中國(guó)風(fēng)電行業(yè)：匆忙安裝沒(méi)有贏家（電力）

1、GlobalResearch10 April 2019EquitiesChinese Wind Power SectorEquitiesElectric UtilitiesChinaNo winners in this rush installation eraElectric UtilitiesChinaNo one benefits from rush installation; downgrade Goldwind from Buy to Sell Wecutourearningsforecastsandpricetargetsforbothwindturbinegenerator(WT

2、G) manufacturers and wind farm operators, taking an anti-consensus cautious view on Goldwind,andbeingneutralontheoperators.Weexpectnewwindfarmadditionswill surge in 2019 and 2020 before subsidy cancellation, as major wind farm operators aggressivelyraisedcapacityadditionguidanceintheir2018resultsbri

3、efings.Contrary toconsensus,wethinkthiscanhardlybenefitGoldwind,asmarginpressureerodedthe volumebenefits,andmaybenegativetowindfarmoperatorsascurtailment,earnings, subsidypayments,balancesheets,andcashflowwillbeundersubstantialpressurefor two years. We downgrade Goldwind to Sell as the current high

4、valuation multiples reflectvolumeupsidebutnotmarginpressure.Weareneutralonwindfarmoperators as we think the impact of rush installation is largely pricedin.Rush installation ahead, but Goldwind can hardly benefitWe raise our 2019/20 wind power connection forecasts from 22/23GW to above 30GW, suggest

5、ing large growth from 21GW in 2018. We think rush installation is justified as, even allowing for delays in grid connection and subsidies, projectinternal ratesofreturn(IRR)insouthernChinaarestillbetterat7.4%ifinstallednow,than5% if installed after 2020. However, we expect Goldwinds gross margin ero

6、sion couldbe worse than we had expected, from 25% in 2017 to 15/17% in 2019/20E. This will lower its WTG EBIT margin to 2-4%.Two dark years for wind farm operators; downgrade Longyuan and Huaneng Webelievewindfarmoperatorswillsufferfrom1)reducedearningsascurtailmentwill likely worsen; 2) deteriorati

7、ng cash flow with larger subsidy deficits and increased capex; 3) increased gearing. We cut our 2019/20 earnings forecasts by cutting utilisation hours from 2,200 to 2,000. We expect they generate negative FCF for 2019/20E from positive FCF in 2018. We downgrade Longyuan and Huaneng Renewable from B

8、uy to Neutral.Whats priced in?WeseevaluationdownsideforGoldwindastheimplied2020EPEforitsWTGbusiness has already exceeded that of the 2015 upper cycle. For wind farm operators, we estimatethatthereturnsprofilesfor2019/20willbesimilartothatin2015.Webelieve valuations could remain close to the 2015 tro

9、ugh for some time at 0.7x P/BV, closeto current valuations.Figure 1: Valuation summary and rating changesAbigailSun HYPERLINK mailto:abigail.sun +86-213-8668637Ken HYPERLINK mailto:ken.liu +852-29717516Simon Powell HYPERLINK mailto:simon.powell +852-29717772 RatingCurrent PricetargetUpside 2019EEPS

10、2020EEPS 2021EEPSNewOldpriceNewOldChgNewOldChgNewOldChgNewOldChgGoldwind-ASellBuyRmb13.80Rmb11.50Rmb17.00-32%-17%0.510.66-22%0.670.82-19%0.610.88-31%Goldwind-HSellBuyHK$10.28HK$8.50HK$12.00-29%-17%0.510.71-28%0.670.88-25%0.610.95-35%LongyuanNeutralBuyHK$5.47HK$6.00HK$8.70-31%10%0.480.80-40%0.520.88-

