What's changed
Goldwind announced its wholly owned subsidiary, Beijing Tianrun NewEnergy Investment Co., Ltd, has entered into an agreement with Apple(AAPL) to transfer 30% ownership of some of its wind farm projects inHenan, Shandong, Shanxi and Yunnan, with total installed capacity of285MW. The release did not contain details of consideration.
Implications
We see the following strategic merits for the transaction: (1) Goldwind willleverage Apple’s extensive suppliers’ network in China to conduct directpower sales, creating an alternative path to lower curtailment rate for itswind farm projects. There are 346 Apple suppliers in China currently,representing 45% of Apple’s total global suppliers. (2) We see ampleopportunities for similar strategic co-operation in the future, due togrowing emphasis on lowering carbon emissions by multi-nationalcorporations. For example, Google has targets to power all of its globaldata centers and offices via 100% renewable energy in 2017. CurrentlyApple procures enough clean and renewable energy to power 93% of itsoffices, retail stores and data centers globally and the company haslowered its carbon emissions per product since 2011. (Exhibit 1). We thinkGoldwind is well-positioned to benefit from the trend; as at Sep 2016,Goldwind operates 3.1GW wind farm projects. (3) In addition, thetransaction provides Goldwind with an avenue to monetize its wind farmprojects. There were no details on consideration paid in the release. Thecompany indicated it will recognize one-off disposal gains in 1H17 and therelated projects will not be consolidated in its financial statements after thetransaction, according to the accounting standards.
Valuation
We maintain our estimates and our 12m P/B vs. ROE-based TP for H-shareof HK$11.7 and Rmb17.6 for A-share. Retain Neutral.
Key risks
Lower curtailment rate for wind farms (upside). Lower wind installationtarget in 2017 in China (downside).
INVESTMENT LIST MEMBERSHIP
Neutral
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