Interview: Saad Qais, CFO, Goldwind Americas
Richard Heap spoke to Saad Qais, chief financial officer at Goldwind Americas, which is one of the leadership sponsors at Financing Wind North America in Denver on 24th and 25th April. He discussed the firm’s strategy in North America, trade wars and evolving technology.
What is Goldwind’s strategy in the US?
By way of background, Goldwind is one of the largest wind turbine manufacturers in the world – second largest to be exact – and we have approximately 30% of the market share in China. What makes us different is that we’re a publicly-owned company in China, listed on the Hong Kong and Shenzhen stock exchanges, and the institutional investors we have is a mix of western players and Chinese players. We aren’t a state-owned enterprise, so we act on a global scale, independently.
While our roots stem from China, we are consistently looking outwards. We have seven divisions in the international market covering the Americas, Europe, Middle East, Asia and Australia. We are continuously looking at ways to deepen our penetration in each of those markets.
Goldwind Americas has been active in the North American market for almost 10 years. We are new to the market in relative speak, which means we’ve been able to be nimble in terms of adapting to the changing landscape of the U.S. market and new opportunities in Canada, Mexico and Central America. As such we look at the North American market holistically and approach our strategy and our customers with products that best fit their needs in multiple countries.
You mentioned manufacturing, but you also get heavily involved in development too.
Yes, that is correct. Goldwind has a heathy mix of development & financing and sales & service. However, we don’t want to compete with our customers but, if it helps turbine sales to invest our own money, we can do that in different forms. It can come as a co-investment with a client, or if we want to invest in a wind farm to prove something or learn about the market. That’s how we do it and, primarily, it’s to help us be a better and a more efficient OEM.
We have done that in North America on a few occasions. Most recently with our 160-megawatt Rattlesnake Wind Project in Texas. We have a strong balance sheet and we can help clients to remove some of the pain points they might be feeling financially. Turbines are the largest single chunk of capital expenditure of the project and because of our appetite to deploy capital, we can be a true partner for our clients.
What do you see as the big technology trends?
Increasingly, we know from being a global player grid-friendliness of our machines is of great importance, so we’re working on enhancing our product offering so that indirect costs that relate to the cost of turbine implementation are still minimised.
To that end, using big data is a key part of any owner/operator strategy to squeeze out every megawatt hour possible. As innovations for turbines change so will big data outputs that accompany them. With the data we are able to assemble now, we’ve already found that there is a direct correlation between utilisation of big data and optimising a wind farm’s operations and maintenance. This data essentially allows us to better predict turbine behaviour which ultimately feeds into grid-friendliness and the O&M planning cycle, further allowing organisations to use predictive technology as opposed to reactionary measures. Ultimately, this accumulation and processing of data will lead to a direct improvement in overall turbine availability and long-term performance.
How easy are you finding it to expand in the US?
As an international company entering a new market – and continuing to enter new markets – there are natural barriers we’ve had to navigate. One of the last and most important hurdles we’ve overcome is bankability of our turbines. In 2018 our 160-megawatt Rattlesnake project in Texas was our first project to receive tax equity financing – a first for any Chinese wind OEM. There are also hurdles that the wind industry overall has to overcome including tariffs imposed on the import of large components, long-term incentives for wind energy development and a skills shortage in the areas of engineering and wind turbine technician – mostly due to competition with other companies for top talent.
Could you explain more about Rattlesnake?
The Rattlesnake Wind Project, located approximately 125 miles northwest of Austin, will utilise 64 Goldwind 2.5 MW Permanent Magnet Direct-Drive (PMDD) wind turbines. The project has been operating for six months now.
This was a strategic investment by Goldwind to further prove the technical and bankable capabilities of our turbines and service offerings. This was our first foray into tax equity financing and the first for a Chinese OEM. What makes this so significant is that before PTCs [production tax credits] expire, tax equity is a gateway to building wind projects in the U.S. You have this limited number of firms who provide tax equity financing – between four and six on any given day – so we had to get acceptance from them. Before Rattlesnake, developers would say: ‘Well, are you tax equity financeable at this point or are you going to use us as a guinea pig?’ It was a problem we were able to resolve with Rattlesnake, and we did that ourselves.
We have proved that not only is Goldwind tax equity financeable but also that customers are not going to pay a premium for going with Goldwind as opposed to another OEM.
Given the current trade wars between the US and China, does that have any practical impact on your business? Does it make life difficult?
The uncertainty in terms of a trade resolution makes any international company pause for concern as no matter which way you shake it, someone or something is impacted. It’s certainly an issue because barriers to trade are never a good idea. AWEA has said that, with these tariffs, the cost of wind power in the US could rise as much as 10%. We’re not spared that, and it’s a shame this is handicapping some of the growth of the market.
But, at the same time, we are leveraging a global supply chain and we will adjust – just like everyone else. We remain committed to the market in North America and our goal is to minimise the burden felt by our customers. They are our top priority.
We are hopeful that the two countries will come together on a resolution soon.
Do you have concerns about US wind after the PTC?
I think it can be divided into two phases. There’s going to be a short-term impact and a long-term impact. Any time you have a support mechanism that everybody relied having a sunset date, it is going to have an impact in the short-term. That’s what we see today: there’s a lot more buildout going on to beat the clock, and we will see a bit of a decline post-PTC expiration.
In the long-term though, I think it’s a good thing. It sets the industry on its own two feet, and removes the leakage in value: the financing structures are quite complex with the tax equity financing monetising the PTCs and depreciation benefits. If that goes away then competition goes up in terms of financing, and you will have 40-50 institutions out there offering financing.
What other pressing issues do you see in the US market?
Intermittency remains the primary issue for renewable energy, and there are solutions that everybody’s working on with battery storage and hybrid solar-wind projects. Going back to our roots in research, we are working on some hybrid wind-solar projects in Australia.
Another issue, when you talk about the US specifically, is the load growth is still weak outside Texas. There’s a transition going on for projects built 30, 40 or 50 years ago, where coal or natural gas are being retired and replaced by a combination of wind, solar and battery. But we want the economy to grow in a way that leads to enhanced load growth.
But at least there’s demand from corporate customers?
Yes, corporate and institutional clients (mostly Fortune 500 companies) are really taking a lead on pushing the renewable energy initiative with or without government. C&I customers are very savvy, and it’s not solely being done for environmental reasons. Pretty much every conversation is going to end on economics, so the fact that wind and solar are able to provide a solution to the C&I customers is a testament to the economic appeal of the renewable energy industry.