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Goldwind 2011 Profit Plunged 74% on Market, Price Slump

Xinjiang Goldwind Science & Technology Co., China’s second-biggest wind-turbine maker, said 2011 profit slumped 74 percent as domestic installations declined and foreign competition forced down prices.

Net income of 607 million yuan ($96 million) compared with profit of 2.28 billion yuan in 2010, the Urumqi-based company said today in a preliminary earnings statement based on Chinese accounting methods. Operating profit fell to 698 million yuan from 2.7 billion yuan.

Chinese turbine makers including Sinovel Wind Group Co. are facing headwinds at home after the government tightened its approval process for projects to ease pressure on the grid. Goldwind said Feb. 21 it’s diversifying into solar-power equipment as demand for wind equipment declines, while it also seeks more turbine orders abroad.

“The degree of competition in the domestic market regarding wind turbine prices is very intensive,” said Pierre Lau, head of Asian utility & clean energy research at Citigroup Inc. Annual production capacity of as much as 25 gigawatts is in excess of the 15 gigawatts required, he said, pushing down prices and putting margins under pressure.

Smaller manufacturers and developers will struggle to compete with the larger makers including Sinovel, Goldwind and Guodian United Power Technology Co. as prices retreat, said Guo Shou, a Hong Kong-based analyst at Barclays Capital.

‘Some Consolidation’

“We think there will be some consolidation in China’s wind industry over the next 12 to 24 months,” said Shou.

At the same time, China is “unabashedly” accelerating its solar development plan, Shou said. Targets for solar have been raised to 15 gigawatts by 2015.

“We further expect China to beat these solar targets given historical precedence in wind market development,” Shou said.

Goldwind has boosted turbine orders overseas to counter the slowing home market using funds from Chinese state-backed banks. Its “aggressive” expansion plans, coupled with Chinese financing, may not be enough to counter the domestic slowdown, Shou said in a research note.

Turbine installations in China doubled each year from 2005 to 2010, when 18.9 gigawatts of machines were added. That pace stalled last year as China added 18 gigawatts, according to the Global Wind Energy Council.

Sinovel, China’s biggest wind-turbine maker, said Jan. 30 it expects a decline of more than 50 percent in 2011 earnings because of competition at home and from rivals including Vestas Wind Systems A/S of Denmark.

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