Principally engaged in the design, development, construction, management and operation of wind farms in areas with abundant wind resources in the PRC and the sales of electricity to the local grid companies.
The Group's profit attributable to shareholders for the 9 months ended 30-09-2019 amounted to RMB 3.51 billion, a decrease of 12.5% compared with previous corresponding period. No dividend was declared. Turnover amounted to RMB 19.96 billion, an increase of 4.1% over the same period last year, gross profit margin down 1.7% to 34.9%. (Announcement Date: 28 Oct 2019)
Business Review - For the six months ended June 30, 2019
1. Advancing safety production and marketing and achieving the objectives of “100-day campaign”
In the first half of 2019, the Group earnestly implemented the “100-day campaign for production and operation” work plan of CHN Energy, and formulated a work schedule for the production and operation campaign to secure fulfillment of targets by setting out specific timelines and rigid performance appraisal. With the aim of “ensuring safety, maintaining electricity output and managing equipment”, the Group worked out 11 specific measures from three aspects including safety, production and marketing to ensure successful completion of the objectives of the campaign.
The foundation for production safety was consolidated. Based on the Safety and Environmental Protection No. 1 Document, the Group directed overall safety and environmental protection efforts. It carried out the “year of responsibility implementation” and “year of equipment maintenance” activities, identified and deployed key tasks of the year, and implemented the responsibility for safety and environmental protection at all levels. Drawing upon past experience in safety supervision and management, it sorted out existing safety production management system by reference to work responsibilities to create a list of systems and carry out system establishment. Meanwhile, it streamlined routine inspections, improved the professionalism of inspections, carried out in-depth inspections of production safety at the headquarters and production sites of certain subsidiaries, strengthened inspections, rectifications and closed-loop control, and improved the long-term supervision mechanism of production safety. Further, the Group strengthened inspection and assessment, studied typical accidents to work out key anti-accident measures, and released the Activity Program for Key Anti-accident Measures (《重點反事故措施活動方案》). The Group held safety examinations for outsourcing personnel for the first time, adopted stringent review and approval procedures on outsourcing. Centering on the theme of “preventing risks, eliminating hidden dangers and reducing accidents” determined by the Work Safety Commission of the State Council this year, the Group arranged and completed a number of tasks during the month of production safety.
Management quality was improved. Based on the power generation indicator, the Group developed key indicators such as generation difference rate, average number of faults, average downtime per failure and completion rate of regular inspection to create a multi-dimensional indicator evaluation system, promoted the assessment method of generation difference rate, and established an effective incentive mechanism for production personnel to stimulate their passion in production and management. In addition, the roles and responsibilities of operation and management of the Company, its subsidiaries and wind farms for the three-level monitoring system were further clarified, thus keeping the state of equipment controllable and under control, and ensuring accurate and timely troubleshooting and safe and effective operation. Moreover, the Group made solid progress in the refined management of equipment, and carried out in-depth the “year of equipment maintenance” activities. In particular, it emphasized rectification of equipment defects, tracked and supervise the rectification of key defects, and increased efforts on technical renovation and in tackling major technical challenges, achieving remarkable results in equipment maintenance.
The Group innovated its management mechanisms. Thanks to the improvement of grid curtailment management, a continuous decrease in the level of grid curtailment was seen. The Group strictly implemented dual controls on grid curtailment rate and quantity, further strengthened follow-up analysis on grid curtailment of subordinate units, and enhanced grid curtailment management in Xinjiang, Western Inner Mongolia, Gansu and other regions with high grid curtailment rate to prevent rebound risks. Meanwhile, the Group rationally sized up and capitalized on market conditions to increase market trading volume and efficiency. Adhering to the principle of “quantity is the fundamental and price is the key, maximizing the benefits”, the Group generated trading strategies scientifically. It generated differentiated trading strategies that were in line with regional realities by reference to the power market conditions, and thus enhancing the refinement and benefits of electricity sales transactions of the Company in the market.
