China Wind Investor Presentation - January 2010
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January 2010 investor presentation for China Wind Power International Corp. (TSX-V: CNW)
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China Wind Investor Presentation - January 2010
- 1. Investor Presentation January 2010
- 3. About China Wind Power International Corp. China Wind is uniquely positioned to capitalize on the growing demand for wind energy in China China Wind is uniquely positioned to capitalize on the growing demand for wind energy in China
- 4. Demand China Exclusivity Du Mon County Guaranteed Power Purchase Agreement Profitable 12-14% IRR
- 5. Source: IEA Rapid industrialization Looming energy shortage Facing one of the world's biggest environmental crisis China overview
- 6. China’s commitment to wind power 2008 12.2 GW 2010 30 GW 2020 100 GW of all power from renewable sources by 2020 st tomorrow 1 4 th today
- 8. Our current focus: Heilongjiang P rovince Exclusive rights to Wind Power Generation Du Mon County Beijing Shanghai Heilonjoang Province Population: ~38 million Annual electricity use by 2010*: * forecast 74 million MWh
- 10. Our portfolio Beijing Shanghai Included in power grid master plan 546 MW over 5 development phases Longer-term potential for building out 1,150 MW
- 11. China Wind — Phase 1 Phase 2: 49.5 MW Phases 3-5: 448.5 MW Phase 1: 49 MW 74% bank 26% equity Financing Completed Turbines Status Commenced commercial Production Dec. 2009 34 turbines producing power 30.4 GWh generated by end of Nov. 2009
- 12. Phase 1: turbines 56% of all globally installed wind power equipment is manufactured in China (2007) DW1.0/56 Two-Bladed DT-1500 Doubly Fed 30 4
- 13. China Wind — Phase 2 Financing Turbines Status Construction in progress 24 on order, 9 delivered plus 2 installed 70% bank* 30% equity Phase 2: 49.5 MW Phases 3-5: 448.5 MW Phase 1: 49 MW * awaiting final approval from Bank headquarters
- 14. Phase 2: turbines DW1.0/56 Two-Bladed HFDY1500/77 Directly Driven DT-1500 Doubly Fed 6 8 21
- 15. Phase 2: project timeline Q2/10 Turbines installation commenced Construction completed Q3/09 Q1 /10 Debt financing Q1/09 Construction commenced Equity financing Q3/09
- 16. China Wind — Phases 3 to 5 Financing (targeted) Turbines Status 299 turbines planned 70% bank 30% equity Phase 3 feasibility study complete Phase 4 & 5 feasibility studies underway Phase 2: 49.5 MW Phases 3-5: 448.5 MW Phase 1: 49 MW
- 17. Phases 3 to 5: project timelines Q2/10 Construction begins Phase 5 ~150MW Phase 4 ~200MW Phase 3 ~100MW Q2/11 Construction begins Q2/12 Construction begins Q4/14 Construction completed Q2/13 Construction completed Q4/11 Construction completed
- 19. Targeted project economics* (20 year average) Capital cost/MW US $1.5 million Levered equity IRR 12-14% * Based on average 49 MW project Installed capacity 49MW Capacity factor 26.31% Revenue: wind power US $8.5M Revenue: carbon credits US $1.8M Total revenue US $10.4M EBITDA US $8.3M Total profit after tax US $3.2M Annual cash flow to equity US $3.9M
- 20. Demand China Exclusivity Du Mon County Guaranteed Power Purchase Agreement Profitable 12-14% IRR
Notas del editor
- Before we begin with the presentation, I would like to draw your attention to the disclaimer with regards to forward-looking statements. [Pause]
- … which we believe is a tremendous opportunity for Canadian investors for the following four main reasons: First, we are uniquely positioned to capitalize on the explosive demand for wind power in China; Second, we have the exclusive rights for wind energy development in Du Mon County; which as I will show you later, is a very favorable location for wind power generation; Third, the law guarantees our sale of wind energy to the power grid – which is important given our pipeline and potential 860 MW capacity – and we already have a 20-year Power Purchase Agreement in place; and, Fourth, we expect to be profitable as a result of the competitive terms on (1) our turbines , (2) bank facility , (3) power purchase agreement with the Chinese grid and (4) forward sale of green credits to Goldman Sachs . So let me start by talking about demand for wind energy in China.
- T he Chinese government has recently indicated they are targeting GDP growth of 8% this year, one of the fastest growing economies in the world . As China continues its rapid economic growth, energy consumption and pollution will increase . By 2030, electricity consumption is expected to grow almost fourfold. Everybody knows China has very severe pollution problem because currently 80% of China’s electricity supply comes from coal . China ranks as the world's secound largest emitter of greenhouse gases.
- Therefore, Government officials recently characterized the move to wind power as “ vital ” and announced a 14.6 billion US Dollars investment to increase wind power capacity to 30 GW by 2010 . Today, China’s installed wind capacity is the fourth largest in the world. By 2020 , the country is projected to have 100GW , making China No. 1 in the world. The sale of our wind energy to the power grid is guaranteed . This is because the country’s target to have 15% of all power to be derived from renewable sources by 2020 is not just a goal …
- … it’s the law . China passed the Renewable Energy Law in 2005, and the law went into effect in January 2006. This law requires power grid companies to buy all output of local registered renewable energy producers. The implication for us, China Wind Power International is – if we make it , the grid company, in our case that is Heilongjiang Provincial Power Grid must buy it .