11、41%0.670.97-30%HNRNeutralBuyHK$2.24HK$2.40HK$3.00-20%7%0.240.36-31%0.270.38-28%0.330.40-16%RegionReutersMktcap PE P/BV ROE Dividend yieldcodeRatingRmb m19E20E19E20E19E20E19E20EGoldwind-ACN002202.SZSell58,30626.9x20.7x1.9x1.8x8.1%9.0%1.8%1.9%Goldwind-HCN2208.HKSell37,17217.2x13.2x1.2x1.1x8.1%9.0%2.7%

12、2.9%LongyuanCN0916.HKNeutral37,6219.8x8.9x0.8x0.7x8.4%8.6%2.0%2.2%HNRCN0958.HKNeutral20,2577.9x7.1x0.7x0.6x9.1%9.3%1.9%2.1%Source: Company data, UBS estimates. Note: price as of 9 April 2019; Goldwind-As EPS change contains changes in share outstanding. HYPERLINK /investmentresearch /investmentresea

13、rchThisreporthasbeenpreparedbyUBSSecuritiesAsiaLimited. ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURESBEGIN ONPAGE44. UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbe aware that the firm may have a conflict of interest that could affect the objectivity of t

14、his report. Investors should consider this report as only a single factor in making their investment decision.ContentsOURTHESISINPICTURES4PIVOTALQUESTIONS5 HYPERLINK l _TOC_250009 Q:Willwindpowerinstallationvolumesurgein2019/20? HYPERLINK l _TOC_250008 Q:Willcurtailmentcontinuetoeaseorturnworse? HYP

15、ERLINK l _TOC_250007 Q:Canwindfarmoperatorsspeedupthecollectionofsubsidyreceivables? HYPERLINK l _TOC_250006 10 HYPERLINK l _TOC_250005 WHATSPRICEDIN?13 HYPERLINK l _TOC_250004 Companypages14 HYPERLINK l _TOC_250003 XinjiangGoldwindScience&Technology HYPERLINK l _TOC_250002 XinjiangGoldwindScience&T

16、echnology-A HYPERLINK l _TOC_250001 ChinaLongyuanPower HYPERLINK l _TOC_250000 HuanengRenewableCorporationAbigailSun HYPERLINK mailto:abigail.sun +86-213-8668637Ken HYPERLINK mailto:ken.liu +852-29717516Simon Powell HYPERLINK mailto:simon.powell +852-29717772Chinese Wind Power SectorUBS Research THE

17、SIS MAP a guide to our thinking and whats where in this report HYPERLINK l _bookmark1 OURTHESISINPICTURESMOSTFAVOUREDLEAST FAVOUREDLongyuanGoldwindA/HPIVOTALQUESTIONSQ: Will wind power installation volume surge in2019/20?Yes. We think wind power installation could surge significantly in 2019/20 ahea

18、d of the subsidy cancellation at end-2020. We forecast 30/32GW wind power connection and 31GW/33GW wind power installationin2019/20. HYPERLINK l _bookmark2 Q: Will curtailment continue to ease or become worse?Worse.Webelievetheglutofnewwindfarmsupplyislikelytoincreasethepressureforthegridto absorbth

19、erenewablepower.Utilizationislikelytobesuppressedin2019/20,whichwouldbebad forearnings.Wethinkcurtailmentmaygobacktothe2016levelofaround15%. HYPERLINK l _bookmark8 Q: Can wind farm operators speed up the collection of subsidy receivables?Unlikely. The rush installation for new wind farms in 2019/20

20、will likely exacerbate the subsidy deficits from the current one year or eighteen months to almost two years. We expect balance sheetsandcashflowsforwindfarmoperatorstofurtherdeteriorate. HYPERLINK l _bookmark11 UBSVIEWWe believe the operating environment for wind farm operators will significantly w

21、orsen in 2019/20 as most companies rush ahead to install new wind projects. We believe they will suffer from 1) reducedearningsascurtailmentswilllikelyworsen;2)deterioratingcashflows,withlargersubsidy deficits and increased capex; and 3) increasedgearing.EVIDENCE1)Mostmanagementsofwindfarmoperatorsh

