China Industry: February 23

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Feb. 23 – This is a regular series of relevant industry news from around China.

Air transport
•The still unnamed Japanese low-cost carrier, a joint venture between All Nippon Airways, or ANA, and Hong Kong-based First Eastern Investment Group, will start domestic flights in November and services to China in 2012, the South China Morning Post wrote.

First Eastern’s chairman, Victor Chu, forecast that Japan will welcome some 4 million Chinese citizens in 2012, up from the 1.35 million registered in 2010.

ANA and First Eastern said last week that the companies, together with other investors, will initially invest about US$365,000 in their budget carrier JV. Prior to the start of service, additional investment will be raised from domestic investors to a maximum of about US$181 million.

•The Civil Aviation Administration of China (CAAC) said on February 8 that domestic carriers transported some 5.07 million passengers during the Spring Festival, an increase of 6 percent compared to the same period in 2009. The average passenger load factor rose 2 percentage points to 72 percent.

The CAAC has organized some 38,992 flights during the holidays to meet increased travel demand. The number includes the eight flights which evacuated some 1,796 Chinese from Egypt.

•China Southern Airlines will extend its service between Dalian in China’s Liaoning Province and Toyama, Japan, to Beijing from the end of March, news agency Xinhua wrote.

•Turkish Airlines has started a service between Guangzhou, China, and Ataturk International Airport in Istanbul.

The airline, which already flies to Beijing, Shanghai and Hong Kong, will operate the new route three times a week using Boeing 777 aircraft.

•Air China said on February 14 that it had serviced 3.84 million passengers in January, a year-on-year increase of 12.3 percent. The passenger load factor rose 1.7 percentage points to 78.6 percent.

The carrier transported 102,500 tons of mail and cargo, an increase of 13.2 percent over January 2010. The cargo load factor improved to 58.8 percent, a rise of 2.3 points year-over-year.

•Hong Kong-based Cathay Pacific Airways and its subsidiary Dragonair transported 2.24 million passengers in January, a year-on-year increase of 6.8 percent, the company said today.

Passenger load factor fell 2.5 percentage points to 81.3 percent. Capacity for the month, measured in available seat kilometers, was up by 10.1 percent.

The two companies transported 144,402 tons of cargo in January, a rise of 8.9 percent compared with the same period last year.

•China Southern Airlines said it had transported 6.37 million passengers in January, up 14.5 percent on an annual basis. Passenger load factor rose three percentage points to 78.8 percent.

The company carried 105,410 tons of cargo in January, an increase of 15.6 percent compared with the same month last year.

•China Eastern Airlines said its January passenger numbers rose 19.9 percent year-on-year to 5.42 million. Passenger load factor improved 4.2 percentage points to 75.94 percent.

The carrier transported 120,300 tons of cargo and mail, a decrease of 0.4 percent.

•Shanghai-based budget carrier Spring Airlines will use AsiaPay’s payment processing solution for its online flight booking in Hong Kong and overseas, AsiaPay said on February 15.

The integration of AsiaPay’s single-interface payment platform allows the carrier’s online customers to pay for tickets in local currencies, initially Hong Kong and U.S. dollars, using credit cards as well as other payment options locally preferred in Asia.

•China Southern Airlines announced last week that it has concluded a cooperation agreement with China’s Guangxi Autonomous Region aimed to boost the region’s air services.

Under the five-year agreement, Nanning Airport will be transformed into an international hub with links to the Association of South East Asian Nations (ASEAN) countries. In addition, the airport in Guilin will be established as a tourism hub.

•The Civil Aeronautics Administration of Taiwan has said that Taiwan and Singapore will soon ink an agreement to lift some restrictions on flights operated between them.

The agreement will remove flight and seat number limitations and will allow additional carriers to operate Taiwan-Singapore services.

At present, five airlines fly on the route – China Airlines, Eva Airways, Singapore Airlines, Silk Air and Jetstar – a unit of Australian carrier Qantas.

•Singapore Airlines and Hong Kong-based Cathay Pacific Airways will increase the frequency of some of their services to Taiwan from March 27, Taiwan’s Central News Agency wrote.

Singapore Airlines will boost the number of weekly flights to Taipei from 14 to 18.

Cathay Pacific intends to increase the frequency of its Hong Kong-Kaohsiung service from 32 to 42 a week.

•China Eastern Airlines said it will start flying between Shanghai and Rome from March 29. The company will operate the service four times a week.

•Cathay Pacific Airways said last week it will boost the capacity of a number of its services, including Milan, Paris, Jakarta, Surabaya, Bangkok and Delhi.

Pending regulatory approval, the carrier will increase its Milan route frequency from four to seven flights a week from July 1, to meet increased demand.

Cathay Pacific added that from March 27, it will add three extra flights to Paris making it a twice daily service. The additional flights will operate through Amsterdam.

