Longyuan Leads Declines as China Eyes Solar, Wind Price Cuts

  • Solar tariffs may be reduced by at least 23% from 2017: report
  • China may cut offshore wind prices by as much as 6.7%: report

China Longyuan Power Group Corp., the nation’s biggest wind-farm operator, fell in Hong Kong, leading declines in clean energy stocks after a report said China plans to cut the rates it pays out to developers of solar and wind power.

The stock slumped 9.1 percent, the biggest drop since March 2014, to close at HK$6.30 on Friday. Concord New Energy Group Ltd. dropped 11 percent, while Huaneng Renewables Corp. lost 10 percent.

China’s top economic-planning agency plans to cut renewable-energy tariffs, a report on Escn.com, the website of the China Industrial Association of Power Sources, said on Thursday, citing a government document. Solar-power tariffs will be lowered by at least 23 percent from 2017 to as much as 0.75 yuan (11 U.S. cents) a kilowatt-hour, according to the report.

The cuts coincide with lower equipment costs, particularly for solar developers.

Average solar panel prices have tumbled more than 26 percent in the past year, according to data compiled by Bloomberg. The plunge has resulted in a lowering of the bids that solar developers offer to build projects. Qingdao New Energy Solutions Inc. this month won a tender to build a solar farm in China’s northern province of Inner Mongolia with a bid of 0.52 yuan a kilowatt-hour, the cheapest on record for China.

Project Profitability

“The reductions are huge,” said Peng Peng, secretary-general of the China Photovoltaic Power Investment and Financing Alliance. The new tariffs, if implemented, “will cause developers to lose appetite for many projects because of much lower profitability.”

China has also proposed reducing the power price for near-shore wind power plants by 5.9 percent and for inter-tidal wind projects by 6.7 percent, the Escn.com report said.

The tariff reduction proposal for wind projects “aims to address the National Renewable Energy Fund deficit and to accelerate development of existing projects,” Zhou Yiyi and David Hostert, analysts at Bloomberg New Energy Finance, wrote in a note on Friday.

The lower tariffs may not significantly hurt current project profitability but “will make China’s offshore development even less attractive to developers,” they wrote.

UOB-Kay Hian downgraded the wind-power sector to market weight. China’s tariff reduction plans could “destroy” market confidence in the industry, analyst Shi Yan said in a note.

Longyuan and Huaneng Renewables were cut to hold from buy on Friday by Shi.

— With assistance by Feifei Shen

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