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The proposed tariff cuts are expected to reduce wind farm operators' estimated net profit for next year and 2016. Photo: Reuters

Wind power and equipment maker shares slide 6pc by midday

Shares of the mainland's wind farm operators and equipment makers slid yesterday on news that the industry regulator is consulting participants on cutting power prices by an average 6 per cent on wind farms.

Shares of the mainland's wind farm operators and equipment makers slid yesterday on news that the industry regulator is consulting participants on cutting power prices by an average 6 per cent on wind farms that start operation from the middle of next year or later.

State-backed China Longyuan Power Group Corp closed 0.86 per cent lower at HK$8.11 after falling as much as 3.2 per cent, while rival Huaneng Renewables Corp lost 0.72 per cent to HK$2.75 after shedding as much as 4 per cent. Privately owned China WindPower sank 5.5 per cent to 69 HK cents.

Equipment makers also fell. Xinjiang Goldwind Science & Technology eased 2.76 per cent and China High Speed Transmission Equipment Group dropped 1.26 per cent.

The long-expected proposed tariff cut, the first since Beijing set regional subsidised wind power prices in 2009, is aimed to reflect lower wind turbine costs and relieve the financial pressure on the government and consumers that have to bear the costs of rising consumption of clean energy.

The average price of a 1.5-megawatt turbine has fallen about 36 per cent to 3.44 million yuan (HK$4.3 million) per megawatt from five years ago, according to a Citi research note.

The National Development and Reform Commission has proposed to cut each of the current regional benchmark per kilowatt-hour tariffs of 51 fen, 54 fen and 58 fen by four fen, and the 61-fen benchmark by two fen, reported. The average cut is 6.4 per cent.

The new tariffs might apply to wind farms coming on stream on June 30 next year or later, the paper quoted sources at a consultation meeting as saying, adding that they faced opposition from the industry and local governments that would lose out if the pace of installation slowed.

The benchmarks were set based on the estimated wind resources in four regions. Higher tariffs were given to wind farms in regions with better resources.

An official at a Hong Kong-listed mainland power generator confirmed the details of the consultation to the "Every [autumn], the [commission] discusses tariff cuts with the industry. But this year, they brought with them concrete proposals," the official said. "In previous years, no action was taken due to opposition from the industry and the government's war against pollution."

He said the wind farm operators' opposition this year was based partly on poor wind resource, which led to lower profits for them so far this year, and partly on the fact that cutbacks of power purchases by grid operators persisted although more grids had been built to relieve the distribution bottleneck.

Pierre Lau, head of Asia utilities research at Citi, said the proposed cuts would cut wind farm operators' estimated net profit by an average 0.3 per cent next year and 4 per cent in 2016.

This article appeared in the South China Morning Post print edition as: Wind power firms fall as tariff cuts loom
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