The company will add an extra flight a week to Surabaya making it a daily route. From August 15, the carrier will add three flights to its Jakarta service.

Services to and from Malaysia will also be enhanced with three Penang flights that currently go via Kuala Lumpur becoming direct flights from March 27. In addition, Cathay Pacific will use larger aircraft on the Bangkok-Delhi services from Hong Kong.

•China Harbor Engineering Company Ltd, or CHEC, said it has clinched a US$1.22 billion deal for the construction of a new international airport in Khartoum, Sudan.

The contract covers a runway, airline terminals, control towers, connecting taxiways, cargo areas, parking lots, a maintenance hangar and ancillary facilities.

CHEC is a subsidiary of China Communications Construction Company Ltd.

•Hainan Airlines and China Telecom Corporation Limited have formed a strategic partnership, news agency Xinhua wrote. Through the deal, Hainan Airlines may become China’s first air carrier to provide in-flight phone calls and Internet. The agreement will also focus on ticket sales, call center and financial services.

•Air New Zealand said last Thursday it will add two additional direct flights each week to China to meet increased demand.

The carrier is adding an additional Auckland-Beijing return service from December 6, 2011 and an additional Auckland-Shanghai return service during the peak summer season from December 11, 2011 to March 18, 2012.

The company said it currently operates two return Beijing services a week and three return Shanghai services a week.

•Italian flagship carrier Alitalia and China Eastern said last week they will start two new direct services, Rome-Beijing and Rome-Shanghai, operated under a code-sharing agreement.

China Eastern will launch the Rome-Shanghai service during the summer of 2011. Flights will be operated four times a week using Airbus A340 jet.

Alitalia will start the Rome-Beijing service on June 1. The route will be served by Airbus A330 aircraft and will initially be operated four times a week. The company will increase the service’s frequency to five weekly flights from October.

•The first Tibet-based air carrier, Tibet Airlines, will start operation with the launch of a Lhasa-Beijing service on July 20, news agency Xinhua said.

Liu Yanping, Tibet Airlines general manager, said that the carrier will receive its first jet on July 7. The company will take delivery of its second aircraft on August 3 and its third on August 9. Tibet Airlines intends to boost the number of jets to 20 within five years.

Following the launch of its first route, the carrier will begin services connecting airports across Tibet with Konggar Airport in Lhasa, the administrative capital of the Tibet Autonomous Region.

Solar power
•China Solar Energy Holdings Ltd said on February 8 it had agreed to acquire domestic thin-film solar photovoltaic module maker Target Samoa for US$45 million in stock and convertible notes.

Via the deal, China Solar will add amorphous silicon thin-film module production to its current operations. The company also seeks to bring certain synergies between the new unit’s business and its existing one.

China Solar will pay for the acquisition with the issue of US$39.7 million in stock and US$5.2 million in five-year convertible notes with no coupon. The shares have been priced at US$0.027 apiece, equal to the average closing price of the company’s stock for the last five trading days. The notes are convertible into stock at the same price. Combined, the issued stock and the converted shares would equal 28.24 percent of China Solar’s enlarged share capital.

Target Samoa has two wholly-owned units — Changzhou WFOE and Dali WFOE — both engaged in the production of thin-film photovoltaic modules and related accessories. At the end of 2010, the company’s consolidated unaudited net assets stood at US$11 million. Preliminary net loss for 2010 was US$439,000, compared to US$530,000 a year ago.

China Solar shares have resumed trading on the Hong Kong stock exchange today after a one-day suspension related to the acquisition announcement.

•Taiwanese Neo Solar Power Corp, or NSP, today said that revenues for January 2011 have jumped by over 150 percent year-on-year to US$84.4 million, reaching a record for 10 consecutive months.

Compared to December, the result has grown by 5.74 percent. The Christmas holidays and the snow storms in Europe did not have any negative impact on the January sales, Neo Solar said. The company continues to work at full capacity.

Neo Solar projects even better results in the near future, as its order book continues to grow rapidly. The company is planning to launch a fund-raising campaign soon in a drive to support expansion projects and bolster its presence on the global solar power market. Fresh capital will be raised through a stock offering, global depositary receipts or a private placement, depending on market conditions.

Current capacity at Neo Solar is over 820 megawatts and is planned to grow to 1.3 gigawatts by the end of the year. In the autumn of 2010, the company implemented a new technology for double printing that boosts the average conversion efficiency of photovoltaic cells up to 0.2 percent in absolute value.

•German solar power developer Volthaus GmbH said it would receive 20 MWp of solar modules from Chinese module maker EGing Photovoltaic Technology under a strategic partnership agreement. Volthaus will use the modules in solar projects, starting this year.