- Our current focus is on Heilongjiang Province, which is the nation’s traditional industry base for a number of industries. We have the exclusive rights to develop wind energy in Du Mon County in the province. Du Mon County is a west suburb of Daqing City. Daqing has the fourth largest oil field in the world and accounts for one fifth of China’s oil production.
- The on-grid tariff in Heilongjiang Province is higher than that of most other provinces in China. Du Mon County is a favorable location with great potential for wind energy development. Our wind farms are located on open land that receives an abundance of sunshine and wind. The wind is strong and the speed is 6.9 to 7.5 meters per second at a height of 70 meters, the height of our 1.5 MW turbine’s tower. The sites are on flat, solid ground that is easy to construct and easy to access through cement roads connecting to the highway. Also important, we are less than 2 kilometers from the power grid.
- We conducted wind assessment studies in Du Mon County starting in 2005, and the studies demonstrated that the potential installed capacity for wind energy development is 860MW over an area of 220 square kilometers. Our current plan is to build out eight wind farms representing 546 MW over five phases . These wind farms are already included in the Power Grid Master Plan of Daqing City , which means we do not have any foreseeable barriers to hook up to the grid in the future
- Wind Farm #1 is already up and running. The 49 MW farm is over 50% completed . At the present time, we have installed 23 turbines out of 36 planned to install, among which 18 turbines are already producing power during trial production. We signed 20-year Power Purchase Agreement and the Grid Connection and Dispatching Agreements with the power grid. We signed an Emissions Reduction Purchase Agreement or ERPA with Goldman Sachs to sell all the Certified Emission Reduction or CERs generated from Wind Farm #1to them. Wind farm #1 is fully financed, with 74% of funds coming from bank loans and the other 26% being equity investment. The interest rate is 5.94%.
- For Wind Farm #1, we purchased 36 turbines from local manufacturers in China at a competitive price . Using local suppliers also provide the convenience for maintenance and services . To give you an indication of the size of the Chinese turbine manufacturing industry –- In 2007, 56% of all globally installed wind power equipment was manufactured in China, and more and more wind power equipment manufacturers are moving to China.
- Let’s now look at the P hase 2, which we raising money for. Phase 2 will use 33 1.5 MW turbines, totaling 49.5 MW, the same as those used in Wind Farm #1, same manufacturer, same terms and conditions. The average unit price for the turbines will be 852 US Dollars per kW, which is a very competitive price We have already received some of the 33 turbines on order. The total investment for Wind Farm #2 is projected to be approximately 76 million US Dollars, again, which will be financed 70% by bank loan.
- For Wind Farm #1, we purchased 36 turbines from local manufacturers in China at a competitive price . Using local suppliers also provide the convenience for maintenance and services . To give you an indication of the size of the Chinese turbine manufacturing industry –- In 2007, 56% of all globally installed wind power equipment was manufactured in China, and more and more wind power equipment manufacturers are moving to China.
- The foundation construction for Phase 2 started in February. Turbine installation will begin in the third quarter and We expect to finish Phase 2 by the end of this year.
- Beyond Phase 2, our growth plan over the next five years will capitalize on the continued, explosive growth of Chinese renewable energy industry . We have plans for Phases 3, 4 and 5 to build out an additional 448.5 MW. We have submitted the application for Phase 3 for government approval and the feasibility studies for Phases 4 and 5 are already underway. For the future wind projects, we will be targeting project financing consisting of about 70% bank loans and 30% equity investment.
- We will continue to grow by project increments of up to 50MW for each wind farm. This is our plan for Phase 3, 4, and 5.
- Let’s take a look on a breakdown of project costs for Wind Farm #1, on your left side. The total project costs are 73 million US Dollars. On the revenue side, Wind Farm #1 is expected to generate over 110 thousand MW hours per year . We are selling the power at the price of 89 Dollars per megawatt hour. The power price was set by the government. Under our ERPA with Goldman Sachs, , the carbon credit price per ton of carbon dioxide is 14.81 US Dollars . Wind Farm #1 is expected to generate over 124 thousand tons of CERs every year, that translates to 1.8 million US Dollars profit per year, that is net profit .
- Wind Farm #1’s capacity factor is rated at 26% based on the wind resources and the types of turbines we used, which the research firm of China Meteorological Administration estimated conservatively after applying a 30% discount. Based on these figures, the annual revenue for Wind Farm #1 is projected to be approximately 10.4 million US Dollars , and EBITDA is projected to be approximately 8.3 million US Dollars . Future wind farm projects are expected to have approximately the same pro forma financials .
- Before turning the presentation over to GMP, I would like to recap our investment highlights. First, the Chinese government has required that renewable energy must fulfill 15% of China's increasing energy consumption by 2020. This will translate to incredible growth in demand for wind energy, which we are well-positioned to capitalize on ; Second, we have the exclusive rights to a favorable location for wind energy development – which is important given our pipeline and potential 860 MW capacity; Third, we are guaranteed that our wind energy will be purchased and we already have a Power Purchase Agreement in place for our first wind farm; and Finally, we are confident that we will be profitable as a result of the competitive terms on (1) our turbines , (2) bank facility , (3) power purchase agreement with the Chinese grid and (4) forward sale of green credits to Goldman Sachs . Now I would like to turn the presentation over to GMP to review the transaction. After that, Wendell and I will answer any questions you may have. Thank you very much.