Longyuan’s September wind power generation plummets 16% y-y

It's partly due to wind power drop.

China Longyuan Power recently announced its September power generation statistics this October, with the group’s blended power generation for September falling 21.9% y-y to 2,127GWh, resulting in a 4.7% drop in 9M14 power generation volume to 23,589GWh.

According to a research note from Nomura, the decline in September power generation was mainly attributable to a 15.8% drop in wind power; a 32.8% drop in coal-fired power and a 32.6% drop in other renewable power.

The weak September power generation data was consistent with wind operators’ feedback Nomura obtained recently. Overall, the first three quarters’ lacklustre wind output was largely due to the significantly below-average wind speed, which resulted in a y-y decline in utilisation for our covered wind farm operators.

However, given that 3Q is generally the weakest quarter and the 4Q is the strongest quarter in terms of wind speed, Nomura believes the weak 3Q data would not have a significant impact to the full-year wind power generation while 4Q data will be more crucial.

That said, the report noted that the weak wind speed in 2014 YTD should still exert some pressure on the share price performance of the wind farm operators in the near term.

Here's more from Nomura:

Among the China renewable/wind farm operators, we continue to favour Huadian Fuxin (816 HK) thanks to its diversified power generation portfolio, resulting in a relatively lower earnings sensitivity to wind speed.

Huaneng RE (958 HK) is also a preferred stock given its highest capacity growth and current attractive valuation vs. peers.

We recommend investors to use any dips to accumulate further given our view that wind utilization hours, on a longer time scale, should return to an average level of 1,950-2,100 hours per year, which should ease the short-term concern on earnings delivery.

In addition, given the low base in 4Q13, especially in Dec-13, we see y-y growth in 4Q14 as very likely.

Wind power generation volume decreased by 15.8% y-y to 1,468GWh, resulting in 9M14 wind power generation growth of 0.3% (vs. 2.3% for 8M14).

This was, again, mainly attributable to low wind speed in most regions of China, especially in Gansu, Fujian and Liaoning. We therefore expect other wind farm operators such as Huaneng RE and Datang RE should also suffer from weak September data.

Due to the efficiency enhancement and renovation of desulfurization of Unit #5 of Jiangyin Sulong and scheduled maintenance of Unit #2 of Nantong Tianshenggang, coal-fired output dropped 32.8% y-y to 619GWh.