Firm links up with China Energy Conservation for 25-year concession to build 200 MW Hebei wind farm Hong Kong Construction (Holdings) has won a 1.6 billion yuan tender to jointly build a wind farm in Hebei province with China's only state-owned investment firm in energy conservation and environmental protection. The company said in a statement that its venture has won a 25-year concession to construct a wind farm in Danjinghe of Zhangbei city with annual generating capacity of 200 megawatts. It has a 40 per cent stake in the venture, with the remainder held by China Energy Conservation Investment. It is Hong Kong Construction's second wind project, after a 60 MW project in the northeastern Heilongjiang province. 'Our participation in the project will strengthen the group's alternative energy sector investment which is one of the primary businesses of the group,' managing director and chief executive Eric Oei Kang said in a statement. The Danjinghe project is part of the fourth concession handed out by top national economic planning body National Development and Reform Commission, involving three wind farms with total capacity of 700 MW in Hebei and Inner Mongolia autonomous region. The Danjinghe project will charge a power tariff of 50 fen per kilowatt-hour, a rate considered too low by some industry executives, who say that a tariff of at least 60 fen per kilowatt-hour is needed to generate a 10 per cent standard rate of return. Wind power projects are attracting aggressive bids from state-owned firms. Even if the size of such business is still negligible, environmentally friendly energy projects are seen as a way to enhance corporate image, market watchers said. State-owned power firms also need to fulfil a government-set target of raising their renewable energy to 5 per cent of their total output by 2010. Chinese Wind Energy Association vice-president Shi Pengfei said the latest bidding results show the government is sticking to its policy of awarding projects to companies offering the lowest or close-to-lowest tariffs. 'I think the government respects investors' decisions and will probably not change the policy,' Mr Shi said. Industry watchers are concerned that such policy, which was announced last year, will harm the development of the nascent sector. They say low tariffs will compromise the quality and reliability of equipment as developers would be forced to pressure equipment providers to cut costs. The government last year issued a directive requiring project bidders to partner with a domestic equipment supplier, and that at least 70 per cent of wind turbine components be made domestically. It hopes localisation of production and mass production will lower equipment costs. Equipment for some 70 per cent of wind power capacity that came on stream last year was imported. The central government hopes to raise the sector's total capacity from 1,854 MW at the end of last year to 5,000 MW by 2010. Following the localisation policy, China Energy Conservation in June bought a 47.5 per cent stake in the nation's second-largest wind power equipment maker Zhejiang Windey Wind Generating Engineering. China Energy Conservation aims to raise its wind generating capacity from 300 MW at present to 1,000 MW by 2012. Hong Kong Construction's shares fell 2.06 per cent to close at 95 HK cents yesterday after announcing the project award in the morning.