China Clean Energy Syndicate [09-16 Mar. 2020]

Hope all of you have a positive week ahead, despite mounting worries globally amid the pandemic.

Below are our reviews of the Chinese new energy market’s news in the past weeks. Scroll down for the full update of 14 updates of the Chinese wind, solar, hydrogen, EV, and power sectors.

Meanwhile, we would like to point out a few highlights:

  • WIND: EDF concluded the prolonged negotiation with China Shenhua over their joint investment in Dongtai IV, and V offshore projects–great relief for all foreign developers looking into the market!
  • HYDROGEN: the first commercial liquified hydrogen (LH2) production plan is announced–a major step forward.
  • EV: CALT has quietly launched a joint venture to develop EV charging infrastructure
  • Energy Policy: we caution you to pay attention to Beijing’s new strategy to promote “new infrastructure” investment as a mean to stimulate the national economy–we will run an analysis on this topic this week, stay tuned!

I hope the news could bring you some inspiration for the coming week.

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EDF Finalised Deal with China Shenhua Over Offshore Wind Joint Venture

China Energy Investment Corporation (CEIC) said it had finalised the commercial contract with the French EDF Group regarding the joint investment into two offshore wind farms off Jiangsu province, Dongtai IV and Dongtai V.

Thus, the two wind farms, with a total investment of ¥7.9 bn, become the first offshore wind project in China invested by foreign developers. The total installed capacity of the duo is at 502 MW (IV=300MW, V=200MW).

Energy Iceberg Note: EDF and CEIC reached the initial agreement last year, but the finalisation of the commercial clauses took a year to complete. During the negotiation, Shenhua–a subsidiary of CEIC and the project developer–has completed turbine installation of Dongtai IV. 

Nevertheless, the finalisation is a good sign, especially to foreign developers, investors and lenders who wish to enter the Chinese market. Given the market’s robust capital demand, offshore wind remains an interesting area for foreign investors. 

Our previous analysis on the foreign investment in Chinese offshore wind market: 

Who are interested in investing and the risk

Chinese offshore wind market 2020-2030 forward-looking

China’s NEA Published the 2020 Notice on Wind Power Projects

China’s National Energy Administration issued the 2020 on-grid price arrangement for wind and solar photovoltaic power projects in the country. Three key message and relevant measures to pay attention:

  1. NEA emphasized again to prioritize approvals of zero-subsidy projects (over those under subsidized). And the zero-subsidy projects are also required to complete construction before the end of 2020.
  2. NEA emphasized to develop offshore wind projects in a “cautious” (稳妥) manner. Provinces that already installed or has approved more offshore wind projects compared to their original 13th Five-year plans will be prohibited from new project development. In these provinces, there will be no new build approvals–even for competitive pricing projects.
  3. NEA only provided 1.5 months extension for wind projects to submit their zero-subsidy approval application, with no mention of the grid-connection requirement.

China Three Gorges New Energy, the Offshore Wind Powerhouse, is Poised for an A-share IPO

CITIC Securities Co., Ltd. has started the coaching program for China Three Gorges New Energy (Group) Co., Ltd. to prepare for the initial public offering (IPO) in the main board of China A-share. Last year, the company changed its name from “Three Gorges New Energy Co., Ltd” to the current one, which already triggered speculation of its intention to go IPO.

Energy Iceberg Note: CTG New Energy is perhaps the most noteworthy new energy developer. CTG group is the largest hydropower producer in the world. And the new energy subsidary is a result of CTG’s (the mother firm’s) strategy to “build another three gorges dam through wind, and solar.” In other words, CTG plans to ramp up wind & solar portfolio to a size equal to its hydropower footprint. 

Under this strategy, CTG New Energy is poised to overtake Longyuan Power Corp (wind subsidiary of China Energy Investment Corp) and to become the largest offshore wind developer in China. Its pipeline projects have way surpassed that of Longyuan, although its installed figure is smaller. 

