China's Wind Energy Development Hits a Road Block

Wind energy development in China has doubled in China in 2008, according to the director of Ministry of Industry and Information Technology Equipment Industry Division, Zhang Xiang-mu, who recently authored an article on Renewable Energy China. Zhang called for a brake on wind energy development because of the lack of grid electricity transportation. Overcapacity in the wind energy industry is even worse than in the solar industry, Zhang said. He estimated that the number of companies involved in wind energy increased from 6 to 70 in 2008, and production capacity will reach an annual output of 35-40 million kilowatts.

Zhang said China's wind farm construction speed may be maintained at the annual installed capacity of 10-15 million kilowatts. As a result, some of the companies face tough competition and reshuffling in the industry is inevitable in the near term. A-Power Energy (APWR), a US-listed company, tripled its stock price on the expectation that China will speed up wind farm development and expanded capacity to 2GW by 2010. However, with the brake call by the Ministry of Industry and Information Technology, the demand for turbines may slow down significantly in 2010. The last few quarters' earnings are rather disappointing, as no wind turbines, aside from two samples, have actually been sold.

Investors should focus on big companies such as GE (GE) and Trinity (TRN). Small companies face uncertainty for the near future.

Disclosure: Author is long GE.

Comments

[balabanovj:]

APWR may be a poor candidate to shine a negative light on, as they've been expanding their offerings. Their partnership with GE should also give them the edge over much of their competition when things do pick back up. They have also better positioned themselves for larger tenders by creating the Shenyang Alliance, which has already netted them one potentially very large contract(the LP gas terminal for which a MOU has been signed). Will all this take a few years to come to fruition? Perhaps yes, but they're already a nicely profitable company with a proven track record in DPG, so I can wait for them to pull their other ventures together. Once industrial output really takes off again in China, APWR, with their strong government contacts, will be uniquely positioned to to successfully bid on many contracts they would not have been able to consider before. And remember, in China, it's not just the lowest bid that counts, it who you know. Barring massive dilution, APWR should be a nice 4 bagger or more within 3 years or so.

J. Balaban, M.D.

2009 Sep 08 05:43 AM

[tresspass:]

APWR is in the unique position of not only the design and construction of wind turbines but design and construction of the electric grid infrastructure that the author claims so lacks capacity.Further, that is the overwhelming revenue stream for APWR ( it's pps was hardly predicated on it's much smaller wind power segment ). Now that's a fairly envious spot to be in. APWR's run up in price was due to the grid build-out contracts it was knocking out of the ball park. Moreover, APWR still reaffirms it's earnings outlook for the remainder of their earnings year, which indicates strong growth in revenue and profit.

Why he did not mention that......one can only wonder or just ask him outright, which I do.

Mr. Schule, if he did do his research would have also mentioned that GE ( the firm he touts ) has partnered with APWR in wind turbine construction.If he did do his research he would know this also insulates APWR and gives them a leg up in the competition ( Mr. Schule , even in second tier journalistic venues as Alpha, you should still know you can't have it both ways. If you did do your research you would have added THAT into your "report." If you did do your "research," you committed the sin of omission.

That is an airplane that never takes off and if it does, crashes and burns.

The truth next time, please, would be appreciated.

trespass

2009 Sep 08 05:46 AM

[leapingsioux:]

The whole article is based on Mr. Zhang's concern about Wind power over supply in China and the threat of weak maker being forced out. But there was no mention of grid construction at all by Mr. Zhang. While Mr. Zhang's is an important Chinese government officer in this field but his report looks more like a personal opinion and not a policy statement.

Can't understand how Mr. Schulle got the conclusion that China is putting a break on wind power development, and how Mr. Schulle connect this article with APWR.

And apparently, Mr. Schulle has not listened in APWR's recent earning call's either. Where APWR reported there are three major grid construction projects by the government in inner Mogolia, Gan Sui, and Halugiang.

2009 Sep 08 08:57 AM

[Alphameister:]

Informative article, though the comments seem superior analytically. Excess capacity in wind turbines is troubling even if APWR has the competitive advantages, but the company seems exceptionally well positioned to address China's energy needs, and its stock offers a lot more potential than GE. In the investment/speculation world, GE and APWR do not compete with each other. Those willing to accept greater risk in the pursuit of greater rewards will always choose an APWR over a GE.

2009 Sep 08 09:03 AM

[searcher:]

GE is a 'big picture' stock subject to the world economy and liquidity in the market, not to any particular technological development or implementation. No one is going to invest in GE based upon even proven and acknowledged dominance in any particular technology.

