China Longyuan Power acquired 2.25GW of wind power projects in H1

247.5MW of these were grid parity projects.

China Longyuan Power has acquired 2.25GW of new wind power projects in H1 2019, including 247.5MW of grid parity projects, 45MW of competitively bidded projects, and 11MW of distributed projects.

Moreover, it has signed a development agreement for a large base wind power projects with a capacity of 1.5GW in Ningxia. According to a note by UOB Kay Hian, 1.5GW of wind capacity was under construction in H1 2019 and construction of another 2.6GW of wind capacity will commence in H2 2019.

Longyuan’s 1GW offshore wind project in Jiangsu will start construction in 2H19 and be put into operations in 2020. Management guided on over 2GW of annual wind capacity additions in 2020-2021.

According to UOBKH analyst Shen Zhifeng, the investment costs for Longyuan’s wind farms dropped 5.2% YoY or $56.41 (RMB404) per kW in H1 2019, despite the increase of $1.4 (RMB10) per kW in wind turbine prices.

“The downward trend in investment cost would continue and partly offset the negative impact from the tariff cut, and Longyuan should have the capability and resources to obtain the grid parity projects with higher returns. Management said most of the provinces in China have been qualified for grid parity wind project developments,” said Shen.

Also read: China Longyuan Power's wind generation down 15.4% in July

Longyuan maintained its wind power utilisation hours target of 2,230 for 2019 and guided on a 5.21% curtailment rate target for 2019. It said its H1 2019 wind power utilisation hours were lifted by 24 hours YoY, thanks to the easing curtailment issue and effective management of equipment, while dragged by 33 hours YoY due to a drop in wind speed.

Shen commented, “We think that the curtailment rate target of 5.21% in 2019 is achievable as: a) the government’s continuous efforts would lend support to the company, and b) most of the capacity additions will take place in 4Q2019. Moreover, Longyuan guided on relatively mild wind capacity additions of 20-25GW annually in China for 2019-20 on possible grid connection issues; hence, no serious curtailment issues are expected.”

Longyuan’s market power sales (MPS) accounted for 27.5% of total wind power generation in H1 2019 vs 24.6% in H1 2018. The average tariff for MPS was at $59 (RMB422.5) per MWh, 3.3% higher than the $57.10 (RMB408.9) per MWh in H1 2018.

The company achieved a flat weighted wind power tariff at $66.75 (RMB478) per MWh in H1 2019. “We expect the VAT cut since 1 Apr 19 would continue to contribute to a relatively stable weighted average wind power tariff in 2019, offsetting the negative impact from: a) increase in the proportion of MPS, and b) relatively lower tariffs from newly added wind projects,” Shen commented.