.

Although break-even points of projects are different, three analysts told the South China Morning Post they believed 1 yuan was the minimum power price to be profitable.

In the first round of project tendering, in the middle of last year, the NDRC awarded a project to the second-lowest bidder, at 1.09 yuan per kWh, instead of taking the lowest bid, of 69 fen. This time around, the NDRC had stuck to 'lowest price wins', the Herald said.

'The bid winners clearly must be expecting substantial panel-price declines over the next year,' said Charles Yonts, head of solar research at brokerage CLSA. 'However, given the data points coming out of Europe over the past two weeks, it looks like they might be disappointed.'