These people said that this should be a relatively common phenomenon, in the next two years, the frequent sales of photovoltaic power plants, wind farms will probably continue.
A local financial official said that it would be unrealistic to start the eighth batch of subsidies in a short time because of the difficulty of fiscal revenue in 2019. In July of last year, tax revenue increased negatively year-on-year.
From June 2012 to June 2018, China issued seven batches of renewable energy subsidies. According to the pilot think tanks preliminary calculation, the first seven batches of new energy projects included in the catalogue need more than 150 billion yuan of subsidies per year, and the additional subsidies for renewable energy are about 80 billion yuan per year. With the increase of new energy grid-connected installed, the subsidy gap is continuously deposited. At the end of 2017, the subsidy gap for new energy generation totaled 112.7 billion yuan, and in 2018 it totaled 200 billion yuan. It is expected that the subsidy gap will exceed 1 trillion yuan by 2030, and the annual subsidy demand will reach its peak around 2025.
Financial Cost Importance
Since October 2018, the pace of new energy enterprises to sell power plant assets has accelerated.
Take Xiexin New Energy, the worlds second largest photovoltaic power plant operator, as an example. In October 2018, Xiexin New Energy sold 80% of the equity and corresponding shareholder loans of 160 MW photovoltaic power plant project to Zhongguang Nuclear Solar Energy. In the following December, all shares of the 140 MW photovoltaic power plant project were sold to the Three Gorges New Energy. Through the above two transactions, Xiexin New Energy received 557 million yuan and its liabilities were reduced by about 1.833 billion yuan.
In 2019, Xiexin New Energy has not stopped selling its power plant assets. In March 2019, Wuling Electric Power Company sold 55% of its stake in about 280 MW photovoltaic power plant at a cost of about RMB 335 million yuan and reduced its liabilities by about RMB 1.6 billion yuan.
In May, Xiexin New Energy sold 70% of its 977 MW photovoltaic power plant to Shanghai Rongyao New Energy, together with 70% of its shareholder loans. The transaction is expected to be completed within this year, bringing about 2.06 billion yuan of cash flow to Xiexin New Energy and reducing its liabilities by about 5.8 billion yuan.
Then in June, a announcement from Poly Xiexin said it planned to transfer 51% of its holding subsidiary, Xiexin New Energy, to Huaneng Group, raising public concern to the highest level.
The main reason behind this series of actions is the pressure of cash flow caused by the default of subsidies. The operation of new energy power plants has two characteristics: capital-intensive and high asset-liability ratio. Large-scale subsidies delay the allocation of funds, which makes the cash flow of power generation enterprises with large-scale stock projects face a severe test.
The industry observers said that in March 2017, the Ministry of Finance launched the declaration of the seventh batch of new energy subsidy catalogues, and the seventh batch of subsidy catalogues were published in June next year. According to the arrangement of relevant departments, only projects connected to the grid before the end of March 2016 are eligible for subsidies. After that, the time for subsidies to be in arrears has been three years for grid-connected projects.
Thus, he calculated an account for the reporter of Economic Observer. Taking the annual power generation of 50,000 kilowatt wind farm as an example, the annual power generation is 100 million kilowatt according to the average utilization hours of wind power. According to the benchmark price of 50 cents in the past, the enterprise can only get about 30 cents of it, which means that the enterprise can only get about 30 cents of it. About half of the earnings are only on the books, and corporate receivables soar.
A person with many years of experience in photovoltaic industry told the Economic Observer: The investment in power plant construction is usually one-time investment, and the industrys own capital is generally 20%-30%. The rest is bank loans. When the electricity price is between 6 and 8 cents, the enterprise calculates the cost according to the normal subsidy. The rhythm of the release is measured.
Take one million investments as an example, 700,000 of which were expected to receive electricity bills on time, but now the subsidies of some power stations are in arrears for more than 40 months, which means that enterprises are forced to bear 70% of the cost of financing for nearly four years.
According to the semi-annual report released by Xiexin New Energy on August 6, as of June 30, 2019, the total borrowing cost was 1.446 billion yuan, an increase of 22% over the previous year. The average borrowing interest rate for new and existing borrowings increased from 6.5% in 2018 to 6.9% in 2019.
Correspondingly, the subsidies of electricity price receivable are still rising. As of June 30, 2019, the total subsidies of electricity price receivable are 8.811 billion yuan. Among them, the total subsidies of electricity price receivable for the Sixth Batch or before, the Seventh Batch and poverty alleviation projects are 3.636 billion yuan, and the total number of applications for registration for the eighth batch or after batch is 5.175 billion yuan.
