* Wind gear makers' profits to dip for next 2 yrs - analysts
* Hurt by sluggish overseas demand, slow growth at home
* Limited success in overseas expansion plans
By Leonora Walet and Li Ran
HONG KONG, Dec 22 Huge overcapacity and
weak demand mean Chinese wind turbine makers, among the world's
largest, are set for lower revenue and profits for at least the
next two years.
China had more than 80 wind turbine makers as of 2010,
capable of producing over 40 Gigawatts, yet wind equipment
demand is expected to be just 15 GW a year.
And companies looking overseas to fuel their growth are met
by funding bottlenecks in Europe and the United States that are
likely to mean a decline in orders.
At home, Beijing has taken action to rein in overcapacity -
implementing stricter technical standards for wind turbine
production, tightening approvals for new wind farms and
suspending connections of certain wind projects.
Those government moves to cool the sector have already
dented profits at China's top companies, including Sinovel Wind
Group and Xinjiang Goldwind Science and Technology
. Earnings at several firms nearly halved
in the first half of this year.
"The worst isn't over for these guys," said Min Li, head of
alternative energy at Yuanta Securities. "Massive oversupply and
a slowdown in wind turbine orders will keep margins depressed
for a couple more years."
Macquarie analyst Patrick Dai said he expected Goldwind's
revenue to decline at an annualized rate of 3 percent from 2011
"Oversupply and soft demand conditions are unlikely to
improve significantly in 2012, which suggests that pricing
pressure should persist in the next 12 months," he said.
Chinese wind turbine makers' global share had been expanding
along with China's rise as the biggest wind power market last
Seven Chinese companies, including Dongfang Electric
and China Ming Yang Wind Power Group, were
among the world's top 15 in 2010, according to Make Consulting,
a specialist in the wind power industry.
China is on track to install 15 GW of wind power capacity
annually through 2020, down from about 19 GW added last year,
according to the Chinese Wind Energy Association.
After a two-fold annual rise in capacity over the last five
years, the pace of China's wind power expansion has eased due to
Beijing's market-cooling measures.
Shrinking markets at home have driven many Chinese firms to
seek growth overseas, but they face fierce competition from
global rivals in big markets such as the United States and
"Chinese turbine makers have increased their efforts for
international expansion, with limited success so far," UBS
analyst Patrick Hummel wrote in a recent report. "Their
aggressive pricing keeps industry margins under pressure."
Exports represented just 5 percent of Chinese companies'
wind turbine sales in 2010. Companies like Goldwind aim to boost
that to 30 percent by 2015.
The Global Wind Energy Council puts the combined market
potential for the United States and Europe at 20 GW next year
and 22 GW in 2013.
As the brakes are applied to the breakneck pace of growth in
China's home market, there may be casualties.
"Now we see the top three turbine makers produced over 10 GW
last year," said Shi Pengfei, Vice-President at the Chinese Wind
"The fact is for each year, the rest of the players will be
forced to compete for the remaining 5 GW."