22、aveincreasedtheirguidanceforexpansionplansin 2019 and 2020; 2) our renewable subsidy funds calculation shows that deficits will escalate in the next two years as capacity expansion isaccelerating.WHATSPRICEDIN?Theimplied2020EPEforGoldwindsWTGbusinesshasalreadygoneabovethelevelin2015upper cycle;wethi

23、nkmarkethaspricedinvolumeupsidebutnotmargincontraction.Tradingat0.7x12- month forward P/BV for wind farm operators, we believe the market has priced in most of the negatives potentially brought by rush installations. Our 2019/20 ROE forecasts are similar to the levelsin2015.Thecurrentvaluationmultip

24、lesaresimilartothosebackin2015. HYPERLINK l _bookmark14 moreInstallation and connection could surge to over 30GW in 2019/20E3431343130 3132 33232325 24 25 25 25 25 25 25 25 2520202021 2117 181515161613353025201510502011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025ENew

25、connectionNewinstallation Source: Reuters, Company data, UBSestimatesChinese WindPowersectorUBS ResearchOURTHESISINPICTURES HYPERLINK l _bookmark0 return GWWindfarmcapacityaddition353025201510520112012201320142015201620172018E2019E2020E2021E020112012201320142015201620172018E2019E2020E2021EChinas win

26、d power capacity addition should surge in 2019/20E30%2022E2023E2024E2025ENewconnectionNew installation2022E2023E2024E2025EWind power curtailment ratio25%20%15%10%Rush installation could drive curtailment ratio to increaseagain5%Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q4

27、17 Q118 Q218 Q318 Q418 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 2020E15,000Free cash flow of wind farm operators (Rmb m)10,0000And subsidy receivable days will also increase, leading to deteriorated cash flows for wind farmoperators(10,000)201720

28、182019E2020E2021E2022ELongyuanHuanengRenewableChina Resources PowerGoldwindsWTGsalesvolumeandmarginMW40%35%30%25%20%15%10%5%0%10,0008,0006,0004,0002,0002020E02020EHowever, Goldwind can hardly benefit due to significant margin contraction2010201120122013201420152016201720182019EWTGexternalsalesvolume

29、EBITmarginGross Sourcesforexhibitsabove:Companydata,UBSResearch2010201120122013201420152016201720182019EChinese WindPowersectorUBS ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 return Q: Will wind power installation volume surge in 2019/20?UBS VIEWYes. We think wind power installation could surge

30、significantly in 2019/20 ahead of the subsidy cancellation by end-2020. This is becausedownstream operators have large amounts of projects on hand that have been approved but that are not operated, and they are keen to install as much as possible before approved subsidies expire by end-2020. We fore

31、cast 30/32GW wind power connection and 31GW/33GW wind power installation in2019/20.EVIDENCEMajor wind farm operators all raised their capacity expansion guidance for 2019/20 during the 2018 result briefings.OurIRRanalysissuggeststhatprojectswithaFeedinTariff(FiT)cangenerate higher IRR, even consider

32、ing the impact of higher curtailment, delayed grid connection, and subsidy payments.WHATS PRICED IN?We think the market has largely priced in bullish installation volume for WTG manufacturers, but has not yet fully factored in the impact for downstream wind farm operators.Wind power installation lik

33、ely to surge in 2019/20We think wind power installation could surge in 2019/20 ahead of the subsidy cancellation.Thisisbecausedownstreamoperatorshavelargeamountsofprojects on hand which that have been approved but that are not operated, and they are keentoinstallasmuchaspossiblebeforeapprovedsubsidi

34、esexpirebyend-2020. We forecast 30/32GW wind power connection and 31GW/33GW wind power installation in 2019/20Figure 2: Wind power installation and connection in ChinaGW343134313330 31322325 2425 2525 2525 2525 252017 181515 16161321 2120202330252015105020112012201320142015201620172018E2019E2020E202