This figure was 6.78 billion yuan six months ago, of which the sixth or previous, seventh and poverty alleviation projects totaled 2.544 billion yuan. The rest were the eighth or subsequent batches of applications for registration.
At present, there is still no official accurate statement on whether the declaration of the eighth batch of projects should be opened. From March 2016 to now, the arrears of subsidies have lasted for 39 months, and the previous seven batches of subsidies are not in place, said the person.
He also said: Take 8.8 billion yuan of subsidies receivable as an example, according to the 6.9% borrowing rate, it willeat upnearly 600 million yuan of enterprises, while the net profit of Xiexin New Energy in the first half of 2019 was 410 million yuan, and the financial cost swallowed up more than half of the book profit.
Generally speaking, the financing cost of private enterprises rises by 30%-40% in the basic interest rate, while the benchmark interest rate of some state-owned enterprises rises by 5%-10%. As a head enterprise, the financing cost of Xiexin in private enterprises has been relatively low.
On the one hand, private enterprises are eager to sell power stations in order to alleviate cash flow pressure, on the other hand, state-owned enterprises are actively contacting the assets of new energy power plants in order to adjust the proportion of renewable energy installed in their power supply structure, but state-owned enterprises are not the saviors who blindly take over the offer.
Taking Huaneng Group, which has obviously accelerated the layout of new energy sector since this year, as an example, a Huaneng internal staff member told the Economic Observer in an interview that when examining related projects, the most basic principle is whether it can meet the groups basic financial requirements for project acquisition.
Huaneng cooperates with private enterprises by starting with the acquisition of a project and continuing to acquire other power plant assets in the same region. Another case is to cooperate with the main manufacturer in exchange for the existing projects or resources of the manufacturer, that is, to promise to adopt the manufacturers wind turbines on the new projects of Huaneng in the region.
In view of the possible impact of new energy subsidies on its cash flow and whether this part of the subsidies in arrears should be included in corporate income, the aforementioned people said that such problems would exist, but not in Huanengs current consideration.
He told the Economic Observer: In the acquisition process of some regions, the current pursuit is the book profit. The consideration behind this is that, from the overall situation of Huaneng, new energy assets relative to thermal power assets, at least at this stage, the former is profitable in the book. This is beneficial to the financial situation of regional companies. As for whether the inadequate subsidy will drag down cash flow, it is a question that needs to be considered in the next stage.
Subsidies will eventually be in place, and for large groups, the waiting process can still be carried. Huanengs plate is very large, and part of the cash flow is not a problem for the group. If there is a big problem in the basic fund of a provincial company, which affects the acquisition and development, the group level will replenish its capital. In short, it is the idea of maximizing the overall interests.
He further said: According to Huanengs financial standards, the pre-tax return on total investment of some projects can reach 11%-12%, but this part of the project may be a loss for private enterprises.
Economic Observer reporters learned that in order to further mobilize the enthusiasm of the acquisition and development of new energy projects, Huaneng Group decentralized the full process management authority of new energy, and authorized 34 secondary units.
The above Huaneng insiders told reporters that the reason for the decentralization of the whole process management authority is also based on the groups consideration of supporting the development of new energy. Previously, all decision-making procedures were in the hands of various departments of the group. At present, all the secondary companies in the group company, project companies can do new energy projects, all the good cats who can get the projects and allow the secondary companies to work across regions.
A more obvious trend in the past two years is that private enterprises are transferring their initiative to buyers due to tight cash flow. Private enterprises also know that Huaneng will charge a lot of money for new energy assets. If so, we will not go on talking about it, because it was not sincere at the beginning. We have our own principles and bottom line.
The most intuitive change brought about by the tremendous march towards new energy assets is the change in the rhythm of work.
According to the person mentioned above, the working hours of the former group building were from Monday to Friday. Now the meeting of group leaders can only be held on Saturdays, and all the leaders will come together. For example, in the dining hall of the former group company, only a few dozen people had dinner. Now, it is common for hundreds of people to have dinner.
Shuffle the cards?
Obviously, in the game with financial institutions and power plant purchasers, new energy enterprises are at a more obvious disadvantage.
The photovoltaic industry is in an awkward period. On the one hand, the state is subsidizing, on the other hand, the power station can not achieve parity completely, said a person engaged in financing leasing of new energy power plants.
In his view, the purchasers of power plants prefer to buy large-scale ground power plants, but there is no cash flow for such ground power plants. There is a profit on the statement, but in fact, we need to keep putting money in. Such an item is obviously unsustainable.
