Sluggish share prices plague Chinese wind-farm operators

But new wind capacity addition on track.

Several wind-farm operators in Beijing reported that still suffer from volatility of wind speed, amid observations that share prices of wind-farm operators in China underperformed during the first quarter of 2014.

According to a research note from Nomura, it was indicated that these operators are still subject to short-term volatility of wind speed. This caused share prices to underperform in the market in the first quarter of 2014.

The report also noted that all four wind operators suffered a year-on-year drop in utilization. However, due to capacity addition, Huadian Fuxin and Longyuan still managed to achieve positive wind power generation growth for 5M14, at 20% and 8% respectively.

Generally, however, Nomura in its report said that it sees the operators recovering from the slowdown in capacity and that new wind capacity addition is on track.

Here's more from Nomura:

At present, capacity under construction for the operators is higher than their installed capacity addition guidance, and should be well on track to achieve the 2014 full-year guidance on capacity growth.

In terms of the focus areas, in order to avoid the ‘curtailment-plagued’ regions, the operators continue their focus on China’s southern regions, with the most popular provinces such as Fujian, Yunnan, Guizhou, etc. Given:

1) the southern regions enjoy the highest on-grid tariff of CNY0.61/kWh; 2) there are no curtailment issues; and 3) the utilization is not as low as the national wind resources survey conducted back in 2008, the operators enjoy a higher IRR for wind projects there (at 15-20%) vs. an average of 10-12% in the traditional regions (such as Inner Mongolia and north-eastern China).

With increasing exposure to the southern regions, we expect a slight improvement in the profitability of the wind operators.