According to Volthaus Managing Director Sabine Bachner and Peer Uhlemann, head of purchasing and divisional manager of Volthaus International, the partnership with EGing strengthens the company’s components trade at home and in England, Austria and Italy.
The German firm has so far installed 1,800 solar photovoltaic systems.

•After returning to the black in 2010, Chinese solar energy firm Yingli Green Energy Holding Co Ltd announced it expects shipments of photovoltaic modules to rise by 60.1 percent to 64.8 percent in 2011, reaching up to 1,750 megawatts.

On February 18, the company reported 2010 net earnings of RMB1.42 billion, or RMB9.06 per share, against a net loss of RMB531.6 million a year before. Non-GAAP profit was RMB1.66 billion.

The gross margin improved to 33.2 percent from 23.6 percent thanks to cost-cutting measures and regardless of a drop in selling prices for PV modules.

Revenue stood at RMB12.5 billion, up 72.3 percent year-on-year, with some 80 percent of the figure coming from the European market. Yingli Green said it expects the continent to account for 60 percent of its 2011 sales.

In 2010 the company shipped twice as many photovoltaic modules as in 2009, reaching shipments of 1,062 megawatts. The growth was a result of increased market demand, expanded capacity, broader recognition of its premium brand and a diversified customer base.

During the closing quarter of the year, the company swung to a net profit of RMB554.4 million, or RMB3.46 per share, from a RMB117.2 million net loss a year ago. Non-GAAP profit was RMB598.3 million, compared to RMB65.2 million in the prior-year period.

Fourth-quarter revenue amounted to RMB4.07 billion, up 60.7 percent in annual terms.

•Chinese solar cell maker JA Solar Holdings last week said it has developed a next generation multi-crystalline silicon solar cells with an 18.2 percent conversion efficiency. The company plans to start commercial production of the cells in the second half of the year.

The new solar cells utilize the company’s patented Maple solar cell technology. They include silicon crystals that are broader, flatter and have fewer grain boundaries, compared to conventional multi-crystalline silicon, which leads to lower energy wastage and higher conversion efficiency. The technology can be used to manufacture advanced solar modules at a low cost-to-performance ratio, JA Solar said.

JA Solar will present the new solar cell and solar module products at the SNEC (2011) PV Power Expo to be held on February 22-24 in Shanghai.

•Hong Kong-based GCL-Poly Energy Holdings said last Friday it would invest some US$2.3 billion in 2011 and 2012 to significantly expand polysilicon and wafer production capacity, seeking to fulfill long-term supply contracts.

At end-2010, the company had polysilicon capacity of 21,000 tons and wafer capacity of 3,500 megawatts. By the end of 2011, polysilicon capacity is planned to grow by at least 25,000 tons, and hit 65,000 tons by the summer of 2012. Wafer capacity will go up to 6,500 megawatts by end-2011.

As part of the project, GCL-Poly will bolster wafer capacity at its existing plants in Jiangsu Province and will set up new wafer production lines close to its China-based customers. It will also develop new polysilicon lines at the existing Xuzhou plant. The funds for the investment will come from internal resources and borrowings.

Wind power
•China Resource New Energy, the clean energy arm of utility China Resources Power Holdings, is in the process of feasibility studies for potential wind power projects in the municipality of Chongqing, cqnews.net writes. The company is considering sites in the cities of Wulong, Yuyang, Wuxi, and Chongqing.

At present Chongqing’s needs 1.10 million kilowatts in capacity to overcome its electricity supply shortage.

Last month, the company announced it planned to pour US$728 million to US$984 million in wind power developments in pursuit of 150 gigawatts of overall installed capacity by 2020. By then it seeks to bring 16 percent of its energy mix from renewable sources. China Resources Power expects that the wind power projects will have a rate of return above 11 percent.

•Chinese Tianjin Power Co has connected to the grid the 49.5 megawatt first phase of a wind farm in northern China, Chinese news agency Xinhua reported last Tuesday, citing a company official.

The first phase of the Shajingzi wind farm in Tianjin can generate 10 million kWh of electricity, enough to power 247,500 homes a year, the agency said, citing Liu Mingzhi, head of the development and planning department of Tianjin Power.

Liu said the project is slated for completion by the end of 2012, when its capacity should reach 200 megawatts.

The city government invested US$212.5 million in building a smart grid last year, Liu added.

•U.S. clean technology firm CleanTech Innovations said last week it has struck a wind tower supply deal from power producer China Guodian.

Under the US$4.4 million contract, CleanTech will deliver wind towers to a subsidiary of China Guodian this year.

The contract value represents about 20 percent of CleanTech’s entire 2010 revenues, CleanTech chairman and CEO Bei Lu said. According to him, the company expects to sign more wind tower delivery deals during the year and to generate a record-high increase of annual earnings.

This industry report brief is courtesy of AII Data Processing.