China: Wind Power for 1.3B People

In a recent trip to China, I experienced the “China Speed” in developing their new mega cities all over the country. The magnitude is beyond my imagination. Anything in this country is “big”. 1.3B population, yes it is a “B”, and let me tell you this, the population of children under age 10 is the same as the whole population of Canada: 40 Million. The China’s biggest city Shanghai is twice the size of New York. The high speed train of Shanghai is two times faster than US, that is half the speed of an airplane.

Then you will ask, where does China get all the energy it needs? The answer is simple, China does not have enough energy to sustain such a magnitude of growth, and it imports crude from every single corner of the earth. And it is planning big for its next generation of energy: Wind power.

According to the Global Wind Energy Council, China’s installed wind energy capacity could reach 122GW by 2020. China’s exploitable wind resource is estimated around 1000GW. In Inner Mongolia of Northern China, massive wind projects have been deployed over the last couple of years, the estimated capacity has reached over 1GW. In West China, provinces such as Gansu, and Qinghai, are also developing their own wind power projects to meet local energy demand. The central government has chosen wind power as an important alternative energy to combat green house emission and secure energy supply.

The wind energy booming in China has attracted many worldwide wind turbine manufacturers invest in China, such as GE (GE), Gamesa (GCTAF.PK) and Vestas (VWDRY.PK). There are also many domestic manufacturers including A Power Energy Generation (APWR), Nantong CASC, REpower North, Nordex, Hunan Hara XEMC Windpower. Among these companies, only GE, Vestas, and APWR are listed in North America, and recently APWR signed 50 of 2.7MW wind turbine contract, and has total annual production capacity of 1.1GW by 2009.

Comments

[Barry Robbins:]

China Wind Systems (CWSI.OB) is a great way to play the China wind expansion. It is a small profitable company that is transitioning from making textile machines to wind turbine components. They currently make rolled rings. In the future they will expand into gearboxes. Wind energy component suppliers is the best sector of wind energy to invest in, particularly in China.

2008 Oct 15 08:02 AM

[Tom B:]

They need wind; it is unlikely nations will continue to allow them to suck up so much petroleum.

2008 Oct 15 12:10 PM

[Buffett Jr:]

I am interested in APWR but there are some lingering doubts about their legitimacy. I think they look good on paper but I'd like to see some actual deals go through and some big name analysts covering them.

2008 Oct 15 12:50 PM

[Robert D.:]

How do you feel the high turn-over rate of Chinese manufactures will play in this technology? China is renown for producing fake counterfeit products or selling products at very low margins, as well as extremely fast replacement of old technology with new ones… the list would go on, but to protect your investment you need long-term contracts, in my opinion.

2008 Oct 15 01:56 PM

[quick:]

Another one to look at is Kaydon (KDN) with regards to wind power. They make a lot of the giant bearings that goes into wind turbines.

2008 Oct 15 05:42 PM

[Ferdinand E...:]

Wind will play a useful but minor role in the Chinese energy picture. Nuclear and coal will be the main inputs. Just stop and think for a moment: wouldn't that be true if you were in their place? And since you arn't in their place, try suggesting that it would be nice if that coal was 'clean' coal.

2008 Oct 16 02:59 AM

[Road Runner:]

Nice to-the-point article. Well written and good info. Thank you,

2008 Oct 16 10:59 AM

[Buffett Jr:]

I understand and share some of your skepticism about APWR but that is priced into the stock right now. I've researched it as much as I can and come to the conclusion they are legit. I don't think they would have distribution agreements with Fuhrlander AG if they weren't serious about the wind business. Fuhrlander is also training APWR staff. So if you believe Fuhrlander is legit you can take some comfort in the fact they are working with APWR. They also have deals with Norwin A/S You can see the press release on their website. With Apower's subsidiary GaoKe www.norwin.dk/ check May 2007.

2008 Oct 17 12:42 AM

[Buffett Jr:]

Sorry this is the link. Company News

www.norwin.dk/NORWIN_N...

2008 Oct 17 08:53 AM

[trumanburbank:]

Another wind power play in China is Jinpan International, a high-tech and profitable producer of power transformers that is moving into windmill transformers, a fast-growing part of this fast-growing business that opened a new plant which increased its capacity by 50 this year.

It was recently named to Forbes List of 'Asia's Best 200 Under A Billion for the second year in a row. Current P/E about 9.

