China Wind Shares Gain After ’Buy’ Rating, Energy Use

China Longyuan Power Group and Xinjiang Goldwind Science & Technology Co. surged in Asian trading after Deutsche Bank AG began coverage with ‘buy” ratings and China overtook the U.S. as the biggest energy user.

China Longyuan, the nation’s largest wind power company by market size, closed 9.6 percent higher at HK$7.77 on the Hong Kong Stock Exchange, the biggest percentage gain since the company began trading in December. Second-ranked Xinjiang Goldwind rose the most in almost a year, closing up 9.7 percent on the Shenzhen Stock Exchange. They were the top gainers of the 88-member WilderHill New Energy Global Innovation Index.

Growing power demand, rising coal prices and strong state support make China a more favorable market for wind power than the U.S. or Europe, Michael Tong, a analyst at Deutsche Bank, wrote in a report. Last year China, which erected more wind turbines than any other nation, overtook the U.S. as the biggest energy user, according to the International Energy Agency.

“We are confident in China’s wind power sector growth outlook in the near, mid- and long term,” Tong, who’s based in Hong Kong, wrote in the report dated yesterday. “Cheaper valuations offer good buying opportunities for established Chinese wind players.”

Shares of global wind-power companies have slumped this year on investor concern that demand will be reduced. European countries are debating reductions to subsidies for renewable energy, and a bill in U.S. Congress to expand alternative energy was set aside pending a review of offshore-drilling safety following the oil spill in the Gulf of Mexico.

Vestas, Gamesa Comparison

Global investment in wind power also eased during the economic slump in the U.S. and Europe, lowering the prices paid for wind farms, according to Bloomberg New Energy Finance, the London-based research firm owned by Bloomberg LP.

Shares of Randers, Denmark-based Vestas Wind Systems A/S, the world’s largest maker of wind turbines, have fallen about 13 percent this year, compared with a 41 percent drop for Spanish wind-turbine maker Gamesa Corporacion Tecnologica SA, a 23 percent decline for China Longyuan and a 0.04 percent drop for Xinjiang Goldwind.

Investors may be underestimating the potential for wind power in China compared with the U.S. and Europe, Tong wrote in the report. China’s central government may raise its target for wind power to 200 gigawatts by 2020 compared with its current target of 150 gigawatts, the report said.

China had 27.9 gigawatts of installed onshore wind power capacity as of the end of May, according to New Energy Finance. A gigawatt can power about 800,000 average U.S. homes.

Coal Price

The nation may install a record 18 gigawatts of wind power capacity this year, New Energy Finance estimates. Second-quarter financing of renewable energy in China surged 72 percent to $11.5 billion, more than Europe and the U.S. combined, the Bloomberg research arm said on July 13.

A 20 percent rise in coal prices year-on-year also makes wind power more attractive in China as the country’s energy demands increase, Tong wrote. China burned 1,537 million tons of coal last year, compared with 498 million in the U.S., BP Plc said in its annual Statistical Review of World Energy in June.

China consumed 2,252 million metric tons of oil equivalent in 2009 in the form of crude, coal, natural gas, nuclear power and renewable sources, IEA Chief Economist Fatih Birol said yesterday. That exceeded the 2,170 million tons used by the U.S.

Xinjiang Goldwind, based in Urumqi city in Xinjiang province, shelved a plan in June to sell 395.3 million new shares in Hong Kong, equal to a 15 percent stake, citing poor market conditions. China Longyuan raised a net $2.2 billion through an initial public offering in Hong Kong in December.

China may spend about 5 trillion yuan ($738 billion) in the next decade developing cleaner sources of energy to reduce emissions from burning oil and coal, Jiang Bing, head of the National Energy Administration’s planning and development department, said in Beijing today.

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