Huaneng Renewables beats peers in capacity growth race

Its capacity addition to hit 23.9%.

Huaneng Renewables Corporation has the fastest capacity growth among peers, with a capacity addition target of 1.8GW for wind and 0.2GW for solar in 2014F, and an expected 2013-16F capacity addition CAGR of 23.9%.

According to a research note from Nomura, while the company commissioned only 167MW of new capacity in 1H14, Huaneng RE management is confident it can achieve its 2014 full-year capacity target, with the majority of the wind power capacity to be commissioned in September/October in the non-curtailment regions.

With this in mind, despite only 1.8% power generation growth in 1H14, Nomura still expects a strong rebound of 22% gross power generation growth in 2014F to 13.6bn kWh, in line with management’s guidance of 14bn kWh.

Upon the completion of the UHV grid construction in 2016/17F, further improvement in the curtailment and wind utilization hours for the company may be seen.

Here's more Nomura:

While only 167MW (wind: 99MW; solar 70MW) was commissioned in 1H14, Huaneng RE management is confident it can achieve its 2014 full-year capacity addition target of 2GW (1.8GW / 0.2GW for wind / solar) with capex maintained at CNY15bn.

Per the company, most of the new wind farms (1.35GW) are located in non-curtailment regions and are expected to be commissioned in September or October, earlier than the previous years.

For the rest of the wind capacity additions, despite the farms being located in high curtailment areas, the company sees continuous improvement in the curtailment rate, especially at its West Inner Mongolia project, where the curtailment rate actually dropped from 19% previously to 11% at present.

For the company as a whole, the curtailment rate in 1H14 was 10.8% and management expects it to continue to improve from 2013 levels.

In addition, the company remains confident that it can achieve its power output target of 14bn kWh, with wind utilization of at least 2,000 hours.

Currently in our model, we estimate 13.6bn kWh gross power generation with wind utilization of 2,020 hours.