Disclosure: I'm long Jinpan (NASDAQ:JST)

2008 Oct 18 02:58 PM

[trumanburbank:]

Another wind power play in China is Jinpan International, a high-tech and profitable producer of power transformers that is moving into windmill transformers, a fast-growing part of this fast-growing business that opened a new plant which increased its capacity by 50 this year.

It was recently named to Forbes List of 'Asia's Best 200 Under A Billion for the second year in a row. Current P/E about 9.

Disclosure: I'm long Jinpan (NASDAQ:JST)

2008 Oct 18 02:58 PM

[wind4me:]

APWR with the Shenyang Power Alliance could be the reason GE signed up with APWR to become a partner with GE/APWR for the future of China wind power

May 24 04:34 PM

[wind4me:]

APWR has signed Two Wind Farms for 126 million in last month, and these contracts are full service from design stage to production


On 2008 Oct 15 12:50 PM Buffett Jr wrote:

> I am interested in APWR but there are some lingering doubts about
> their legitimacy. I think they look good on paper but I'd like to
> see some actual deals go through and some big name analysts covering
> them.

Oct 24 09:28 AM

[adt:]

It would appear the A-Power storey has moved from one of stock volatility and perennial technical critique (Zacks), to stock and political volatility. Granted reported earnings have not been very consistent at least on a quarterly basis, and as reported, financials can be a little confusing, but the Group has a new CFO now and is gaining some considerable structure and mass.
Management have this year put in place a structure, following alliances and acquisition – bringing together interests from China, Japan and the US, to support significant growth and some diversification through renewable energies and potentially related product.
A recent blog posted by Douglas Macintyre on 24/7 Wall Street, outlined below, highlighted criticism by New York Senator Charles Schumer of A-Powers Texas project with US entities US-Reg and Cielo. Schumer appears concerned that manufacture of Wind Turbines will occur in China through A-Power’s alliance and that Chinese jobs will be created, albeit only temporarily if further contracts are not won.
His criticism and concern is that the $1.5B project may attract US economic recovery aid. This criticism appears somewhat off-beam, in particular for the following reasons:
1. Chinese investment – financial institution and corporate – will create US jobs in the wind farm construction phase – possibly the biggest wind farm to date in the US; and
2. US multinationals manufacture by choice in China, creating Chinese jobs and repatriating profits or dividends from China. Why is this so?
Why wouldn’t Schumer focus on helping the emergence of new industries in the US rather than looking to jeopardise a Chinese – US project that will actually create US jobs and help further develop two US entities and potentially new US industry? Especially at a time when Obama, Geithner and Chinese officials have been building US / Anglo – Sino relations, for very good reasons.
Does he want to create a Trade War?
Does he want US multinationals banned from China or banned from selling in or to China? For example bans on Microsoft product in China. Or for that matter HP, Dell, Sun Micro, Adobe, Apple or Research in Motion?
Does he want wholesale sale of US treasuries by China?
Does he want a response by China, which has growing per capita income, or the rest of the world, in the form of – Don’t Buy US Goods?
Does he want a permanent ban on Chinese export of Rare Earths or the products they are used to manufacture, including wind turbines?
Does he want a US and possibly Global Depression?
Douglas Macintyre is correct. Schumer is grandstanding and he is naive. I will add to that, he is a moron, stupid and short sighted. He might be best to keep his mouth shut for fear of a Chinese Dragon jumping into it.
Andrew D Turner (adt)

China Goes To Texas: The Great Wind Farm Dispute
Posted: November 6, 2009 at 6:35 am
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Chinese interests and private capital will build a huge wind farm in West Texas. China-based wind turbine firm A-Power Energy Generation Systems (NASDAQ:APWR) will lead the project. It will cost as much as $1.5 billion and could supply energy to nearly 180,000.
Senator Charles Schumer of New York State does not like the Texas project, although he might like it more if the turbines were destined for up-state New York. Schumer believes that $450 million in federal stimulus funds could go into the project from the government’s stimulus package. That would help to create as many as 3,000 jobs at turbine plants in China according Reuters.
Schumer wants to have the best and worst of the stimulus programs. He wants job creation and improved alternative energy prospects for America so it can break its addiction to fossil fuels. That may mean a sacrifice which is that China, the growing threat to US global economic dominance, will get a few jobs.
Schumer is naive, or is grand standing. Supplies for alternative energy has to come from somewhere and not all of its will not come from US manufacturers. That is a simple reality which cannot be changed.

Douglas A. McIntyre

Nov 08 06:44 AM