GM interview: CTG Renewables’ current development status and future prospects Interview with Zhao Guoqing, General Manager of China Three Gorges Renewables (Group) Co., Ltd.

Reporter: China plans to increase the share of non-fossil fuels in its primary energy mix to around 25% from 20% by 2030, lifting the amount of installed wind and solar power capacity to more than 1,200 gigawatts. What role will CTG Renewables play in this new energy-dominated power system envisioned in the country’s 14th Five-Year Plan?

Zhao Guoqing: The new energy-dominated power system will require a sharp increase in the share of wind and photovoltaic power in the energy mix, in terms of both installed capacity and power generation. We expect installed new energy capacity to account for more than 50% of the total energy mix, indicating there is still huge room for development going forward.

In line with China Three Gorges Corporation’s (CTG) strategy, CTG Renewables aims to reach total installed capacity of 50 GW by the end of the 14th Five-Year Plan. That will require average annual growth of at least 7 GW on top of the 15 GW base at the end of 2020. To achieve this goal, CTG Renewables has set up 26 subsidiaries nationwide and an operations and maintenance company.

Reporter: What are the highlights and advantages of CTG Renewables’ investments?

Zhao Guoqing: As one of the forerunners and fastest-growing companies in the new energy industry in China, CTG Renewables enjoys the following advantages in terms of investment.

First of all, we have abundant resources. CTG Renewables' accumulative resource reserves exceed 120 GW, including nearly 30 GW of offshore wind power and over 90 GW of onshore wind power and solar power, which will underpin the next stage of our development.

Our second advantage lies in the low-cost of funds. CTG's sovereign credit rating provides support and guarantees for CTG Renewables. Meanwhile, we also have an AAA corporate credit rating. This is why over recent years we have secured lower financing costs for debt issuance, bank loans and financial leasing, which in turn has significantly improved our cost control capacity and competitiveness.

We also have an advantage in terms of coordination across the industry chain. We have equity participation in a number of well-known upstream equipment manufacturers and downstream power trading centers, jointly set up multiple industry chain investment platforms, and supported a few leading new energy manufacturers such as Goldwind Science and Technology Co., Ltd. and JA Solar Technology.

The fourth advantage comprises technology and innovation. We continue to double down on R&D in terms of both funding and investment, on the one hand tracking the industrial applications of new materials and technologies, such as flexible photovoltaic components and lightweight and high-capacity wind turbines, and on the other, keeping our innovative efforts in the cutting-edge technology to lead the healthy development of the industry.

Reporter: What are CTG's advantages in terms of offshore wind power? What are your expectations for the future development of offshore wind power?

Zhao Guoqing: Over more than a decade of exploration and development, CTG Renewables has put in place a rolling development pattern along China’s coast, focusing on Jiangsu, Fujian and Guangdong, where we have developed the new energy projects at scale in a continuous way. To date, the company has connected over 1.4 GW of offshore wind power to the grid with another 3 GW under construction. It is expected to have more than 4 GW of offshore wind power by the end of 2021, meaning it’s well on the way to becoming the largest offshore wind power company in China. At the same time, we are working closely with local governments to conduct preliminary studies and devise sustainable development plans. The planned projects amount to nearly 30 GW, of which plans covering 5 GW have already been approved, which gives an indication of the huge potential for future development.

To consolidate our leading position, CTG acquired the German Meerwind offshore wind power project in the overseas market, making us the first Chinese company to hold a controlling stake in an offshore wind farm operating abroad and allowing us to collaborate with European offshore wind power developer on innovation and exchange experiences. Turning to the domestic market, with the construction of the Fujian Three Gorges Offshore Wind Power International Industrial Park and Xinghua Bay prototype test wind farm, we led offshore wind power developer on a journey of independent innovation, which included mastering a series of core key technologies, continuously upgrading manufacturing techniques and driving the transformation of the industrial chain. CTG Renewables is building up an impressive array of leading advantages in offshore wind power, especially in terms of scale, management, technology, standards, talent and brand.

We believe that as offshore wind technology continues to improve, construction costs will come down, which will in turn improve offshore wind power’s comparative advantage and drive energy efficiency at CTG Renewables.

Reporter: How will you adjust your presence in the offshore wind power market against the backdrop of declining wind power feed-in tariffs?

Zhao Guoqing: Developers have been rushing to complete projects before the central government’s tariff subsidy programme comes to an end this year. That caused a shortage in the supply of wind turbine installation vessels and wind turbines, leading to a cost hike for building offshore wind power.

With the feed-in tariffs of wind power being cut, we expect offshore wind power manufacturers and developers to rapidly progress next year. For example, with improved capacity from suppliers, the construction window for offshore wind power projects in Guangdong, Fujian and other places may increase to 150 days or even longer, from the current 110 days, thereby enhancing construction efficiency.

Meanwhile, the application of lightweight large-capacity wind turbines will significantly reduce the cost of building the offshore wind turbines, which will in turn lead to a significant decline in the cost of building offshore wind farms. We expect that even though the state subsidy is being withdrawn and the tariffs cut, we would be able to achieve a sufficient yield from the offshore wind power projects, especially in terms of the return on net assets and return on investment, so as to support the healthy development of CTG Renewables.