35、1E2022E2023E2024E2025ENewconnectionNew installationSource: National Energy Administration (NEA), Chinese Wind Energy Association (CWEA), UBS estimatesLarge numbers of projects need to be installed in 2019/20According to the tariff policy HYPERLINK l _bookmark4 (Figure 4), wind farms that have been a

36、pproved beforeend-2018canenjoytheFiT,butwillfaceapotentialtariffcutiftheydonot start construction within two years after the approval.We think that wind projects displaying the following two criteria will rush to install:1) projects approved before 2018, which can enjoy the 2016 FiT if starting cons

37、tructionbyend-2019;and2)projectsapprovedin2018,whichcanenjoythe 2018 FiT if starting construction by end-2020.According to Goldwind, there were 42GW projects with financing secured or under construction and 46GW projects being approved but not yet starting constructionatend-2018 HYPERLINK l _bookmar

38、k3 (Figure3).Wethinkthissuggestsalargenumberofrush installations in 2019/20.Figure 3: Wind power projects with FiTFinancing construction 42GW48%Approved 46GW 52%Source: Goldwind PPT.Figure 4: Wind power tariff changesTariff PolicyAnnouncement timeAverage cut (Rmb/kWh)Criteria2015 cut12.2014(0.02)App

39、roval after 1.1.2015; or approval before 1.1.2015 and connected after 1.1.20162016 cut12.2015(0.02)Approval after 1.1.2016; or approval before 1.1.2016 but have not started construction by end-20172018 cut12.2016(0.05)Approval after 1.1.2018; or approval before 1.1.2018 but have not started construc

40、tion by end-2019biddingtariff05.2018TBCNew wind farm projects in provinces that has not published 2018 wind power construction plan by theannouncement day; and all approval after 2019Gridparityna0.1Grid parity projects are encouragedSource: NEAIRR analysis: operators will rush to install, especially

41、 in southern ChinaWethinkrushinstallationisbadfortheindustry,asitwillcauseproblemssuchas delaysingridconnection,increasesincurtailmentratio,delaysinsubsidies,andso on.However,ourIRRanalysisshowsthat,evenwithalltheseconcerns,windfarm operators still have incentives to install before the deadlines and

42、 secure the FiT, especially in southern China.In HYPERLINK l _bookmark5 Figure5and HYPERLINK l _bookmark6 Figure6,weanalysewindprojectsIRRsunderdifferentscenarios, for regions in southern and northern China (we use Inner Mongolia as an example), respectively.Weassumethat1)iftheprojectsareconstructed

43、beforeadeadline,itcouldenjoy FiT but will face a one-year delay in grid connection and subsidy payment, and a higher curtailment ratio in northern China; 2) if the projects are constructed after 2020, it is applied to local coal-fired tariffs with no subsidy, but they will face no curtailment or del

44、ays in grid connection.OuranalysisshowsthatwindfarmsinsouthernChinawillhavelargeincentivesto installinarush,astheirprojectIRRmaydropby2.4pptsundergridparity.Butin areassuchasInnerMongolia,wherecurtailmentisaconcernandcurrentsubsidies are low, wind farms will not be hurt much under grid parity.Figure

45、 5: Wind project IRR under different scenarios South (Region IV)Capex (RmbTariffSubsidyUtilizationm/MW)(Rmb/kWh)(Rmb/kWh)hoursDelay in connection?Delay in subsidy?IRRNormal case8.00.5700.1802,100No1 year9.10%Constructed by 20208.00.5700.1802,1001 year2 year7.40%Construct after 20207.50.390-2,100NoNo

46、5.00%Source: UBS estimatesFigure 6: Wind project IRR under different scenarios Inner Mongolia (Region I)Capex (RmbTariffSubsidyUtilizationm/MW)(Rmb/kWh)(Rmb/kWh)hoursDelay in connection?Delay in subsidy?IRRNormal case7.00.4000.1073,000No1 year11.00%Constructed by 20207.00.4000.1072,8501 year2 year8.

