In their bid for market share, Chinese wind energy companies are pressing rapidly into the Americas, Europe, Africa and Australia with a strategy that incorporates two seemingly disparate credos: 'Buy from China' and 'Buy local.'
Major Chinese manufacturers and developers are setting up branch offices and subsidiaries throughout the world, then hiring local talent, purchasing equipment from local vendors, and partnering with companies that are savvy about the local marketplace. Goldwind, one of China’s largest wind manufacturers, calls the approach ‘globalisation through localisation.’
‘The majority of our projects in the United States consist of more US content than foreign content,’ said Tim Rosenzweig, CEO of Goldwind USA, the American subsidiary of the China-based Goldwind Group. ‘Specifically, our projects in Minnesota and Illinois were built with over 60% American content by cost. This figure includes blade and tower manufacturing in North Dakota, Texas, Wisconsin and Minnesota as well as engineering, procurement, transportation, construction, O&M and a variety of ancillary work including legal and accounting services.’
Rosenzweig, himself, represents part of the localisation strategy. Hired by Goldwind in 2010, Rosenzweig was already known in the US market for his work at First Wind, a Massachusetts-based wind development company, which he helped expand from five to 150 employees. Joining him at Goldwind USA were others who previously worked at First Wind, as well as Gamesa USA, Enel North America, Texas Wind Power, Plug Power and other American energy companies.
The same year that Goldwind hired Rosenzweig, it also completed its first US demonstration project - in fact its first overseas megawatt level project - a 4.5 MW installation at Uilk Wind Farm in Pipestone, Minnesota. Less than three years later, Goldwind now trumpets projects on six continents, with 14 deals struck between June 2010 and January 2012 in the US alone. The company has wind farms built or underway in Minnesota, Illinois, Massachusetts, New York, Rhode Island, Ohio, Iowa and Montana. Among them is the 109.5 MW Shady Oaks in Lee County, Illinois, a strong example of the company’s globalisation through localisation strategy. The wind farm was developed through a local partnership deals with the Timken Company, an Ohio bearings manufacturer; LM Power, a North Dakota blades manufacturer; and Broadwind Towers, which fabricates towers from facilities in Texas and Wisconsin.
In addition, Goldwind accepted an invitation from Chicago to locate its US headquarters in the city, part of Chicago’s effort to build its standing as a hub for international corporate headquarters. Aware of the Chinese localisation strategy, World Business Chicago, a non-profit economic development organisation, began courting Goldwind in 2009, travelling to China to meet with the company. The organisation sold Goldwind on the city’s proximity to the US wind energy corridor, and access to industry talent and suppliers. More than a dozen other wind energy companies have corporate offices in the city. Two years later, Goldwind joined them.
‘Goldwind has a philosophy about bringing in Western expertise. They were not going to come in with an all Chinese staff. They wanted to draw from North America, and they did,’ said Tom Bartkoski, World Business Chicago’s director of international business.
A Strategy of 'Co-opetition'
Brendan Andrews, vice president of sales and Marketing at IOXUS, a New York-based manufacturer that sells its ultracapacitors globally, including into the Chinese wind market, says that such ‘co-opetition’ is widespread among Chinese wind energy companies as they move quickly into international markets.
‘They are setting up manufacturing facilities, sales offices, engineering support locally, in the most viable regions. Not only that, they have started to partner with US and European OEMs. So you’ve got what I call co-opetition; they are competitors in the market, but they have joined forces to benefit each other,’ he said.
Co-opetition brings jobs and economic activity to the host nation, and diffuses political concerns that the Chinese will use their market clout to dislodge local players. This is a particular worry in the US now, given that it is an election year and China’s economic growth is serving as political fodder to highlight US manufacturing decline.
‘In our short time in the Americas, our presence has created or retained over 500 US jobs in a variety of industries and at a variety of levels including engineering, manufacturing, transportation, construction, professional services, and project operation,’ said Goldwind’s Rosenzweig.
Meanwhile, the Chinese enterprise gains local partners that can help it navigate the unfamiliar legal and regulatory complexities of foreign governments, a particular problem for those entering the US market with its myriad of rules and government agencies. America’s fluctuating energy policy is especially difficult for the Chinese ‘who are used to a five-year plan, a 10-year plan, obviously no changes in government or administration, so tremendous consistency in government policy,’ said Charles Dewhurst, who frequently works with Chinese companies as head of the Natural Resources Industry practice at law firm BDO USA.
‘To develop a power project is quite a challenge for someone coming into the US from any country. There are federal regulations, state regulations, county regulations and permits that you have to acquire,’ added Kerin Cantwell, who is a partner in the global project finance group at Akin Gump Strauss Hauer & Feld. ‘And when it comes to financing, the banks have their requirements and may want to change aspects of how a deal is structured. So that will pose a challenge too.’
In fact, project financing may be the biggest hurdle for Chinese wind companies in the US, according to Cantwell. The problem? Chinese wind turbine manufacturers, new and unfamiliar to the US investors, must demonstrate that their technology is bankable.
‘The loans are secured by the project assets, which includes both the hard assets and intangible project rights. When banks take a look at projects, they are looking at all the project assets, including the wind turbine technology. For wind turbines to be bankable, they have to have a track record of performance,’ Cantwell said.
In some cases, Chinese companies will build small, self-financed demonstration projects to prove their technology is bankable. But this can take time since some North American engineering firms advise banks to require demonstration of at least 100 turbine years of experience (100 installed turbines operating for a year at 95% availability). So buying turbines from a proven manufacturer, or partnering with a developer that is already established locally, offers a quicker route to project financing.
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