Energy & Resources, ESG

Back with the wind in its sails

Sany plans STAR listing of new energy wind turbine unit

Sany-w

The world’s biggest digger maker has diversified into wind power

A decade ago, Liang Wengen was riding high at the top of the Forbes China rich list. The founder of Sany Heavy Industry became the country’s richest tycoon by providing the construction equipment that helped China to urbanise rapidly. Liang was even tipped to become the first private sector entrepreneur to be elected to the Communist Party’s Central Committee, a powerful body that comprises 300 or so of the most senior Party cadres.

It did not happen and Sany was dislodged from its home base in Changsha by state-owned rival Zoomlion (see WiC123; it relocated its headquarters to Beijing). Over the past decade, Liang’s ranking has fallen to 148th in the rich list. However, while Liang’s down, he’s far from out.

Sany has just had a very good year, overtaking Caterpillar as the world’s largest excavator manufacturer. Financial analysts believe that it will also become the world’s largest overall construction machinery producer this year.

Revenues and profits rose by more than a third last year. The company’s Shanghai-listed stock responded by more than doubling in 12 months.

But the fact remains that if Liang wants to power his way back up the rich list rankings, he needs to cultivate another revenue stream. And he is intent on carving out a fresh fortune in the new economy. Liang’s chosen field is wind turbines.

This isn’t a new industry for Sany. Almost a decade ago the company tried to sue President Barack Obama after he blocked it from installing wind turbines close to a US naval weapons testing facility. The 2012 incident proved to be an early warning shot in Sino-US geopolitical tensions.

But Sany’s turbine business has only really scaled up over the past two years as operators rushed to install turbines before the government’s wind subsidy scheme wound down. Sany has been one of the chief beneficiaries, breaking into the global top 10 for the first time in 2020, according to Bloomberg New Energy data.

It overtook Germany’s Nordex and China’s CSSC Haizhuang Wind Power to claim the tenth spot after selling 3.72 GW worth of turbines.

Revenues and profits from the new division have soared. In 2019, the company booked sales of Rmb1.48 billion ($227 million) and net profits of Rmb126 million. Over the first three quarters of 2020, these had respectively increased to Rmb5.04 billion and Rmb677 million.

The group is now hoping to capitalise on this momentum with a listing on Shanghai’s STAR Board for science and technology companies. Sany Heavy Energy hopes to raise about Rmb3 billion from an initial public offer that has just received regulatory approval.

It will follow Shanghai Electric Wind, which has just launched a similarly sized STAR Market IPO. It also has the wind at its back after rising two places to seventh in the global rankings, with 4.77 GW of turbine sales in 2020.

Last year, China notched up about 72 GW of new wind capacity, propelling seven domestic companies into or up the top 10. Shenzhen-listed Xinjiang Goldwind was at number two with 13.06 GW, with Shanghai-listed Mingyang and CRRC at sixth and ninth respectively. Two other companies have yet to float: Envision (fourth) and Windey (eighth).

But some wonder if peak profits in the sector has passed. China’s listed turbine manufacturers have all seen their shares prices ease off since late January.

Capacity growth could halve to about 30 GW to 40 GW this year now the subsidy scheme has largely closed.

Sany Heavy Energy was able to increase its market share in 2020 because some of the larger turbine players were at full capacity. That may not continue in 2021 and it remains to be seen whether Sany can break into the top tier.

Yet the long-term picture looks extremely positive. This month, the National Energy Administration (NEA) announced that it wants wind and solar to account for 16.5% of China’s energy output in 2025 and 25% in 2030, up from 11% in 2020. The central government is urging local governments to speed up approvals to bring new projects on stream.

The subsidies may have gone, but capacity expansion has not.


© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.