All this is caused by heavier financial burdens
The financial situation of those who produce solar energy in China does not seem to be the best. This is due to heavier financial burdens which, according to a report published by Fitch Ratings, for Chinese companies that produce solar energy represent greater pressure than wind farms.
In particular, as confirmed by Fitch in a research note, the financial results of 2018 show that the credit profiles of the wind operators have stabilized, while those of the photovoltaic plants have weakened.
Three Chinese solar energy operators – including Beijing Enterprises Clean Energy and Panda Green – reported a combined net profit of 41.8% in 2018, while their debt increased by 17.6% on an annual basis.
For wind farms the cash flow pressure is less severe
Among the factors identified by the rating agency are the decline in earnings to debt, the increase in financing costs and the boom in solar panel installations in recent years, which has heavily inflated budgets.
Meanwhile, delays in receiving subsidies have also exacerbated the cash flow pressure of renewable energy operators. For wind farms, on the other hand, the cash flow pressure is less severe. This is because they are based on subsidies for a lower percentage of rates.
Fitch expects some wind operators to have already achieved positive free cash flow in 2018
The five renewable subsidiaries of the Chinese Big Five groups (which mainly invest in wind energy), including Huaneng Renewables and China Power Clean Energy, recorded a joint growth of 7.3% net profit in 2018, commensurate with their increase in debt of 2.3%, according to Fitch.
Due to the performance divergence, Fitch expects some large wind operators to have already achieved positive free cash flow in 2018. However, some solar manufacturers will probably have to opt for asset sales in order to increase liquidity.
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