In the first half of 2019, the Group generated a cumulative gross power generation of 26,291 GWh, of which wind power generation amounted to 21,445 GWh, representing a year-on-year increase of 3.15%, mainly attributable to the increase of installed capacity, effective equipment management and improvement of grid curtailment. In the first half of 2019, the average utilisation hours of the wind power business were 1,172 hours, down by 9 hours as compared to the corresponding period of 2018, which was primarily due to the combined effect of the decrease in wind resources, effective equipment management and the decrease in grid curtailment rate.
During the period from 1 January 2019 to 30 June 2019, the consolidated gross power generation from coal power segment of the Group was 4,580 GWh, representing a decrease of 4.44% as compared with 4,793 GWh in the corresponding period of 2018. This was primarily due to the combined effect of the increase in the electricity transmitted from other provinces and the new energy power generation, which squeezed the share of coal power, and the overhauling of some of the generating units. The average utilisation hours of the Group’s coal power segment in the first half of 2019 was 2,443 hours, representing a decrease of 113 hours as compared with 2,556 hours in the corresponding period of 2018.
2. Upholding the plan-guided strategy and improving strategic layout consistently
The Group enhanced the strategic guidance and formulated the large base planning report, 3-year action plan on offshore wind power and other instructive documents upon careful analysis of changes in future wind power investment environment and policies as well as potential risks, accurate comprehension of the trend of industry policies and thorough study of the competing strategies adopted by major wind power developers, thus providing scientific guidance for the large base and offshore wind power development. The strategic guidance and regional layout of the Company were improved from the troubleshooting perspective, by lining up with standards and pursuing investment-driven developments, in the light of sufficient reserve projects with high quality and with economic profitability as a core.
In the first half of 2019, the Group continued to optimise the strategic layout, intensified research on development strategies and further clarified the general idea of developing large base, offshore and distributed wind power, thereby forming the strategic landscape of regionally synergic development. The Group schemed for preliminary work in curtailmentexempted provinces in the “Three North” areas by keeping abreast of the planning proposals issued in different provinces; and strived to win all tenders submitted thorough analysis of resource conditions and pricing levels of different provinces, preliminary estimation of bidding bottom line and comprehensive understanding of projects with strong competitiveness. The Group expanded its cooperative channels through entering into strategic cooperation agreements with China Southern Power Grid, Shanghai Electric and Envision and reaching consensus on cooperation with governments at provincial and autonomous regional levels in Shanxi, Qinghai, Henan, Inner Mongolia, Ningxia, Fujian, Guangdong, etc., having thus made positive progress in project development. In the first half of 2019, the Group obtained state approval for parity price projects with a capacity of 247.5 MW, secured development rights to bidding projects with a capacity of 45 MW and won over development rights to distributed projects with a capacity of 11 MW.
3. Accelerating project construction to cement foundation for achievement of the annual targets
In the first half of 2019, the Group embraced safe and steady project construction, further improved project quality management and enhanced cost management and control. The Group coordinated and settled problems identified in a timely manner and thereby ensured project quality through scientifically optimised design, strengthened supervision, emphasized supervising and manufacturing; effectively curbed project changes and strictly controlled the project costs within the scope of decision-making authority by regularly conducting overall analysis on cost, review on changes and the maximum price limit and other in-process controls. In addition, the Group standardised work concerning conservation of water and soil in the wind farms from the perspectives of design, bidding, construction and supervisory management, strictly implemented “three-simultaneousness” requirements for conservation of water and soil for projects under construction, and fully fulfilled the requirements of acceptance check and putting on record in relation to water conservation and environmental protection for projects already completed, aiming at comprehensively creating eco-friendly wind farms and achieving green and sustainable development.
In order to accelerate project construction effectively, and create favorable conditions for the satisfactory attainment of the annual construction targets, in the second quarter of the year, the Group responded proactively to the deployment of CHN Energy for the “100-day campaign for safe production” campaign and organised the “100-day campaign for project construction” activity. Meanwhile, the Group further improved the system enabling synergic advancement of projects and preliminary work to speed up the implementation of construction conditions for newly commenced projects and timely carried out project-related work including geological prospecting, map survey, road design, microsite selection etc., which initiated the work relating to forest and land expropriation in advance and sped up the project construction progress.
