Longyuan's wind power segment's profits up 14%

But profit attributable to shareholders fell.

During its 1H14 results analysts' briefing, China Longyuan Power noted that in 1H14, all its business segments (wind, coal-fired, solar, and biomass) showed y-y improvement in earnings ability, with wind power up 14% and coal-fired power up by 25%.

According to a research note from Nomura, however, given the fair value adjustments on trading securities, with an unrealized loss of CNY86mn in 1H14 versus an unrealized gain of CNY245mn in 1H13 (a difference of CNY331mn), the profit attributable to shareholders finally showed a 6.8% y-y fall during 1H14.

Overall, despite unfavourable wind conditions, the company still showed earnings growth for the wind segment during 1H14, which Nomura noted clearly proves the company's strong operating capability.

Here's more from Nomura:

During 1H14, unit repair and maintenance (R&M) expenses had a y-y drop, from CNY14/MWh in 1H13 to CNY11/MWh in 1H14.

This was mainly attributable to the centralized R&M works, which lift operating efficiency.

Accordingly, management guided for unit R&M expenses at CNY15/MWh for 2014F, lower than CNY20/MWh in 2013, despite an increase in the number of wind turbines being out-of warranty.

Despite no new capacity being commissioned in 1H14, management appears confident in achieving its full-year wind capacity growth guidance of 1.5-1.8GW.

In addition, commissioning dates of the new projects are targeted to be earlier than in the past years, with 0.4GW / 0.7GW / 0.6-0.7GW to be commissioned in October/November/December respectively.

Overall, management expects the new projects to bring an additional 0.5bn kWh generation in 2014, apart from 0.3bn kWh generation from the operational efficiency gains.

In the mid- to long term, the company expects to secure ~10% of annual national wind capacity addition (ie, ~1.5-2GW pa).

With the new feed-in tariff set for the offshore wind project, together with the experience and technical know-how possessed by Longyuan, management stated that the return of offshore wind projects should be better than onshore.

Accordingly, management also expects offshore wind projects to contribute to the above capacity addition plan, with a target to install 1GW offshore wind project by 2017F, in locations such as Jiangsu, Fujian, Shandong, etc.