47、30%Construct after 20206.50.293-3,150NoNo8.20%Source: UBS estimatesDownstream operators have all raised installation targets for 2019/20Major wind farm operators all raised their installation targets for 2019/20 during the 2018 result briefings HYPERLINK l _bookmark7 (Figure 7), as they all have lar

48、ge number of projects on hand that have been approved but that are not operated yet. And over 50% of these projects are in southern China.Figure 7: Major operators plan to accelerate installation in 2019/20CompanyProjectsapprovedbutnotoperatedGuidance on capacity expansion Longyuan7GW1.2-1.5GW in 20

49、19, more in HuanengRenewable4.2GW1.6GW in 2019, more in 2020HuanengPowerNa2GW in 2019CRPower9GW1.7GW in 2019, 2.3GW in 2020Source: Company guidanceChinese WindPowersectorUBS ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 return Q: Will curtailment continue to ease or turnworse?UBS VIEWWorse. We bel

50、ieve the glut of new wind farm supply is likely to increase the pressure for the grid to absorb the renewable power. Utilisation is likely to be suppressed in 2019/20, which would be bad for earnings. We expect the curtailment ratio to go back to the 2016 level of around 15%.EVIDENCEWe looked at the

51、 level of curtailment relative to power demand and the new capacityadditionsforrenewables,andbelievethatcurtailmentmayturntobe as bad as the level of 2016.WHATS PRICED IN?We believe investors have priced in modest curtailment risks.The curtailment ratio is usually a function of overall power demand

52、growth and the speed of capacity additions. Weak power demand growth and high capacity additions usually could result in a high curtailment ratio, and vice versa. HYPERLINK l _bookmark9 Figure 8 and HYPERLINK l _bookmark10 Figure 9 show the historical curtailment ratio for wind farms compared with p

53、ower demand growth and wind farm additions. As we expect new additions in 2019/20 could reach levels similar to those in 2015 with weakening power demand to potentially 4-5%, we believe the curtailment ratio for 2019/20 could be similar to that in 2016 at around 15%. This is a substantial increase f

54、rom the latest Q418 curtailment ratio of only 5%.We therefore believe that utilisation hours for wind farms will be under pressure, at least for two consecutive years. We expect utilisation hours for 2019/20 to be similar to the levels in 2016 for listed companies, at around 2,000 hours.Figure 8: Cu

55、rtailment ratio forwindfarmsFigure 9: National capacity addition for wind farmsversusnational power demand growth30%25%20%15%10%5%0%4035302520151050201420152016201720182019E 8.0%7.0%6.0%5.0%4.0%3.0%2.0%1.0%0.0%Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318

56、Q418 2020ECapacityadditions(MW)Power demand (YoY,RHS)Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 2020ESource:NEASource: CEIC, UBSestimatesZone IV means no curtailment?Although most of the new projects added are in Zone IV, where curtailment was almo

57、st zero, we believe the inflow of new projects in Zone IV developed regions could likely crowd out the demand of renewable power imports in Zones I to III. This situation could be similar to those in 2015 and 2016, when most of the new projects added were at non-curtailment regions in Zone IV, and t

58、he overall wind power curtailment ratio still increased substantially.Chinese WindPowersectorUBS ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 return Q: Can wind farm operators speed up the collection of subsidy receivables?UBS VIEWUnlikely.Therushinstallationfornewwindfarmsin2019/20islikelytoexac

59、erbate the subsidy deficits. We expect balance sheets and cash flows for wind farm operators to further deteriorate.EVIDENCEOurcalculationshowsthattheannualsubsidydeficitwillcontinuetoescalate to around Rmb108bn in 2020E, from Rmb66bn in 2018, with an increase of 63% in two years. It will be increas

60、ingly difficult for the wind farm operators to receive subsidies in a timely manner, and we expect receivable days to furtherincreasefromthecurrentoneyearoreighteenmonthstoclosetotwo years.WHATS PRICED IN?Webelieveinvestorshavelargelypricedinlongreceivabledays,butmaynot have expected this to further