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Ming Yang Smart Energy just signed a large order for 270MW wind turbines from Germany on July 2, but problems arose just a few days later.

Overseas media reported on July 11 that the European Union has expanded its anti-subsidy investigation on Chinese wind turbine suppliers and included a Chinese wind turbine company doing business in Germany in the scope of the investigation. This wind turbine company is my country's wind power giant - Ming Yang Smart Energy.

01 A Happy Outflow of 2 Billion

On July 2, after several rounds of fierce bidding, Ming Yang Smart Energy won a large order of 270MW German offshore wind turbines from Luxcara, a European independent clean energy asset management company. According to the agreement, Ming Yang Smart Energy will supply 16 offshore wind turbines, each with a power of up to 18.5MW, to Waterkant, an offshore wind power project in the North Sea of ​​Germany invested by the customer.

Ming Yang's overseas major client, Lux Scala, is not ordinary, even a little legendary. It was co-founded by two women in 2009. The company is not large at present, with more than 50 people, managing about 6GW of European clean energy infrastructure, with a total investment of 6 billion euros, and investors mainly include pension funds from Germany, Europe and overseas.

In August 2023, Waterkant Energy, a bidding entity, won the right to build a 270MW offshore wind farm in the German North Sea. The project, numbered N-6.7 Wind Farm, is located within the exclusive economic zone, about 90 kilometers from the island of Borkum. Important milestones for the wind farm, including comprehensive geotechnical and environmental surveys, have been completed, which will enable the project to be connected to the German national transmission grid as early as 2028.

The German government has set an ambitious goal of achieving 30GW of offshore wind power installed capacity by 2030. To achieve this goal, the German government has launched a series of competitive tenders, allocating 8GW of new installed capacity in 2023. It is expected that Germany will tender another 8GW of installed capacity in the summer of 2024.

02Sanctions and counterattacks

On April 9 this year, the European Commission announced that it would launch an investigation into Chinese wind turbine suppliers in Spain, Greece, France, Romania and Bulgaria in accordance with the Foreign Subsidies Regulation.

On July 11, the South China Morning Post reported that the scope of the EU investigation was further expanded to include Ming Yang Smart's large German order.

Before Ming Yang, my country's wind turbine companies such as Goldwind Science & Technology and Envision Energy had received preliminary questionnaires from the European Commission and were participating in the investigation. Now the scope of the investigation has been further expanded, and the flames of war have spread to Ming Yang Smart Energy, a company that has just started its globalization journey.

The EU believes that the Chinese government provides these companies with cheap turbines and easy financing conditions, which distorts the integrity of the European market and undermines fair competition.

According to Lea Zuber, a spokeswoman for the European Commission on competition, the EU has obtained information in its investigation on "potential '(market) distortions' in the development of wind power projects in other member states, such as Germany." She said: "We have sent a request for information to further evaluate this information and whether there are potential foreign subsidies that distort the internal market."

It is noteworthy that on July 9, German Vice Chancellor and Economy Minister Habeck expressed so-called "concerns" about Chinese companies' participation in Germany's wind power projects on the grounds of "data security."

Robert Habeck is Germany's current Vice-Chancellor and Federal Minister for Economic Affairs and Climate Action.

At a citizens' meeting in Bonn, Germany that day, Habeck said: "It is possible that components of Germany's wind turbines come from China. I cannot rule out this possibility - I hope these are not digitally controlled components."

Habeck also pointed out that the so-called laws on monitoring supply chains will be increasingly used. He added that the German government will not provide guarantees for so-called "Xinjiang-related" companies. Habeck emphasized: "I take this very seriously. We will not only demand more forcefully to control the supply chain, but also conduct stricter supervision."

Before Habeck made the above remarks, Germany announced in early July that it was reviewing the Ming Yang Smart Energy project due to concerns about critical infrastructure.

Robert Habeck is a Green Party representative in the German Bundestag and was interested in running for German president in 2012. He also participated in the Green Party's activities in the 2017 German federal election and became one of the two major candidates of the party. On June 21 this year, Habeck just paid a three-day state visit to my country.

On July 10, the Ministry of Commerce of China hit back at the trade investigation launched by the European Union, launching an in-depth investigation into the EU's trade practices and believing that the EU's trade practices are unfair. The investigation by the Ministry of Commerce of China is expected to last for six months and may be extended to April 10, 2025, aiming to determine whether Chinese companies have lost market share in the European Union.

The Ministry of Commerce made it clear that the scope of the investigation will cover "high-speed rail, photovoltaic and wind power generation products". According to the investigation rules, if China determines that an EU measure is illegal, it will initiate bilateral negotiations and multilateral dispute settlement procedures and take "other appropriate measures". The Ministry of Commerce said in another document that the relevant measures may include recommendations for "retaliatory measures".