In 2019, CTG New Energy had an incremental grid-connected capacity of over 2000 MW. Cumulative installed capacity has reached over 11GW. 

CTG’s new energy ambition is mainly at the wind, especially offshore wind. But its business is across small hydro, CSP, distributed gas, as well as wind-to-hydrogen projects. 

China State Shipbuilding Corporation (CSSC) Kicked off Asset Consolidation to Optimize for Offshore Wind Market

CSSC set off an internal asset consolidation that aims to promote synergy among subsidiaries in the offshore wind market, following the mega CSSC and CSIC (China Shipbuilding Industry Corp) merger late last year.

Last week, CSSC’s subsidiary COMEC announced to transfer its 49% equity of Chengxi Yangzhou (shipyard) to CSSC group and CSSC Chengxi, who will take 24% and 25%, respectively. Meanwhile, CSSC Chengxi plans to acquired 12.56% of CSSC Guangxi (shipyard).

The complicated restructuring meant to strengthen Chengxi’s position and production capacity in shipbuilding and, especially, offshore wind tower manufacturing. Currently, Chengxi owns four production lines totaling 50,000-60,000 tonnes of tower production capacity per year.


Trina Solar Secured Approval for Public Offering in China

Shanghai Stock Exchange announced to approve the public offering plan of Trina Solar, China’s leading maker producer.

The photovoltaic manufacturing firm has spent three years on its A-share IPO plan, first by launching the privatization from the New York Stock Exchange and applying twice to issue in the Shanghai stock exchange. The firm’s first IPO application was rejected due to questions regarding its debt issue and a power plant asset placement.

Trina Solar last week also announced to win an order to provide 600MW PV products to SGCC’s Qinghai-Henan ±800KV ultra-high voltage DC project–the largest deal ever achieved by Trina Solar.

Energy Iceberg Note: read our analysis on Chinese new energy companies’ privatization from the international stock market: motivation and impacts

Opinion: “Chinese Solar Export Faces Challenges due to Coronavirus Outbreak Widens Impacts in Japan and Italy”

  • The export volume of China’s PV modules is around 4.45GW in Jan. this year, down 11.29% year-on-year
  • The export volume of converters is estimated at 4.17Gw, up 34.5% y-o-y but down 12.58% compared to that in Dec. 2019, industry association revealed
  • Work and production resumption has been delayed, leading to some 15-20 days of delay for export. Transportation disruption is currently the major challenge facing Chinese PV producers
  • By the end of Feb., Chinese PV producers have issued 14 force majeure notes
  • However, commentaries believe that the pandemics–especially in Japan and Italy–will harm PV exports for the coming months

Beijing Suggested to Raise Solar Pricing for 2020 in the New Policy Draft

National Development and Reform Commission released another draft of solar PV pricing in 2020 and asked for industry feedback. The new draft sets ¥0.35/kwh、¥0.40/kwh, and ¥0.49/kwh for I, II, and III regions. Meanwhile, it suggests ¥0.05/kwh subsidy for distributed solar (commercial use) and ¥0.08/kwh subsidy for private rooftop units.

Notably, the new draft raised mounted solar prices by ¥0.02/kwh from the prices mentioned in the previous policy draft.

Energy Iceberg Note: The new policy signals Beijing’s intention to ensure growth in the solar power sector in 2020, amidst challenging market condition following the coronavirus outbreak. 

By the higher prices, China is still likely to achieve 40GW incremental solar capacity in 2020, we expect.

Hanergy’s German Subsidiary Solibro Hi-Tech Unit in Liquidation
Hanergy’s German Subsidiary Solibro Hi-Tech Unit in

Late last month, a German insolvency court opened regular insolvency proceedings for the photovoltaic company, which belongs to Chinese thin film manufacturer Hanergy. Schorisch had unsuccessfully tried to arrange a reorganization of the business during preliminary insolvency proceedings since the start of the year. “An M&A process was set up by the administrator during the preliminary administration but was, unfortunately, unsuccessful,” said the hww hermann wienberg wilhelm spokeswoman. End of the line The lack of a white knight investor and laying off of employees means the company will now fold. “In this respect, there is a liquidation of the company, there is no resilient interest in taking over the company,” added the spokeswoman.

