Longyuan plans big increase in offshore wind farms
Mainland developer plans to move wind farms closer to coastal regions and raise offshore generating capacity five-fold over the next three years
China Longyuan Power, Asia's largest developer of wind farms, aims to raise its offshore generating capacity fivefold by 2015, despite technical challenges and the large capital required.
The development of projects offshore is part of the industry's effort to shift focus away from the windy northern regions which suffer from power transmission bottlenecks due to overly rapid development of wind farms there, to coastal provinces that are close to consumption centres and do not require long-distance transmission infrastructure.
Beijing-based Longyuan, a unit of China Guodian Group - one of five state-owned power generation groups - aimed to increase offshore capacity to 1,000 megawatts (MW) in three years from 182MW currently, company secretary Jia Nansong said last Friday.
Based on an average investment cost per MW of around 15.5 million yuan (HK$19.13 million) on a 150MW project that was officially commissioned last week, completing projects to meet the goal will require 12.7 billion yuan of investment. Mainland power projects are typically 20 per cent equity capital-financed and 80 per cent bank loan-funded, implying some 2.5 billion yuan of equity capital will be required.
Longyuan had a total wind farm capacity of 8,994MW at the end of June and plans to add 1,600MW this year and 2,000MW in each of the next few years, of which most will be onshore projects. For onshore projects, based on last year's average construction cost of 7.9 million yuan per MW, the company may need some 41 billion yuan of investment in the next three years, of which 8.2 billion yuan is equity capital.
Longyuan had 3.9 billion yuan of cash on hand at the end of June, with a net debt-to-equity ratio of 198 per cent. To keep its debt ratio at a level comfortable to management, it said in May this year it planned to issue up to 1.36 billion of new shares, or half of the total number of its Hong Kong-floated shares, to raise fresh equity capital.
After fund managers complained that the plan would cause substantial dilution of their interest, Longyuan trimmed the number of shares to be issued to not more than 813 million. If they were issued at last Friday's closing price of HK$4.85, that could raise HK$3.94 billion.
But Jia said Longyuan had no fixed timetable for the share sale, and pointed out its mandate from shareholders to issue more shares was valid until July 2 next year.
Longyuan said it planned to use half the proceeds of the new share issue to fund construction of onshore wind farms, 20 per cent to finance offshore wind farms, 15 per cent for overseas wind and solar power projects, 5 per cent for mainland solar projects, and the remainder to boost working capital.
After completing a 32MW experimental offshore project in 2010 and a 150MW demonstration project this year, Longyuan is performing preliminary work on a 200MW project it won two years ago via a development right auction by the central government.
After some delays caused by the relocation of the project to make way for seafood farming, Longyuan plans to start construction next year and aims to complete the project by the end of next year. All three projects are located in near-shore inter-tidal areas off the coast of southern Jiangsu province.