According to media reports, China has plans to investigate French brandy and Spanish pork, and is considering investigating other industries such as Germany-dominated large-displacement cars and France-dominated aviation. European media commented that this move may mark another escalation of trade tensions between the two economies.

03 Is Ming Yang trying to grab orders overseas at low prices?

The wind power industry is even more popular than photovoltaic and energy storage. Before energy storage systems were sold by the pound, wind turbines were already sold by the pound.

In my country's domestic market, the average bidding price for onshore wind turbines fell from 3,100 yuan/kW in January 2021 to around 1,700 yuan/kW in December 2022. The current bidding price is still at a low level of around 1,500 yuan/kW. The price of offshore wind turbines has dropped from around 7,000 yuan/kW to the current 3,000 yuan/kW.

However, overseas wind turbine orders, especially those for offshore wind turbines, are very profitable. How much is Mingyang's 270MW European order worth?

In 2023, the average sales price of onshore wind turbines of overseas wind turbine companies will be around 860 euros/kW (about 6,680 yuan/kW), and the average sales price of offshore wind power will be around 1,134 euros/kW (about 8,800 yuan/kW). Based on this calculation, the order may be as high as 306 million euros, equivalent to 2.376 billion yuan!

In December 2023, Ming Yang Smart Energy won the bid for Serbia's 150MW wind turbine procurement project at a price of RMB 785 million. Based on this calculation, each watt is about RMB 5.24. At this price, the total price of Ming Yang Smart Energy's large order in Germany is as high as RMB 1.4 billion.

The unit price of the large order won by Mingyang Smart Energy in Serbia is actually far lower than the average price of the European wind turbine market. Take wind turbine company Nordex as an example. In the third quarter of 2023, the average selling price of the company's wind turbine products was 790,000 euros/MW, equivalent to 6,083 yuan/kW, while the average selling price in the third quarter of 2022 was 6,930 yuan/kW.

Domestic wind turbine companies do have a great competitive advantage over European companies. In terms of wind turbine prices, by the end of 2023, the average bidding price of onshore wind turbines in my country will be about 1.5-1.6 yuan/W, while the average price of new orders for onshore wind turbines from Vestas during the same period will be about 0.99 euros/W, or 7.78 yuan.

In terms of offshore wind turbines, the prices of domestic offshore wind turbines (including towers) are mainly in the range of 3.3-3.5 yuan/W, while the average price of new orders for Siemens Gamesa's offshore wind turbines in fiscal year 2023 is about 1.2 euros/W, or about 9.43 yuan.

What does this order mean to Ming Yang Smart Energy?

Ming Yang Smart Energy 2023 Annual Report

In 2023, Ming Yang Smart Energy achieved operating income of 27.859 billion yuan, with overseas income of only 76.55 million yuan, accounting for only 0.27%. The large order from Luxcara in Germany is equivalent to 30 times Ming Yang Smart Energy's overseas revenue last year!

According to an official press release from Luxcara Germany, the Waterkant team thoroughly reviewed the turbine quotations received for the international tender launched at the end of 2023. In addition to technical, financial, contractual and environmental aspects, before the final decision to select Ming Yang Smart Energy, international consulting firms such as DNV and KPMG were hired to conduct extensive due diligence on Ming Yang, including supply chain, ESG compliance in accordance with the EU taxonomy, and cybersecurity standards.

04The Tragedy of Globalization

Wind turbine company shipment rankings in 2023; Source: GWEC

Looking only at the shipment ranking, four Chinese companies, Goldwind, Envision, Wind Energy and Ming Yang, occupy four of the top five spots. There is no obvious difference in shipments among Chinese companies.

But if we look at the export data, there is a huge difference between Chinese wind turbine companies:

Goldwind Science & Technology, the market leader, will have overseas revenue of 7.84 billion in 2023, accounting for 15.5% of its operating income of 50.5 billion. Yunda Technology, ranked fourth, will have overseas revenue of 262 million in 2023, accounting for about 1.4% of its operating income of 18.727 billion. Sany Heavy Industry, ranked eighth, will have overseas revenue of 309 million in 2023, accounting for about 2% of its operating income of 14.939 billion.

However, the global shipments of these companies combined are less than that of Envision Energy. Envision is not a listed company and its financial data is unknown, but this company is definitely a company that makes a fortune quietly.

According to industry media statistics, the scale of overseas orders for my country's wind turbine manufacturers reached 8.27GW in 2022, of which Envision Energy alone received 6.77GW of orders, accounting for more than 80%.

For example, the 270MW order is a first for Mingyang Smart Energy, but it is nothing for Envision Energy. In March 2022, Envision Energy won an order in India for 596 wind turbines with a total capacity of 1.97GW. This record has become the ceiling for Chinese wind turbine companies.