A public announcement of the insolvency proceedings stated creditors could lodge their claims against the business until Monday. A meeting of creditors has been arranged for 31 Mar.

Hydrogen Storage & Fuel Cells

Chinese Raised Funding to Build the Country’s First Liquified Hydrogen Production Facility for Commercial Use

Chinese chemical producer Hongda Xingye Co. last week issued a private placing in the Chinese domestic market aiming to raise some ¥4.985 bn. The funding raised will be used to construct a liquid hydrogen project of 50,000 ton annual production capacity.

Of the plant’s total capacity, 30,000 ton is for civil/commercial hydrogen market, which marks the first civil-used liquid hydrogen production plant in China.

Energy Iceberg Note: more and more in the hydrogen industry agree that liquified hydrogen (LH2) is the future direction and expect to see LH2 become a market norm by 2030. But at the moment the technology, equipment, and industrial application for LH2 is practically non-existed in China. Hongda Xingye’s plan signals the first attempt. International tech supplier in that area should take note.

Foton Motor Moves Forward FCVs Production Line Development

Foton Motor secured an approval to construct a fuel cell vehicle (commercial use) production and testing facility. The project is estimated to cost ¥1.27bn and will allow the firm to produce and test some 2,000 FCVs annually.

However, Foton said this project “has nothing to do with Futian’s collaboration with Toyota.” Once the production line is launched, part of the FCVs are set to embark and provide services for the 2022 winter Olympic in China.

EV & Battery

Industry Urgently Needs Stimulation Policies to Fight Against Sales Slump; Production Resumption only at 40%, CAAM said

Against the coronavirus outbreak, Chinese automotive sales in China plunged 79% in Feb., registering the most significant decline at all time, China Association of Automobile Manufacturers (CAAM) said last week.

The world’s biggest car market tumbled, with just 310,000 vehicles sold and less than 285,000 produced–down 79.1% and 79.8% year-on-year, respectively. Car sales continued to drop for the 20th straight month.

New energy vehicles’ production and sales also plummeted, registering at 9,951 and 12,908 in Feb– 82.9% and 75.2% drops YoY.

Against the backdrop, CAAM called for regulators in Beijing to quickly introduce policy measures to stimulate growth and save the car market. The policy it suggested include:

  • increase the numbers of license plates issued in restricted areas
  • lift the restrictions on new energy vehicle purchase restrictions
  • adjust passenger vehicle tax rates for the smaller-engines (1.6L and below)

Meanwhile, the CAAM also summarized the work resumption level in the industry. Eighteen automobile manufacturers including Changan Automobile, Chery, Geely, JAC, etc. and six major auto component manufacturers, Weichai Power, Continental Automotive, Changchun FAWAY, CITIC Dicastal, Yu Chai and Contemporary Amperex have fully resumed working by 11 Mar., it claimed.

It said the resumption rate of auto companies was 90.1%, while the re-production rate at 40%.

CATL Shows Ambition to Set Foot in EV Charging Infrastructure

China’s largest automotive lithium-ion battery maker, Contemporary Amperex Technology (CATL), set up a new technology company Shanghai Kuaibu New Energy Technology Co. (Shanghai Kuaibu), together with Fujian Baicheng New Energy Technology Co.(BACN).

Shanghai Kuaibu was incorporated with a registered capital of ¥50 mn. BACN and CATL each own 51% and 49% of the equity shares, respectively.

The business scope of Shanghai Kuai includes “new energy technology, battery technology, parking lot (storage) O&M, as well as construction and operation of new energy vehicle charging facilities.” Despite a minority shareholder in the JV, the move of CATL sparks speculation for its intention to expand its business into the EV charging infrastructure business.

