Business

China Huadian Corp, one of the country’s five leading power companies, yesterday said it would invest 485.64 million yuan to develop a wind power project in the Inner Mongolia autonomous region.

Huadian will develop the project in Tongliao in Inner Mongolia, with a capacity of 49.5 mW, the company’s listed arm Huadian Power International Corp said in a statement yesterday.

Huadian has started a subsidiary for the construction and operation of the initiative. It has a registered capital of 169.98 million yuan, said the statement.

The project is in line with the company’s strategy to further boost the development of the clean energy source. The company will also make efforts to increase its portfolio in other renewable energy fields, according to the statement.

Established in 2002, Huadian’s total installed power capacity was 63 gW by the end of last year. It has wind power capacities of 216 mW, accounting for 0.35 percent of the total.

Besides Huadian, other Chinese power producers all quickened their pace in the development of wind power. China Huaneng Group, the country’s largest power company, said it has accelerated the construction of its wind power projects in Guangdong, Jilin, Shandong, Inner Mongolia and Hainan.

Huaneng’s wind power projects in operation or under construction now have a total capacity of 1,347 mW, according to the company’s statistics.

China’s wind power sector has seen rapid growth in the past years. According to China Electricity Council, an industry association, the wind power sector in 2007 generated electricity of 5.6 billion kWh, a growth of 95.2 percent over the previous year. The growth rate was 22 percentage points higher than the year before.

China had wind power facilities with a combined installed capacity of 6,050 mW at the end of 2007, increasing from 2,670 mW a year earlier. Wind power projects that are being built involve a combined installed capacity of 4,200 mW.

Now China ranks the fifth in the world in terms of wind power installed capacity. The country plans to increase its wind power capacity of 10,000 mW by 2015, and to 30,000 mW by 2020.

“China has large wind resources,” says Shi Pengfei, vice-chairman of the Chinese Wind Energy Association. “China possesses 250,000 mW of wind energy potential on land, mainly in the northwest and the east coast, and 750,000 mW offshore.”

According to the National Development and Reform Commission, the country’s top economic planning body, China has taken a string of measures to support the exploration of wind power, including conducting a survey of wind resources, organizing biddings for franchise of large wind power projects, and promoting localization of domestically produced wind power equipment.

International Energy Agency said when oil prices hit or exceed $60-$70 a barrel, wind energy becomes the world’s cost-effective and competitive energy resource.

(China Daily August 13, 2008)

Australia is seeking to strengthen cooperation on clean energy with Guangdong province.

“There is a great opportunity for Australian providers of environmental technologies to take an active role in assisting the province move toward a more energy-efficient economy,” Australia’s Minister of Trade Simon Crean said at a China-Australia clean energy forum yesterday.

He also mentioned that Guangdong is one of China’s wealthiest provinces and one of the largest emitters of carbon dioxide in the country.

Mark Kelleher, managing director of a wind energy company in Tasmania, Roaring 40s, said: “We are confident that further Sino-Australian business contacts can be developed, which will ultimately benefit both countries.”

Roaring 40s is jointly owned by Australian and Hong Kong interests, and regards China as a key market in Asia. It operates wind farms in China.

Eleven other Australian firms in areas such as coal bed methane, landfill technology and fossil energy also participated in the forum.

Li Miaojuan, director of the Guangdong development and reform commission, said the province has been making great efforts to save energy and lower emissions, and welcomes the involvement of Australian firms in clean energy development.

In another development, Crean officially opened the Australian Consulate-General’s new chancery in Guangzhou.

The consulate covers the provinces of Guangdong, Fujian, Yunnan, Hunan and Hainan, and the Guangxi Zhuang autonomous region.

Southern China is Australia’s 9th largest export market. It accounted for 20 percent of Australia’s total exports to China last year.

About 10,000 Australians live and work in southern China, Crean said.

(China Daily August 13, 2008)

Datong Coal Industry Co said it plans to sell shares to its parent in exchange for mining and other related assets worth up to 2.5 billion yuan (US$364 million).

The firm will issue as many as 120 million A shares to state-owned parent Datong Coal Mine Group, at 22.08 yuan apiece, or the last 20-day average price, it said in a filing to the Shanghai Stock Exchange yesterday.

Datong’s target is Yanzishan mine, which made a net profit of 117 million yuan, or 0.98 yuan per share, last year. In contrast, Datong made a 499-million-yuan profit, or 0.60 yuan a share, the filing said. The acquisition will boost the firm’s reserves, output capacity and profitability, Datong said. The deal is subject to shareholder and regulatory approval.

