China wind energy firm set for $1.4 billion IPO

Sinovel, China’s top wind turbines producer, plans to raise up to $1.4 billion in one of the most expensive main board IPOs in Shanghai, hoping to ride high on the back of strong demand for Chinese renewable energy stocks.

Sinovel Wind Group Co, which unveiled the indicative price range for its IPO on Tuesday, looks poised to become China’s first major IPO of the year and follows a bumper 2010 for IPOs in Asia.

Still, the Sinovel listing may well be a test for China’s IPO market, which had a mixed performance late last year with some firms such as China’s No. 3 wind power company Huaneng Renewables Corp scrapping plans to list in Hong Kong due to market volatility.

Sinovel will sell up to 105.1 million shares at 80-90 yuan apiece, according to an exchange filing, potentially enabling the firm to raise as much as 9.46 billion yuan ($1.4 billion), nearly three times its original target of 3.45 billion yuan.

That would make Sinovel the most expensive IPO ever in per-share terms on the main board of the Shanghai Stock Exchange.

Sinovel told that it would use the proceeds of its IPO to expand wind power installed capacity and beef up its research and development capability for 6-megawatt (MW) wind turbines.

The company expects its business to grow at a more than 30 percent compound annual rate over the next five years, it said. Investors are concerned about falling wind turbine prices but Sinovel expects product prices and profit margins to stabilize over the next few years because production costs have also dropped.

"Moving forward, prices of wind turbines should hover around 3,800 yuan per kilowatt; an annual fall of 1,000 yuan per kilowatt won’t happen again," said Chairman and President Han Junliang, referring to sharp falls in turbine prices in the past few years.

Under Han’s leadership, Sinovel displaced Xinjiang Goldwind Science and Technology as the top Chinese wind turbine company in terms of installed wind farm capacity via a series of aggressive expansions in the past two years.

Han, an engineer by training who is known for keeping a rather low profile in the fiercely competitive market, signaled his dedication to his work by telling the online roadshow that his hobby was "building China’s wind turbine industry into the top player in the world."

China has been doubling installed wind power capacity every year for the past several years as it pushes ahead to develop the sector, with some of the $1.5 trillion investments over the next five years earmarked for the green sector.

In 2009, China became the third largest wind energy provider worldwide, ranking behind the United States and Germany.

Despite increasing competition, Sinovel still cannot meet rising customer demand and consolidation in the sector would benefit the industry, it said in its IPO prospectus.

Sinovel competes with major domestic rivals Xinjiang Goldwind and Dongfang Electric Corp as well as global competitors including Vestas, Siemens, Gamesa, Suzlon – Repower, Enercon, Nordex and General Electric Co.