Wind turbine parts maker says profits face powerful headwinds
China High Speed Transmission Equipment Group, the nation's largest maker of gearboxes for wind turbines, has warned major regulatory changes could help slow sales growth markedly next year.
Chairman and chief executive Hu Yueming said China's wind-power industry was suffering from a near-term turbine glut after a prolonged building boom outpaced power line construction and Beijing swept in to control future growth.
Hu nonetheless said yesterday that the wind-power industry would remain strong in the long term.
'I believe next year's output will not see substantial growth since our scale is already quite large,' Hu said. 'But we won't see a decline.'
The Hong Kong-listed company on Wednesday posted a 49.2 per cent year-on-year decline in net interim profit, as sales edged up 2.8 per cent. Excluding accounting losses related to fair value changes of convertible bonds and an equity swap deal, underlying profit fell 27.5 per cent to 375 million yuan (HK$458 million).
China's wind power industry - fuelled by developer interest and lax local approvals - saw generation capacity at least double every year between 2006 and 2009. State-owned power generation companies could not build power lines fast enough to keep up with the boom.
As a result, over a fourth of the nation's installed capacity is now waiting for a grid connection.
In addition, aggressive cost-cutting by developers eager to win project bids meant most turbines were built without more advanced 'low voltage ride-through' (LVRT) technology intended to keep them running and connected to the grid even after severe drop in voltage.
The shortcoming has already contributed to a few incidents in which hundreds of wind turbines suddenly dropped off the grid, threatening stability of entire regional electricity distribution systems.
Beijing, hoping to get a handle on the industry, has ordered all wind farms to make sure their turbines are LVRT-enabled by the end of next year. It also stripped local governments of the power to approve any new wind farms. Previously, projects smaller than 50 megawatts did not need higher approval.
China High Speed made gearboxes to produce 4,800MW in the first half, but only delivered 3,800MW, since customers stopped taking deliveries because of the shake-up.
'Deliveries are recovering,' Hu said. 'As for the second half, the market situation has changed substantially. It is no longer like the kind of growth we have seen in the past.'
Gigawatts of wind power that the mainland aims to have on-grid and operational by 2015. It had 42GW online at the end of last year