Hong Kong company reporting season

China Longyuan posts higher interim profits with lower wind wastage

Longyuan is not the only renewable energy producer to report improved earnings. Rivals Huaneng Renewables and Datang Renewable have also seen first-half profit increases

PUBLISHED : Tuesday, 22 August, 2017, 8:35pm
UPDATED : Tuesday, 22 August, 2017, 10:46pm

China Longyuan Power Group, Asia’s largest wind farm developer, unveiled a 5.7 per cent rise in interim profit, with rising wind power profit largely making up for the lower profit from coal-fired power due to higher coal costs.

The firm, a unit of China Guodian Group, one of the nation’s big five state-owned power generation majors, recorded a net profit of 2.42 billion yuan for the year’s first six months, up from 2.28 billion yuan in the same period last year.

The profit is in line with the average 2.43 billion yuan estimate of four analysts polled by Bloomberg, and amounted to 61.6 per cent of the 4.06 billion yuan full year average estimate of 29 analysts.

“[The higher profit] was mainly attributable to the increase in the installed capacity and the higher utilisation hours in the wind power segment,” chairman Qiao Baoping said in a filing to Hong Kong’s bourse on Tuesday after market close.

First half revenue surged 9.7 per cent year-on-year to 12.3 billion yuan, on the back of an 11 per cent growth in wind power output and a 13.6 per cent rise in coal-fired power generated.

Operating profit from wind farms operation rose 14.5 per cent year-on-year to 4.45 billion yuan, while that of coal-fired power plunged 41.6 per cent to 340.7 million yuan as the average coal cost per tonne surged 55 per cent.

Its wind farms recorded an average utilisation of 1,030 hours in the year’s first half, up 5.1 per cent year-on-year, reflecting lower wastage of wind power generating capacity arising from grid bottlenecks.

Daiwa Capital Markets head of utilities and renewables research Dennis Ip noted that Longyuan’s accounts receivables jumped 79 per cent to 10.6 billion yuan on June 30 compared to December 31, which he said could be partly due to subsidies arrears.

Longyuan is not the only industry operator seeing improved profits.

Huaneng Renewables, the renewable energy unit of another big five generator China Huaneng Group, on Tuesday reported in a stock exchange filing, a 12.4 per cent year-on-year jump in first-half net profit to 2.03 billion yuan.

The profit is in line with the 2.06 billion yuan consensus estimate according to Bloomberg, and amounted to 64 per cent of the 3.17 billion yuan full year average estimate.

China Datang Corporation Renewable Power, a unit of China Datang Group, on Friday reported a 115 per cent year-on-year first-half net profit jump to 455.5 million yuan.

The company’s average first-half wind turbine utilisation rose 2.2 per cent to 941 hours, trailing the industry’s 7.3 per cent rebound to 984 hours.

Datang Renewable’s first-half wind power wastage ratio fell to 19.4 per cent from 25.2 per cent in the year earlier period.

Renewable energy shares have trailed the market due to concerns on the nation’s surging arrears of state subsidies for the sector and slow improvement of grid bottlenecks.

This is not helped by uncertainties on how the existing subsidy system that allows wind and solar farm operators to charge higher tariffs will be transitioned to a new system, where coal-fired power producers will have to buy “green certificates” from renewable power producers, so as to shift the financial burden from consumers to polluters.

Longyuan’s share price has fallen 1 per cent year to date, against a 24.6 per cent gain of the Hang Seng Index. Datang Renewable bucked the sector trend with a 25.4 per cent rise.