CGN to buy 3 UK wind plants

Share price up on media reports of entry in EU energy market

Shares of China General Nuclear Power Group (CGN), one of the country's biggest nuclear power generators, rose by 0.57 percent on Monday, following media reports that it intends to enter the EU's renewable energy market.

State-owned CGN, which just got listed on the Hong Kong stock market on Wednesday, saw its shares close at HK$3.56 ($0.56) per share on Monday, witnessing a slight rise from the previous price of HK$3.54.

The rise came against the backdrop that CGN is reportedly set to announce a purchase of three wind power plants from a French utility EDF on Monday.

A report by the Financial Times on Sunday said that the Chinese group will obtain an 80 percent stake in the three farms in UK, while the remaining 20 percent goes to EDF Group, which will continue operating the turbines and also buy the electricity generated by the farms.

The EDF did not reply to the Global Times e-mail inquiry on the matter by press time. A PR representative with CGN refused to comment on this by press time either.

According to the report, citing unnamed analysts, the value of the deal is expected to hit over 100 million pounds ($157 million), and the sites will generate over 70 megawatts of electricity, which is enough to serve nearly 40,000 homes.

Upon the completion of the potential acquisition, CGN's business portfolio will be diversified, giving the company more chances to further open up the global power generating market, said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

The purchase of the wind farms is reportedly CGN's first big presence into the renewable energy sector beyond China.

As China's demand for electricity grows at a slow space amid economic slowdown, local power generating companies need to fast-track their overseas expansion to consume its large capacity, Lin told the Global Times Monday.

A report by China Electricity Council showed in late November that the national electricity usage in the first 10 months of the year amounted to 4.55 trillion kilowatt-hours, up 3.8 percent year-on-year, while the growth rate over the same period of 2013 is 7.4 percent.

"This is also a good deal for EDF. In addition to offering advanced technology, the cooperation with CGN will lower its costs in the development of wind power farms in the UK, where the labor costs are likely 30 percent higher than in China," said Lin.

EDF's latest financial reports showed that in the first nine months of the year, the group's sales amounted to 52.3 billion euros ($64.08 billion), a slight increase of 0.4 percent year-on-year or down 1.3 percent in organic terms.

Analysts thought that it is now a good time for domestic power generating companies to dip a toe into the overseas renewable energy market, especially the wind power segment.

China has showed a great progress in wind power generation, which provided a solid technological ground for domestic companies to compete with other foreign counterparts, Meng Xian'gan, deputy director of the China Renewable Energy Society, told the Global Times Monday.

2014 will see China cross a milestone, as it is expected to become the world's largest wind power market with installed wind capacity of over 100 gigawatts, according to the Global Wind Energy Outlook 2014 issued by the Global Wind Energy Council in October.

Meng's opinion was echoed by Lin, who noted that EU governments' current active initiatives in boosting renewable energy will also facilitate domestic companies' globalization.

The UK government, for instance, has introduced a number of regulations and subsidies, such as feed-in tariffs, to boost the application of renewable energy in the country, calling for a rise in the usage to 30 percent of the total electricity generated in 2020.

In 2013, renewable energy accounted for 15 percent of total generation, according to the US Energy Information Administration's report issued in June.

Against the backdrop, CGN's major domestic rival China National Nuclear Corp (CNNC) also actively bumped up investment in the EU renewable market.

On December 4, the CNNC signed a memorandum of understanding with the US engineering construction company Fluor Corp to jointly develop their nuclear power and wind energy business in UK, Germany and China.

Meng noted that it is good to see more domestic power generating companies go abroad, but warned that they need to have a very thorough understanding of local culture and policies before investment.

Personnel management and plant operation, in which Chinese companies are usually weak, may also be major hurdles for their overseas expansion, he said.