2009 Sep 08 11:43 AM

[Road Runner:]

Though APWR seems like a good investment, one I am looking at, there may be an opportunity in the next year to buy this stock at a lower price because of the real and/or perceived problem of building enough electrical transmission lines for all the wind generated. I'm not looking at the electrical grid bottleneck as a problem, but as a temporary (as in 2 to 3 years) buying opportunity. Once China “turns up the heat” on something it wants or needs it happens fast, as opposed to almost every other country in the world.

Also, I like PWR and ABB as grid infrastructure plays. I own PWR. I will buy ABB if there is a pullback. I’ll admit it – I missed out on buying it lower.

ABB is big into High Voltage Direct Current (HVDC) transmission lines which is a good fit for distant wind farms and undersea cables to offshore wind farms. China is also using HVDC to transmit power from the interior hydroelectric dams to the big cities on the coast.

2009 Sep 08 01:16 PM

[wind4me:]

sorry dude, seems the 9% MOVE today sort of ran over your short position and so you go from somebody ENDORSING (APWR) one day and then dissing it the next week based on the GRID of China???

did U read the 20GW's of Solar today for First Solar??? U sure do know HOW to try and influence some readers but those of us on the RIGHT SIDE of the tracks sure can call BS when we see it!!!APWR has partnered with your GE so you have NOT a clue of China stopping Wind power.........waht a JOKE

APWR

2009 Sep 08 02:07 PM

[wind4me:]

lets see, U endorse APWR.........then , U SELL APWR..........then, U MISS the 10% moves of last 2 days, then U write an article of how APWR is NOT going to ramp Wind power

guess what??? APWR is a DPG power company with a Wind power kicker for 2010. My numbers for Wind and production are on my site, why dont U read and learn??? Answer:: U SHORT?

2009 Sep 08 02:09 PM

[wind4me:]

seems HE Sold and now trying to talk himself and the stock back down..........yep, pure piece of work who writes alot, the CHART says the opposite, whom to BELEIVE?? well, it aint Kevin!


On Sep 08 05:46 AM tresspass wrote:

> APWR is in the unique position of not only the design and construction
> of wind turbines but design and construction of the electric grid
> infrastructure that the author claims so lacks capacity.Further,
> that is the overwhelming revenue stream for APWR ( it's pps was hardly
> predicated on it's much smaller wind power segment ). Now that's
> a fairly envious spot to be in. APWR's run up in price was due to
> the grid build-out contracts it was knocking out of the ball park.
> Moreover, APWR still reaffirms it's earnings outlook for the remainder
> of their earnings year, which indicates strong growth in revenue
> and profit.
>
> Why he did not mention that......one can only wonder or just ask
> him outright, which I do.
>
> Mr. Schule, if he did do his research would have also mentioned that
> GE ( the firm he touts ) has partnered with APWR in wind turbine
> construction.If he did do his research he would know this also insulates
> APWR and gives them a leg up in the competition ( Mr. Schule , even
> in second tier journalistic venues as Alpha, you should still know
> you can't have it both ways. If you did do your research you would
> have added THAT into your "report." If you did do your "research,"
> you committed the sin of omission.
>
> That is an airplane that never takes off and if it does, crashes
> and burns.
>
> The truth next time, please, would be appreciated.
>
> trespass

2009 Sep 08 02:31 PM

[connorport:]

According to yesterdays reports their is still 4.6 million shares out there shorted which have to be covered. Unless the report is off this would be a huge boost.

2009 Sep 09 03:39 PM

[chinastakes:]

The Global Financial Crisis Should Have Been Better for China, But...
Growing production surpluses resulting from the government's stimulus package and loose credit policies are constraining the rebound of industry and the economy, and may undermine their recovery.Data from the Ministry of Industry and Information Technology (MIIT) show that current overcapacity in the steel industry has reached more than 100 million tons, with 20% growth of new projects this year. Cement production surpluses total nearly 300 million tons, and over 200 new production lines are under construction with new capacity of more than 200 million tons. The capacity utilization rate of the aluminum industry is only about 65% of its production capacity of 5.6 million tons and 2 million tons for alumina and electrolytic aluminum. In addition, industries such as shipbuilding, chemicals, and flat glass, among others, also face serious problems of excess production capacity, and projects in emerging industries such as solar, wind energy are duplicating each other.

2009 Sep 10 03:40 AM

[wind4me:]

lets see, the AUTHOR said APWR was a '''problem'' at $8 and now its $11.22........yep, that author was trying to talk the stock down so he could buy again...........nice try but foolish outcome!