The private placement marks the start of a group listing plan as Shanxi Province-based Datong aims to be the sole coal mining unit under its parent before 2014.

Datong closed at 23.77 yuan on July 14. It fell 10 percent to 21.39 yuan yesterday after trading resumed.

(Shanghai Daily August 12, 2008)

China’s electricity producers asked the government to provide subsidies in the second half of this year to meet losses incurred by higher fuel costs and ease the country’s sixth year of power shortages.

“When electricity tariffs are not high enough to cover power companies’ cost, the government should start granting subsidies in the form of rebates from value-added taxes and an increase in cash loans,” the China Electricity Council has said in a report on its Website.

Four of the country’s biggest power companies, including China Datang Corp and China Guodian Corp, may have posted combined losses of about 7 billion yuan (US$1 billion) in the first half, the Shanghai Securities News reported last month. Power shortages have forced the country to ration supplies in Shandong, Hubei, Shanxi, Henan and Liaoning provinces, Bloomberg News said.

Power supply will be “generally balanced” in the second half of this year, with some provinces having “slight shortages,” the group said in a report last week. The shortage may reach 15,000 megawatts in the second half, it said. The government should expedite power-pricing reforms to help power producers cover losses, it said.

Power plants may need 1.6 billion tons of coal this year, a rise of 11.5 percent from 2007. Power demand may rise 11 percent this year.

(Shanghai Daily August 12, 2008)

Electricite de France SA, Europe’s biggest power producer, signed a final agreement to form a joint venture with China Guangdong Nuclear Power Holding Co to build and operate two nuclear power reactors.

EDF will take a 30-percent stake in Guangdong Taishan Nuclear Power Joint Venture Co, the Paris-based company said in a statement on Sunday.

EDF and Guangdong Nuclear plan to build two European Pressurized Water Reactors in the southern province of Guangdong, according to the statement.

China is turning to alternative energy sources to cut its reliance on polluting coal, Bloomberg News said. Areva SA, the world’s biggest maker of nuclear reactors, and Alstom SA have signed contracts with Guangdong Nuclear to supply nuclear equipment and turbines, EDF said in the statement.

(Shanghai Daily August 12, 2008)

China, the world’s second-largest energy consumer, will cut diesel imports this month and next after domestic supplies improved, insiders said.

China International United Petroleum & Chemical Corp, the nation’s largest oil trader, will halt, purchases in August and September, an insider told Bloomberg News. China National United Oil Corp will reduce imports this month by a “big margin” from July after it increased purchases in the past two months, another insider said.

China raised gasoline and diesel prices by about 18 percent on June 20, which encouraged refiners to increase fuel supplies and reduce inventories. State oil companies had stepped up imports to end shortages and build stockpiles before the Olympics Games.

“The improved Chinese supply may also be attributed to refinery upgrades which boosted yields of diesel,” Ong Eng Tong, a Singapore-based consultant with Mabanaft International GmbH, said yesterday. “The move will increase diesel supply in the Far East region and weaken regional prices.”

Unipec, as China International is known, more than halved diesel imports to 200,000 tons last month from June after the nationwide fuel-price increase. Chinaoil, as China National is known, bought a similar amount in July from June’s 400,000 tons, an insider said. Chinaoil, the nation’s second-largest oil trader, has not decided on the volume of September imports, the insider said.

China increased diesel purchases to the highest in at least five years in June to meet rising demand during the Olympics Games and for reconstruction after the Sichuan earthquake in May. Diesel imports rose to 960,000 tons, the Customs General Administration of China said on July 15.

Chinese oil refiners boosted crude processing to the highest in at least 17 months to 29.61 million tons in June.

China controls the cost of diesel, gasoline and jet fuel to limit their impact on inflation.

(Shanghai Daily August 8, 2008)

Guangzhou Automobile Group Co has been in talks with the Hunan Changfeng Motor Co on a possible tie-up, according to an insider.

“We have been in contact over the past few months,” said an unnamed Guangzhou official. “Both companies have proposals but we haven’t gone through all the details.”

The deal, if successful, will be the latest merger and acquisition in the world’s second-largest auto market after the Chinese government called on industry-wide consolidations to heal the fragmented industry and help Chinese car makers grow and become more competitive.

Yesterday, a report in China Business News said Guangzhou Auto was planning to take a controlling stake in the pickup and sports-utility vehicle maker Changfeng through its Shanghai-listed unit.

The deal is expected to be sealed in the fourth quarter of this year, the Shanghai-based newspaper said.

It also said that Guangzhou Auto was in competition with Beijing Automotive Industry Holdings, which is also interested in being involved in the restructure of Changfeng.

