Another Chinese wind turbine maker is preparing to hold an Initial Public Offering of shares on the Shanghai Stock Exchange. Sinovel Wind Group Co. has priced shares at 80-90 yuan, or about $12-$13.50/share, and expects to raise $1.44 billion on the sale of 105 million shares in the company. The IPO shares total about 10.5% of the company’s value.

The company is the largest wind turbine maker in China in terms of market share, and will compete with General Electric Co. (NYSE: GE), Siemens (NYSE: SI), Denmark’s Vestas Wind Systems (OTC: VWDRY), China Longyuan Power Group Corp. (OTC: CLPXF), and Xinjiang Goldwind Science & Technology Co. Sinovel first announced its intention to go public in March 2010, but that offering was delayed in October as Chinese regulators sought more information.

Sinovel produces 1.5-megawatt and 3-megawatt turbines and has a production capacity of about 3,300 megawatts. In 2009, the company’s sales were mainly of 1.5-megawatt turbines, which accounted for more than 99% of sales. Sinovel has built a 6-megawatt prototype and expects to start building production versions in the first half of this year.

The company held about 25% of China’s market share for wind turbines in 2009, and in March Sinovel had about 10,000 megawatts in its sales pipeline.

Chinese wind turbine makers now account for about half the total global market for the turbines, and control about 85% of the market in China itself. The growth path for these companies lies outside China, and the US is a key market.

General Electric has long been the leading wind turbine producer in the US, but it’s no secret that the Chinese makers are lining up to take a shot at the US market. At the same time, GE, Vestas, Siemens, and others are doing all they can to get a piece of the action in China.

Because the Chinese market for wind power is so enormous, even a small share of that market can produce good returns for turbine makers. Spain’s Gamesa, once the leader in turbine sales in China, now has just 3% of the market, but its sales have doubled.

There’s little doubt that Chinese turbine makers will be the low-cost leaders going forward, but they won’t be able to produce enough turbines to drive Vestas, Siemens, and GE out of the game. In fact, as demand for wind turbines rises, the competitors to the Chinese companies should do very well indeed.

Paul Ausick

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