The statement was originally made by premier Wen Jiabao in his annual work report of the government. However, a week later, he had swapped the word "stop" for "prevent" in an amended report.
"The modification means that China will continue to support the boom of wind power industry," said Niu Li, chief of the macro-economy division of the State Information Center. "With 'prevent', the Chinese government declares its stand more clearly, saying it will direct the wind-power sector to develop in a sustainable way."
Wind-power companies were relieved at the change of wording after suffering a bad year. Increased government regulation of the sector in 2011 aimed at making the industry more manageable and reduce China's grid-connection backlog put the industry under pressure and led to fierce competition between manufacturers.
Sinovel has already predicted that its net profits fell by over 50% in 2011 in an advance notice of its annual results. It blamed this on plunging turbine prices, sales revenues and gross profit margins amid ferocious market competition.
Chen Danghui, vice-president of Sinovel, said Sinovel installed 3.7GW wind turbines in 2011, down 16% from the previous year. It was the first time Sinovel saw its annual newly installed capacity fall.
To solve the problem of inadequate cash flow, Sinovel took on bank loans of CNY 26.9 billion ($4.2 billion).
In January, Sinovel issued CNY 2.8 billion bonds on the Shanghai Stock Exchange. It will use 89% to repay bank loans and optimise the debt structure and use the remaining 11% to supplement working capital.
Goldwind has met similar misfortune. In 2011, its net profits were down 73.5% to CNY 606.7 million. It also attributed this decline to slower growth in wind-farm construction and lower turbine prices. Its main 1.5MW turbine, sold for CNY 4.4 million/MW in 2010, down from CNY 5.3 milion/MW in 2009.
Goldwind also experienced cash-flow problems. It had CNY 6.843 billion operational cash flow in the first three quarters of 2011, down 262% year on year. It blamed reduced operating incomes, slower collection of accounts because of the economic environment, and storage of raw materials to prevent the rise in price of key components and to fullfil follow-up orders.
In 2011, the top three Chinese turbine makers accounted for 53.2% of the market share for new installed capacity in 2011 in China, down from 56.8% in 2010 (see chart). Foreign competitors have also suffered setbacks. In February, Nordex announced an 80% drop in turbine sales in China while Suzlon said that delays in connecting Chinese projects to the grid could cost it $600-800 million in lost revenue for its current financial year.
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