Capturing the WindBy
As Chinese cities have become increasingly polluted, the government has laid out ambitious plans to lessen dependence on fossil fuels. By 2020, Beijing aims to have 15% of the nation's electricity come from wind, solar, or other renewable sources. Adrian Ho sees that as a tantalizing opportunity for startups like his China Water & Energy, which builds and operates wind farms for power companies. These startups have the chance to grow into major businesses while helping the most polluting country clean up its act. "There are opportunities for almost anyone who has access into the game," he says.
Getting in the door is the trick, though, and that's where Ho figures Hong Kong-based CWE has an edge. In a country where guanxi, or connections, remain an important part of doing business, the 32-year-old former investment banker comes from a prominent southern China family. His grandfather, Ho Tim, co-founded Hang Seng Bank, one of the largest in Hong Kong, and an uncle, Edmund Ho, became the first chief executive of Macao in 1999 after the former Portuguese colony returned to Chinese rule.
Now, as chairman and chief executive officer of CWE, Ho is putting those connections to work. Family members provided some of the $6 million in angel-round funding for CWE last year, and he is using the family name to make inroads with the government-run companies that operate China's power grid. Steve Lyons, general counsel at CWE, recalls one meeting with local officials in Inner Mongolia. Negotiations over a partnership were tense until Lyons reminded the officials of CWE's ties to the Ho family. "Their eyes lit up," says Lyons. "We were able to solve [the problems] primarily on that."
INDUSTRY KNOWHOWFamily guanxi aren't CWE's only kind of connection. When Ho decided to focus on wind energy he recruited Jim Crabtree and Jim Morris, two former General Electric Capital vice-presidents. GE (GE) is one of the world's top producers of wind turbines and also invests in wind farms. But since Beijing requires 51% Chinese ownership of renewable-energy projects to qualify for carbon credits, GE must partner with power companies or operators like CWE. Ho believes he can help match GE with those Chinese power producers.
CWE's biggest deal so far is a joint venture with a subsidiary of China Guodian, one of the five largest electricity producers in China. CWE expects to invest about $80 million initially, with the first phase of the project going online in early 2011. The company says it has nearly sealed a deal to co-develop an $88 million wind farm in Jilin that will begin operations next year.
Many outfits are trying to get a piece of the $16 billion Chinese power companies are expected to spend on wind projects over the next decade. Jonathan Woetzel, a McKinsey partner in Shanghai, believes companies focusing on wind-farm design and management are well-positioned. "The big opportunity to improve wind is around operations," he says. That suggests CWE, with both guanxi and industry expertise, has a good shot at success.
With Frederik Balfour
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