In the first half of 2019, the Group’s new wind power projects with installed capacity of 90 MW commenced operation. As at 30 June 2019, the consolidated installed capacity of the Group was 21,134 MW, among which, the consolidated installed capacity of the wind power, coal power and other renewable energy segments were 19,009 MW, 1,875 MW and 250 MW, respectively.
4. Participating in market transactions in a rational way and maintaining basically stable tariffs
In the first half of 2019, the average on-grid tariffs for overall power generation segments of the Group amounted to RMB457 per MWh (valueadded tax (“VAT”) exclusive), representing an increase of RMB2 per MWh as compared with RMB455 per MWh (VAT exclusive) in the corresponding period of 2018. The average on-grid tariffs for wind power amounted to RMB478 per MWh (VAT exclusive), about the same as compared with RMB478 per MWh (VAT exclusive) in the corresponding period of 2018, which was primarily due to the expanded scale of the market transactions of wind power and the decrease in VAT rate. The average on-grid tariffs for coal power amounted to RMB335 per MWh (VAT exclusive), representing a decrease of RMB1 per MWh as compared with the average on-grid tariffs for coal power of RMB336 per MWh (VAT exclusive) in the corresponding period of 2018, which was primarily due to the expanded scale of direct electricity supply transactions for major users of coal power and the decrease in VAT rate.
5. Carrying on with capital management and taking effective control of capital cost
In the first half of 2019, the liquidity in the capital market moderately eased as compared to that in the corresponding period last year. Capitalizing on the window of opportunity, the Group carried out swap and optimization of interest-bearing liabilities to exert effective control over capital cost. Thanks to its all-out efforts on expansion of financing channels, the Group organized the recruitment of bond underwriters twice, enhanced its competence in bond issuance, and successfully issued two tranches of mid-term notes, and three tranches of ultra-short-term debentures in the first half of the year. It also cemented its ties with major partners in the financial market to further replenish the credit facilities of the Company and ensure capital supply. The Group continued to deepen financing innovation and promoted innovative products such as recycling factoring, asset securitization and supply chain finance, revitalized existing receivable new energy subsidies. Short-term capital operations such as ultra-short-term loans and overdraft of corporate account were employed flexibly to reduce currency capital precipitation. It also improved refined capital operation and achieved the management and control of large-capital income and expenditure plans to full coverage at home and abroad to seek the time value of capital. The Group strengthened the management and control of capital risks and expanded the proportion of long-term financing to ensure the safety of the capital chain.
6. Boosting technical innovation steadily and leading the direction of industry development
In the first half of 2019, the Group made new phased achievements in respect of standards formulation and intellectual rights. It participated in the formation of 2 national standards for wind power and 11 industry standards for wind power, of which 5 industry standards including “Applied Technology Standards for Safety Belts/Safety Tools of Wind Power Generating Units” passed the review of Energy Industry Wind Power Operation and Standard Maintenance Committee, leading the development direction of the industry. The Group obtained 9 new patents including 1 invention patent and 8 utility model patents.
In the first half of 2019, the Group gained approval for and launched 14 technical projects, of which 7 projects including the “Research and Application of Key Technology for Intelligent Offshore Wind Farm” were approved by CHN Energy. The “Study on Wind Power Operation Big Data Analysis and Processing Technology”, a technical project of CHN Energy undertaken by the Company, obtained the acceptance successfully and delivered a number of achievements. The “Application and Verification of Wind Resource Appraisal and Wind Power Generating Unit Design for Wind Farms”, a national key special research project led and undertaken by the Company, passed the review of the Ministry of Science and Technology and was launched officially. The technical results of “Key Technology for Construction of Offshore Wind Farms under Complicated Geological Conditions” developed independently by the Company passed the authoritative verification of domestic academician-level experts and aligned with those at internationally leading standards.
