China Industry: Aug. 5

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Aug. 5 – This is a regular series of relevant industry news from around China.

Solar power
Chinese photovoltaic (PV) cells and modules maker Suntech Power Holdings said it has inked a strategic agreement with China Energy Conservation Investment Corporation (CECIC) to develop solar projects over the next five years. Under the terms of the deal, CECIC will primarily be responsible for project investment and solar project development and Suntech will supply solar products, system design and technical support.

The two parties will focus on the development of large scale on-grid projects, urban BIPV projects, rural off-grid projects, and wind-solar hybrid projects.

Chinese multi-crystalline solar wafers maker LDK Solar said last Thursday it expects to report a net loss of US$180 to US$200 million in the second quarter of 2009. The negative projection is based on the company’s expectations to write down US$150 to US$160 million against the cost of inventories as the net realizable value of inventories has declined due to the continued fall of market price for solar wafers.

As a result, the gross margin is expected to be negative although sales are expected to come at between US$225 million and US$235 million, slightly above the previously announced estimated range for the second quarter of 2009. For April to June, LDK Solar forecasts wafer shipments between 230 and 240 MW. LDK Solar plans to release its detailed second-quarter financial results on August 12 after the market closes.

Air transport
China Eastern Airlines intends to initiate 29 weekly direct flights between Taipei and nine mainland cities. The flights are scheduled to begin in September.

The Civil Aviation Department of Hong Kong has granted approval to Cathay Pacific Airways’ application seeking permission to raise passenger fuel surcharges by 33 percent. The regulator has also approved similar applications filed by Singapore Airlines Limited and Nepal Airlines.

Cathay Pacific Airways plans to start flying four times a week to Jeddah, Saudi Arabia, from October 25 this year. The route will be served by Airbus A330-300 aircraft. The company will also boost the number of its flights to Riyadh to daily from five a week from August 1.

China Airlines and its subsidiary Mandarin Airlines plan to start scheduled flights to Xiamen, Ningbo, Zhengzhou, Shenyang, Changsha and Xian in mainland China.

China Eastern Airlines will launch regular cross-Straits flights from August 31. The air carrier will add four cross-Strait destinations including Ningbo, Qingdao, Hefei and Nanchang. The previously established cross-Straits routes were five – Shanghai, Nanjing, Kunming, Xi’an and Wuhan.

Shanghai-based Juneyao Airlines plans to initiate routes to Hong Kong and Macau. The company is currently seeking approval by the General Administration of Civil Aviation of China.

Russian Ural Airlines has entered into an interline agreement with Air China under the terms of which passengers of the Russian air carrier will be able to make connections through Beijing with Australia, Brazil, Vietnam, Indonesia, Malaysia, South Korea, Singapore and Japan.

An official of the Taiwanese Ministry of Economic Affairs has said that the country may grant approval to six Chinese air carriers with local offices to establish operations in Taiwan. The six companies include Air China, China Southern Airlines, China Eastern Airlines, Hainan Airlines, Shanghai Airlines and Xiamen Airlines.

The Shanghai Securities News has said that the state-owned Assets Supervision and Administration Commission intends to pour RMB3.1 billion into the biggest air carriers in the country in a bid to decrease their debt-asset ratios. The parent companies of China Southern Airlines and China Eastern Airlines may receive RMB1.5 billion. Air China might obtain RMB100 million.

Wind power
The Chinese Government has introduced feed-in tariffs for new onshore wind farms in a move that is expected to unleash profits for struggling project operators. The National Development and Reform Commission, the country’s economic planning agency, unveiled over the weekend four categories of onshore wind projects that will be eligible for feed-in tariffs according to region, with areas with ampler wind resources offered smaller incentives than those with lower projected output.

Operators will be able to tap RMB0.51, RMB0.54, RMB0.58 and RMB0.61 per kWh. The rates compare with an average of RMB0.34 per kWh for coal-fired power. Tariffs on offshore wind projects will be determined separately, depending on the construction process, the NDRC said.

Under the former mechanism, planning consent and energy supply contacts were awarded to the lowest bids pitched in a public bidding process. A report by the State Electricity Regulatory Commission, a government agency which oversees China’s power sector, last week blamed the former system for eroding profitability for wind farm operators, thus denting the growth of the industry.

The low tariffs and lengthy grid-connection last year held up more than 20 percent of the country’s installed capacity waiting to be hooked in. Thus, wind made up 1.1 percent of the Chinese overall power generation capacity but just 0.3 percent of its total output, according to figures from the China Electricity Council, a government-backed industry association.

A-Power Energy Generation Systems said it had inked a contract with Shenyang Huaren Wind Power Technology Development, under the terms of which A-Power will acquire Huaren’s technology to commercially produce and sell 1.5 MW-grade wind turbines.

A-Power has also agreed to fulfill Huaren’s back order of ten units of the same turbines with a customer in China.

This industry report brief is courtesy of Aii Data Processing.