However, an official from Changfeng Motors denied the report.

Guangzhou Auto is the nation’s sixth-biggest auto maker and the Chinese partner of Toyota and Honda.

The move could help it form a third partnership with Japanese partner Mitsubishi, which currently owns 16.07 percent of Changfeng.

Analysts said the cooperation would benefit Guangzhou Auto, adding Changfeng’s production and engineering strength in SUV and pickups.

Guangzhou Auto sold more than 500,000 vehicles last year with sales revenue of 108.4 billion yuan (US$15.8 billion). Changfeng fell 8.84 percent to close at 5.36 yuan.

(Shanghai Daily August 12, 2008)

Daimler AG and China’s Beiqi Foton Motor Co are forming a joint venture to produce medium and heavy-duty trucks and technology in China.

The venture will also explore other opportunities to expand the production and sales of Foton models in international markets.

Daimler said in a statement yesterday that a letter of intent was signed yesterday to set up the equally-shared venture. It did not provide financial details.

The new joint venture is expected to benefit from Daimler’s technologies, specifically the Mercedes-Benz heavy-duty engine technology, and use Foton’s Auman brand as a platform for international growth in the lower-end commercial vehicle segment, the statement added.

“The new joint venture will benefit from the outstanding strengths of the two companies.” said Ulrich Walker, chairman and chief executive officer of Daimler Northeast Asia.

“Daimler’s technology expertise, global scale and leadership in the high-end truck segment, complement Foton’s broad distribution in China and leadership in the low-end truck segment.”

Overseas car makers have been seeking exports from China at competitive pricing because of low labor and production costs. Beiqi Foton is China’s biggest light commercial vehicle maker and exporter. It is owned by the Beijing Automotive Industrial Holding Company.

The move shows Daimler is increasing its cooperation with BAIC as it expands ambitiously in China.

With this new joint venture, Daimler will now have two commercial vehicle joint ventures and one passenger car joint venture in China, in addition to wholesale and financial services operations.

“This new joint venture will be the first Sino-European commercial vehicle operation aiming at expanding production in international markets,” said Wang Jinyu, president of Foton.

Daimler produces Mercedes-Benz E and C-Class sedans at its joint venture in Beijing.

(Shanghai Daily August 8, 2008)

China Eastern Airlines (CEA) announced on Sunday that the stake sale plan to Singapore Airlines (SIA) and Lentor Investments had failed.

The preliminary agreement would become invalid if no further progress was achieved as of Saturday, the expiring date, according to a CEA statement.

SIA and Temasek, Singapore’s state-linked investment firm and the parent of Lentor Investments, signed a preliminary deal in September to take a 24-percent stake in the Shanghai-based CEA for 923 million U.S. dollars, or 3.80 Hong Kong dollars per share.

The bid was voted down by CEA shareholders in January, however, as they believed the offer price did not reflect the fair value of CEA.

But SIA did not plan to raise its offer price agreed in the framework agreement, SIA’s vice president for public affairs Stephen Forshaw told Xinhua early this week.

Despite the failure, CEA would continue to look for strategic investors, increase cooperative chance with world leading airline companies and strive to improve the company’s competitiveness on the global market, it said.

(Xinhua News Agency August 11, 2008)

China Eastern Airlines will invest 50 million yuan (US$7.3 million) to set up a business jet unit and cash in on the growing demand for corporate air services.

The wholly owned unit will offer services for business aircraft, including operation and management, leasing, ground handling and maintenance, the carrier said in a statement yesterday.

The service will be targeted toward high-end clients such as multinational companies and celebrities, according to the statement.

“With the approach of the Olympic Games and the Shanghai World Expo, there is great potential in the domestic business aviation market,” the carrier said. “So it’s time for China Eastern to diversify and add professional services for high-end clients.”

China Eastern, the country’s third-largest carrier, said it does plan to purchase business jets but may renovate existing planes.

More than 400 of the world’s top 500 companies are doing business in China, and about 80 percent of them own business jets, China Eastern said.

The Shanghai-based carrier currently offers ground-handling services for charter flights and business jets in more than 40 airports across China.

Competitor Air China has run a business jet unit since 2003, which deals in charter service, sales consulting, aircraft operation management, maintenance and piloting.

The company has two aircraft devoted to charter flights; one that can carry up to 10 passengers and the other seating up to seven passengers.

Boeing Co said China’s business aviation market promises great potential. The company sold 20 large private business jets in the Asia-Pacific region in the past seven years, 15 of which went to the China market.

(Shanghai Daily August 7, 2008)