May 19, 2008 / 1:25 AM / 10 years ago

UPDATE 2-China Power New Energy hikes renewable energy target

* Raises renewable energy capacity targets by a half by 2010

* Eyes more asset injections from parent (Adds share price action, chairwoman’s name)

By Judy Hua and Joanne Chiu

HONG KONG, May 19 (Reuters) - China Power New Energy Development Co Ltd 0735.HK raised its renewable energy targets by a half as Beijing pushes to clean up the country’s air and water and whittle down its reliance on imported resources.

By 2010, China Power New Energy, chaired by the daughter of former Premier Li Peng, plans to put into operation 1,500 megawatts (MW) of renewable energy capacity — including wind, hydropower and biomass, Chief Executive Officer Liu Genyu said.

It also plans to have another 1,500 MW under construction and a further 1,500 MW in the pipeline.

That would be 50 percent higher than the company’s original target of having 1,000 MW of renewable energy capacity on stream, 1,000 MW under construction and another 1,000 MW in the pipeline.

“The new targets are still conservative,” said Liu.

“We had underestimated support from our parent company and CNOOC had not become a shareholder (when we set the targets),” he added, referring to China National Offshore Oil Corp (CNOOC), the country’s third largest oil and gas producer and parent of CNOOC Ltd (0883.HK) (CEO.N).

The company now had installed renewable energy capacity of 980 MW, Liu said late on Friday. The remarks were embargoed for release on Monday.

Li Xiaolin, daughter of Li Peng, is the company’s chairwoman.

China intends to spend an estimated $200 billion on renewable energy over the next 15 years, partly to build hydropower and wind- and solar-powered plants to help meet growth in the world’s largest energy consumer after the United States.

The government aims to boost renewable energy to 10 percent of energy use by 2010 and has ordered its largest power firms to ensure that 5 percent of their generation runs on renewable sources by the end of this decade, rising to a tenth by 2020.

Among the large state-run power firms are Huaneng Power’s (0902.HK) (HNP.N) parent Huaneng Group, Datang International Power’s (0991.HK) (601991.SS) parent Datang Corp and China Power Investment Corp, which is now the largest shareholder of China Power New Energy with a 28.4 percent stake.

CNOOC became a shareholder of China Power New Energy last August and now has a 12.78 percent stake.

Liu said it typically cost 8,000 yuan ($1,144) to build 1 kilowatt of renewable capacity, and capital expenditure usually accounted for 20 percent of total investment.

Shares of China Power New Energy jumped as much as 6.5 percent on Monday before closing up 2.2 percent at HK$0.95, outpacing a 0.48 percent gain in the benchmark Hang Seng Index .HSI. They have dropped nearly 30 percent so far this year, lagging an 8 percent fall in the index.

PROFITABLE?

The renewable energy firm has bought several power assets from its parent, China Power Investment Corp, over the past year and Liu said it was eyeing more asset injections, mainly wind power and medium- and small-sized hydropower.

“Our parent has the largest hydropower capacity among all state-run power firms. It also has more than 10 wind power projects, each with 50 MW capacity,” Liu said.

Analysts say high costs and low tariffs for renewable energy mean profit uncertainty, but Liu said all of his company’s projects were profitable.

“The government’s renewable energy policies are enacted and implemented gradually, therefore we need to have a long-term view,” said Liu.

“I believe our profitability will be enhanced with more favourable policies from the government.”

He declined to give a return on investment ratio for his projects, but said the average ratio for renewable energy projects is 8 to 10 percent.

Among the company’s seven existing projects are a 100 MW wind power plant in northwestern Gansu province, a 300 MW hydropower plant in eastern Fujian province and a 360 MW heat and power plant in southern Guangdong province which is fired by liquefied natural gas provided by CNOOC. ($1=6.990 Yuan) (Editing by Anne Marie Roantree)

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