On Sep 08 05:43 AM balabanovj wrote:

> APWR may be a poor candidate to shine a negative light on, as they've
> been expanding their offerings. Their partnership with GE should
> also give them the edge over much of their competition when things
> do pick back up. They have also better positioned themselves for
> larger tenders by creating the Shenyang Alliance, which has already
> netted them one potentially very large contract(the LP gas terminal
> for which a MOU has been signed). Will all this take a few years
> to come to fruition? Perhaps yes, but they're already a nicely profitable
> company with a proven track record in DPG, so I can wait for them
> to pull their other ventures together. Once industrial output really
> takes off again in China, APWR, with their strong government contacts,
> will be uniquely positioned to to successfully bid on many contracts
> they would not have been able to consider before. And remember, in
> China, it's not just the lowest bid that counts, it who you know.
> Barring massive dilution, APWR should be a nice 4 bagger or more
> within 3 years or so.
>
> J. Balaban, M.D.

2009 Sep 15 09:26 PM

[wind4me:]

APWR won a wind contract today at $1.80 per watt

their COST advantage is key in gaining market share


On Sep 08 09:03 AM Alphameister wrote:

> Informative article, though the comments seem superior analytically.
> Excess capacity in wind turbines is troubling even if APWR has the
> competitive advantages, but the company seems exceptionally well
> positioned to address China's energy needs, and its stock offers
> a lot more potential than GE. In the investment/speculation world,
> GE and APWR do not compete with each other. Those willing to accept
> greater risk in the pursuit of greater rewards will always choose
> an APWR over a GE.

2009 Sep 15 09:27 PM

[wind4me:]

lets see, at $8 , the author is badmouthing (APWR)

today, at $12.25, we SEE who is right and who is just a blabbering Opinion of himself

sorry Dude, U dont know squat about (APWR) but I am LONG APWR and U are chasing to get back in from $8......nice call on your part==NOT!

2009 Oct 21 10:42 AM

[wind4me:]

yep, I LOVE the internet to call out those that have ZERO clue yet publish their jibberish and NOW they have to be called out for such a HORRIBLE article!

On Sep 08 02:31 PM wind4me wrote:

> seems HE Sold and now trying to talk himself and the stock back down..........yep,
> pure piece of work who writes alot, the CHART says the opposite,
> whom to BELEIVE?? well, it aint Kevin!

2009 Oct 21 10:45 AM

[wind4me:]

how Ya think the author is feeling AFTER he sold APWR at $8 and then writes such a stupid report/OPINION ??


On Sep 08 05:43 AM balabanovj wrote:

> APWR may be a poor candidate to shine a negative light on, as they've
> been expanding their offerings. Their partnership with GE should
> also give them the edge over much of their competition when things
> do pick back up. They have also better positioned themselves for
> larger tenders by creating the Shenyang Alliance, which has already
> netted them one potentially very large contract(the LP gas terminal
> for which a MOU has been signed). Will all this take a few years
> to come to fruition? Perhaps yes, but they're already a nicely profitable
> company with a proven track record in DPG, so I can wait for them
> to pull their other ventures together. Once industrial output really
> takes off again in China, APWR, with their strong government contacts,
> will be uniquely positioned to to successfully bid on many contracts
> they would not have been able to consider before. And remember, in
> China, it's not just the lowest bid that counts, it who you know.
> Barring massive dilution, APWR should be a nice 4 bagger or more
> within 3 years or so.
>
> J. Balaban, M.D.

2009 Nov 02 03:49 PM

[wind4me:]

Mr Shculle demonstrates his LACK of knowledge on $APWR


On Sep 08 08:57 AM leapingsioux wrote:

> The whole article is based on Mr. Zhang's concern about Wind power
> over supply in China and the threat of weak maker being forced out.
> But there was no mention of grid construction at all by Mr. Zhang.
> While Mr. Zhang's is an important Chinese government officer in this
> field but his report looks more like a personal opinion and not a
> policy statement.
>
> Can't understand how Mr. Schulle got the conclusion that China is
> putting a break on wind power development, and how Mr. Schulle connect
> this article with APWR.
>
> And apparently, Mr. Schulle has not listened in APWR's recent earning
> call's either. Where APWR reported there are three major grid construction
> projects by the government in inner Mogolia, Gan Sui, and Halugiang.

2009 Nov 02 03:51 PM

[wind4me:]

hows that SHORT of (APWR) treating Ya this am ????

2009 Nov 04 09:53 AM