7. Advancing overseas projects steadily and carrying out “Going Global” strategy proactively
In the first half of 2019, following the requirements of high-quality development, the Group strived for breakthroughs in respect of overseas business by optimising overseas layout and exerting greater efforts on preliminary work for and development of projects in countries covered by the “Belt and Road” Initiative. Positive progress was made in the Central and Eastern European market. In this regard, in addition to close follow-ups of the bidding for the 2019 wind power projects in Poland, the Group also further tapped the opportunities arising from the greenland wind power projects in Ukraine by proper utilization of the limited window period of fixed tariff, and obtained the right to develop the project. The Group has set up working teams to open up new markets in Vietnam, clarified development idea as well as sorted out the first-tier projects to carry out key cooperative development. The Group also conducted evaluation and measurement on a number of wind power and photovoltaic projects in the markets of such key countries as Australia, Bangladesh, Argentina and Egypt, laying the ground for forwarding future projects.
The Group strengthened management of in-service overseas projects and enhanced its capability in improvement of quality and efficiency. The Group’s companies in Canada and South Africa consolidated the production and operation mode and improved the responsibility management system to level up their management and production safety standards in full swing, resulting in striking effect in respect of production and operation. In the first half of 2019, Dufferin Wind Farm of the Group in Canada recorded total power generation of 151 GWh, representing a year-on-year increase of 3.18%; maintained safe production for a total of 1,672 days as at 30 June 2019. In the first half of 2019, the Group’s in De Aar Wind Farm in South Africa recorded total power generation of 363 GWh, representing a year-on-year increase of 3.69%; and maintained safe production for a total of 609 days as at 30 June 2019.
Business Outlook - For the six months ended June 30, 2019
In the second half of 2019, the Group will thoroughly study Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, firmly adhere to the working general principle of seeking progress while maintaining stability, and earnestly implement the new energy security strategy of “Four Revolutions, One Cooperation (四個革命，一個合作) “as well as CHN Energy’s development strategy of “Three Types, Five Variations and Seven First-classes ( 三型五化, 七個一流)”. The Group will strive to advance various tasks in pursuit of the goal of developing into a world-class new energy company.
In the second half of 2019, the Group will focus on the following five areas of works:
(I) Emphasizing the political work of the Party and launching educational activities on the theme of staying true to the founding mission of the Party
The Group will keep enhancing the Party’s political building as the overarching principle so as to urge Party members to strengthen their consciousness of the “Four Types of Awareness”, and arm their mind with Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era. To this end, it will launch educational activities on the theme of staying true to the founding mission of the Party, and conduct in-depth investigation and study to solve key challenges and difficulties and boost work morale.
(II) Implementing the gist adopted at the interim working meetings to promote strategic transformation and materialize high-quality development
More effort will be made to strengthen policy research and technical follow-up to speed up the preparation of the “14th Five-year” development plan. The Group will expand its presence in both southern and northern regions of China by increasing reserved resources of offshore wind power in the southern regions and accelerating the development of large-scale wind power base projects in the northern regions. Moreover, it will increase effort in developing PV power projects and exploring strategic emerging industries diversified, and steadily push ahead with the development and construction of overseas projects.
(III) Deepening internal reforms and drawing up a plan for building itself into a world-class new energy company with global competitiveness
The Group will speed up to build itself into a world-class enterprise by improving development plans and indicator systems, aligning itself with global leading peers, and continuously enhancing management standard, so as to build a world-class new energy company with global competitiveness.
(IV) Consolidating the foundation for work safety, and strengthening management to ensure accomplishment of the objectives and tasks for the year
The Group will carry out the campaign of “year of safety and environmental responsibility” and implement the responsibility for safety and environmental protection at all levels of the Company for preventing the occurrence of all sorts of accidents in an effective manner. Further, it will deepen centralized management of equipment, carry out preventive maintenance, and ensure the completion of the annual electricity output target. It will continue to reduce its “receivables and inventories (兩金)”, optimize financing structure, and strictly control the increase of costs and expenses.
(V) Strengthening the development of innovation capacity and optimizing technology management mechanisms to enhance core competitiveness
The Group will increase investment in technology, carry out research on floating and ultra-large offshore wind power technology, and actively participate in the formulation of industry standards for offshore wind power infrastructure and operation and maintenance. Moreover, it will promote information-based and intelligent development, upgrade new energy monitoring centers and develop high-standard smart wind farms.
Source: China Longyuan Power (00916) Interim Results Announcement