0956.HK 600596.SHG
Suntien focuses on improving efficiency of wind farms

The wind farm operator said its power generation stabilized in the second half of last year as it curbed its spending on new projects

Key Takeaways:

  • Suntien Green Energy said its green power generation dropped 0.93% last year, easing from 3.57% decline for its core wind power in the first half of the year
  • The company’s profits from its wind and solar power business fell 10% in the first half of last year, as its utilization and tariff rates sagged

  

By Doug Young

Blame it on the wind.

That was the word coming from China Suntien Green Energy Corp. Ltd. (0956.HK; 600956.SH) earlier last year, when it blamed poor winds for the weak performance at its core wind farms in its 2024 mid-year results. Now, a new full-year update from one of China’s leading wind farm operators shows the breezes appear to be picking up again, helping to improve the company’s performance towards the end of the year.

Suntien is just one of the many state-backed entities in China rushing to build up the nation’s green energy sector in response to Beijing’s big ambitions in the space.

The company’s latest report shows its business appeared to stabilize in the second half of the year, after its wind power generation dropped by a relatively large 3.57% in the first half, which it blamed on a decrease in average wind speeds. For the full year, its overall power generation, the vast majority of which comes from wind, fell by a much milder 0.93% to 14.12 million MWh, indicating better utilization rates in the second half of the year.

Suntien had 6.36 GW of installed wind capacity at the end of June, equal to about 1.2% of the 520 GW of capacity for all of China last year. The company also operates a much smaller solar power business, but that accounts for less than 2% of its electricity output.

China has been massively building up its green energy capacity in the last few years as it races to meet its previously announced goals of reaching peak carbon emissions by 2030 and going carbon neutral by 2060.

Last year alone, the country added 45% more new solar capacity than it did in 2023, bringing its total to 887 GW, according to the National Energy Administration. By comparison, the U.S. had just 139 GW in installed solar capacity at the end of 2023. Newly added wind capacity last year rose 18% year-on-year, bringing the nation’s total to 520 GW.

The sum of those two figures, around 1.41 TW, already outpaces China’s previously stated goal to build 1.2 TW of capacity from those sources by 2030.

Suntien’s latest and previous figures reflect quite a few things about China’s green energy ambitions, including the rapid buildup and relatively low rate of newly generated power that is actually generating revenue. And while Suntien has been approved to keep expanding its wind power portfolio at breakneck speed, the company appears to be slowing down new construction in an effort to better manage what it has already built.

As we’ve previously noted, Suntien said its green energy operations generated 14.12 million MWh of power last year. But its transacted electric volume for the year, which presumably means electricity it actually sold, was a much smaller 5.89 million MWh, or just around 42% of the total generated. The company points out the transacted volume of its power output improved by 0.57 percentage points in 2024 from the previous year. Still, being unable to sell more than half of your power output seems to reflect huge inefficiency.

Building slowdown

All this shows that Suntien appears to have built too much too quickly, no doubt with strong encouragement from its local government in Hebei province where the company is based and where more than 70% of its wind power capacity is now located. Now it’s focusing on operating its wind farms more efficiently, even as it’s undoubtedly coming under competitive pressures from other state-backed entities that also spent massively on similar buildups.

Those competitive pressures were reflected in Suntien’s average grid tariff for the electricity it managed to sell last year, which fell 2.5% year-on-year to 0.43 yuan per KWh.

Reflecting its own slowdown in new building, Suntien said in its interim report last year that it added just 64.5 MW of wind power capacity to its total in the first half of last year, boosting its capacity by just 1% to 6.36 GW by the end of June. The same report shows the company’s spending on new wind and solar farms dropped sharply in the first half of the year, down 43% to 708 million yuan ($98 million) for the period from 1.23 billion yuan a year earlier.

Despite the headwinds Suntien and its peers are facing on many fronts, they still seem to be finding strong business in green energy. The company’s revenue rose 20% in the first three quarters of the year to 15.8 billion yuan, according to a third-quarter update released in October. But the company acknowledged in its midyear report, which showed similar gains, that those big gains were largely the result of selling more natural gas – its other main business.

More than 70% of Suntien’s profit comes from its wind and solar power businesses, which provided 1.2 billion yuan in profits out of its total of 1.89 billion yuan in the first half of the year. But the profit from its new energy power business was down 10% year-on-year, as Suntien blamed lower utilization hours.

Suntien’s Hong Kong-listed shares were unchanged on Monday, the first trading day after the release of its full-year update, which didn’t include any revenue or profit forecasts. But the stock’s latest levels are near a two-and-a-half year high, perhaps as investors marvel at the company’s ability to be so profitable despite all the issues it faces. Analysts are also quite positive on the company, with six out of seven polled by Yahoo Finance rating it a “buy.”

Part of the bullishness may owe simply to Suntien’s relatively low price-to-earnings (P/E) ratio of just 6.8. Multiples are far higher outside the country, including the P/E of 22 for NextEra Energy (NEE.US) and the 14 for Enel SpA (ENEL.MI), which are more commercially focused and actually sell most of the power they generate.

To subscribe to Bamboo Works weekly free newsletter, click here

Recent Articles

BRIEF: EPWK ends flat in Nasdaq trading debut

Gig worker crowdsourcing platform operator EPWK Holdings Inc. (EPWK.US) made a muted trading debut on Thursday, closing up a slight 0.24% at $4.11 in its first trading day on the…