Mingyang Smart Energy probably never dreamed that Envision Energy, a little brother that sent its senior executives to climb over the wall to take photos and learn from its master and was caught on the spot by Mingyang Smart Energy, would become an insurmountable mountain today (see the early article "Famous People | Wind Catcher Zhang Lei: My heart is wild and I ride the wind》）。

Ming Yang Smart Energy disclosed in its 2023 annual report: "Through years of accumulation, the company has become the company with the most actual operation data of typhoon wind farms in the industry, and is also the "first brand" in typhoon-resistant wind turbines. Up to now, the company has more than 2,000 wind turbines operating in typhoon areas. These wind turbines have experienced dozens of typhoons of different levels, with the maximum typhoon level reaching level 18, and they are all safe, reliable and stable in operation."

In 2023, Mingyang Smart's overseas operating income was only 76 million, which was obviously the lowest among all the leading companies. Because of this, the company worked hard and finally won a big order from Germany.

In December 2023, Mingyang Smart Energy launched the MySE 18.X-20MW wind turbine at its Shanwei manufacturing base. The rotor diameter of this product can cover 260-292 meters, and the maximum wind sweeping area is 66,966 square meters, equivalent to the size of 9 football fields. It is currently the world's largest single-unit capacity and largest rotor diameter offshore unit.

Mingyang Smart Energy, which has launched a heavy weapon, is ambitious and intends to conquer the lucrative European market. However, it never expected that Mingyang Smart Energy's cooked duck in Germany would actually fly away. How would Envision Energy, which was reported to the public security authorities and publicly humiliated by Mingyang Smart Energy for the so-called commercial espionage case, view this incident?

05 Overseas factories, no sign of a long way off

Huachuang Securities' research report pointed out that global offshore wind installations have entered a period of rapid development, with the European market seeing impressive growth.

According to GWEC statistics and forecasts, global new offshore wind installed capacity will increase from 10.9GW to 32.8GW from 2023 to 2028, with a CAGR of 24.8%; and will increase from 32.8GW to 66.2GW from 2028 to 2033, with a CAGR of 15.1%.

The Asia-Pacific region will still dominate the new offshore wind installation market by 2030, but the European market is expected to grow rapidly starting next year and is expected to become the core engine of global offshore wind installation growth around 2030. According to GWEC's forecast, from 2024 to 2033, Europe's new offshore wind installations will increase from 3.7GW to 28.2GW, with a CAGR of 25.3%.

In terms of main engine orders, European offshore wind turbines were mainly provided by Siemens Gamesa (SGRE) and Vestas in the past. In 2023, the two companies received 7.9GWT and 2.1GW of new offshore wind orders, up 159.6% and 223.6% year-on-year, respectively. The two companies received a total of 10GW of new offshore wind orders, up 170.9% year-on-year.

Looking only at the installed capacity plans for 2030 proposed by countries in the North Sea region, the installed capacity target of the five EU countries of Germany, the Netherlands, Denmark, Belgium and Ireland in the North Sea region is 77.8GW, which has exceeded the 60GW target proposed in the EU's special renewable energy strategy.

Ming Yang Smart Energy has been working hard to expand overseas markets.

In April 2022, Ming Yang Smart Energy supplied 10 offshore wind turbines to the Port of Taranto in southern Italy, helping Italy build its first offshore wind power project, the "Beleolico 30MW Offshore Wind Power Project", which is also the first offshore wind farm in Europe using Chinese wind turbines.

To gain a firm foothold overseas, investing and setting up factories overseas is an important step. Mingyang Smart Energy has always planned to build factories overseas.

In September 2021, Ming Yang Smart Energy Vice President Ye Fan revealed to the media that the company plans to build a wind turbine assembly plant in Germany within the next three years to provide wind turbine equipment and components to European customers, with a production capacity of no less than 1GW per year.

In December 2021, Ming Yang Smart Energy announced that it had signed a memorandum of understanding with the UK Department for International Trade's representative in China to invest in the construction of a blade manufacturing plant, a service center, and possibly a wind turbine assembly plant in the UK.

Nearly three years have passed, and Ming Yang Smart's plan to set up factories overseas has still not been implemented, as its competitors have surpassed it.

In 2022, Envision Energy established a wind blade research and development facility in Boulder, Colorado, USA.

Earlier this year, Sany Heavy Energy signed a technology licensing agreement with India's W Energy, authorizing it to produce Sany Heavy Energy's 3.X MW model in India. The latter controls 3.6GW of project resources in India.

In April this year, Goldwind Science & Technology and GE signed an agreement in Camaçari, Bahia, Brazil, completing the acquisition of the Camaçari Assembly Plant, Goldwind's first overseas wind power equipment manufacturing base.

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