Energy Iceberg Note: currently three players dominate in China’s EV charging market: TELD, StarCharge and State Grid. As CATL has become a dominant player in global EV cell, whether it could make an inroad into the infrastructure business and vertically integrate remains to be seen. One thing to note is that China is launching a “new infrastructure” investment strategy in the hope of stimulating the national economy. EV charging infrastructure is one of the “new-infrastructure” areas. We would see more players cross over into this market in the coming years. 

China Mobile & China Tower Kicked off Lithium-ion Battery Tenders, Amidst Heated 5G Construction

Last week China Tower issued a tender announcement to procure 2GWh of lithium iron phosphate battery in 2020. The procurement is set to meet the demand of China Tower for one year. Five successful bidders were already decided, but their identities not announced.

This is yet another major lithium-ion battery tender after China Mobile announced to purchase 6120 Ah lithium-ion cells.

Energy Iceberg Note: the telecommunication industry’ battery demand is mainly related to UPS construction for their network and stations. Notably, the industry now collectively moves to embark lithium-ion cells to replace lead-acid cells.

Clean Energy Related

Grid Construction the First to Benefit from China's New Securities Law, with SGCC Planning to Raise ¥80Bn from Debt Holders
Grid Construction the First to Benefit from China’s New Securities Law, with SGCC Planning to Raise ¥80Bn from Debt

Shanghai Stock Exchange revealed that it had accepted State Grid’s(SGCC) application for issuing ¥80 bond.

The application follows the first array of corporate bond recently issued totaling ¥187.2bn by four state-owned enterprises. The collective bond issuing comes at the backdrop of Beijing drastically changed the requirement for Chinese companies’ bond offering by the introduction of the new Securities Law.

The other bond issuers after the release of the new law include Eternal Asia Supply Chain, Overseas Chinese Town Enterprises, Blue Sail Medical, and China Coal Energy.

Energy Iceberg Note: 

  1. By the new Securities Law, Beijing effectively makes it much easier for the Chinese companies to issue bonds; new bond issuing do not need approval from Beijing any more–instead, they are required to register the cases only
  2.  12 days after the new law becomes effective, the Shanghai Stock Exchange has already received 27 corporate bond cases, with total raising amount of ¥187.2 bn
  3. Next to the new law, China has kicked off a new national economic strategy “the New Infrastructure Investment,” which boost companies to (borrow &) invest into 5G, smart grid, UHVs, EV charging, IoT, and other new infrastructure with “network” features.
  4. These two measures, together, reflects Beijing’s new policy priority to stimulate economy against economic growth slow-down, trade war, and the coronavirus global pandemic 
  5. That changes the position of SGCC and China’s grid companies (and therefore new energy companies), again. China is most likely to re-accelerated UHV construction. And the push for power market reform may be stranded. 

We will run a short analysis of the Keynesian strategy’s impacts on the energy sectors this week. Stay tune.

SGCC Acquired 49% Stake of Oman Electricity Transmission

China’s State Grid International Development (SGID) has successfully acquired a 49% stake in Oman Electricity Transmission (OET) on Mar 11. After the acquisition, the Oman state-run firm Nama Holding remains majority stakeholder of 51% share of the grid on behalf of the Government of Oman.

OET is a national transmission company in Oman, responsible for the construction, operation and maintenance and dispatching of the major transmission network in Oman. It consists of a transmission network of 7240KM and 89 grid stations.

The deal is the single most significant investment in Oman by a Chinese company. It is also the first major privatization by the Middle East’s largest non-OPEC oil producer. The deal is part of China’s “Belt and Road” initiative to invest in infrastructure projects in Asia and the Middle East. The investment marked another State Grid foray into a foreign market, following deals in Italy, Portugal, Greece, Australia and Brazil, among others.

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