The psychological expectations of buyers and sellers differ too much, which will also lead to a slower transaction progress: the sellers asking price is too high, which will involve the loss of state-owned assets. If it is too low, it will not completely solve the burning urgency of cash flow of sellers. On the other hand, the enterprises eager to sell power plants are eager to pack and sell, and they are reluctant to produce the best quality. Assets are traded, which is also at odds with buyers who want to buy high-quality power plants.
The aforementioned people engaged in financing leasing of new energy power plants told reporters that some power plants owned by head enterprises had found the above platform to talk about financing. The reason for the failure was that the power plants themselves had poor cash flow and could not repay the financing. On the other hand, it was also difficult from a credit point of view, holding a large number of cash-free electricity. The investment side of the station is not optimistic. Its a sick power station, and its hard for us to cure it.
In this regard, the above-mentioned main new energy financing leasing platform is also expected, so the previous two years in the process of doing the project has decided not to take this part of the subsidy into account. This also leads to the relatively slow progress of the project. As the investor of the power plant, whether to include subsidies or not, the expected income of the project will be more than double, and the corresponding amount of financing will also be double. That customer naturally tends to choose platforms with high financing quotas. In fact, this part of the revenue is not in place.
At the same time, he believes that the process of shuffling is slower than expected. Without the promotion of bidding policy and the pull of overseas markets, private enterprises should fall a lot this year. These two slow down the effect of this process. Overseas power plants have led to the production of domestic components. At the same time, there is no default of subsidy for bidding projects. Relevant enterprises will also have some new projects, which will also act on the manufacturing side and slow down the process of clearing up. If the shuffling process is from 1 to 100, its about 40 now.
In the view of the above-mentioned photovoltaic industry observers, this is an abnormal shuffle, mainly caused by unpredictable policies. Normal shuffling should survive as a high-quality enterprise. The so-called high-quality enterprise refers to a leading enterprise in cost control, product quality and brand influence. However, in the current wave of so-called shuffling, who has a large amount of cash, whose financing cost is low, who is a high-quality enterprise. And the low cost of financing does not come from the strong competitiveness of enterprises themselves, which is contrary to the fair competition of the market and the elimination of the fittest and the fittest.
He believes that this process will be finalized by the end of this year or the first half of next year. If the assets can not be sold, then the arrears will reach 45 or 46 months, enterprises will inevitably be eliminated in the process of abnormal shuffling.
He said: At present, all photovoltaic products are basically in a balance of supply and demand, even supply is slightly greater than demand. Everyone is competing in price and performance. The average profit margin of the whole industry has shown a sharp decline compared with the earlier years, and this downturn is basically irreversible. The photovoltaic industry has presented itself. It has the characteristics of traditional industries and tends to the average profit margin of industry.
The advantage is that lower manufacturing costs create possibilities for the development of emerging overseas markets. In the future, new energy enterprises can relieve the pressure on cash flow caused by the inadequate pre-subsidy by relying on the manufacturing industrys low profits, which also needs a certain period.
The industry observers recalled: Even three or four years ago, when the generation cost of a single generation was between 6 and 7 cents, some countries in Southeast Asia could not afford to use it. In the Canton Fair in 2015, an overseas Chinese from Myanmar opened a steel-making plant in Myanmar and came to the exhibition stand in the hope of supplying power to his factory through photovoltaic power generation. However, when he realized that the electricity price level at that time was far higher than that of thermal power and hydropower, and did not have economic feasibility, he gave up further access. Harmony. If put in today, it should be completely feasible.
Just on August 19, the government website of Dalat Banner in Inner Mongolia released the information bulletin form for the enterprises of Dalat Banner Photovoltaic Power Leading Award and Incentive Base in 2019. Among them, the special substation operators quotation is 0.24 yuan/KWh, which has set a new low record.
Many interviewees were not optimistic about the implementation of the green card and quota system. Behind the green certificate and quota system is the question of which party should bear the cost and how to distribute the cake. Unlike the subsidy policy, the green certificate and quota system do not only add but also subtract. The one who is subtracted is naturally hard to push forward. People from inside Huaneng also said in the economic observation report: At present, there is no progress in this area. We did not take this into account in our decision-making process. Because at present we still need solid interests, green certificate, quota system is certainly a trend, there are some companies in this area of reserve, but at present when real weapons do projects, this is not the first priority. Unless the future becomes mandatory, the situation will certainly change. Source: Responsible Editor of Economic Observation Network: Zhong Qiming_NF5619
People from inside Huaneng also said in the economic observation report: At present, there is no progress in this area. We did not take this into account in our decision-making process. Because at present we still need solid interests, green certificate, quota system is certainly a trend, there are some companies in this area of reserve, but at present when real weapons do projects, this is not the first priority. Unless the future becomes mandatory, the situation will certainly change.