With the price of Western-made wind turbines still high, French renewable energy developer Neoen SA is open to purchasing Chinese machines but continues to face bankability concerns from the finance community, CEO Xavier Barbaro said Nov. 2.

Neoen, which is nearing 5 GW of operating wind, solar and storage assets globally, has typically bought from the major Western manufacturers: Denmark's Vestas Wind Systems A/S, US-based General Electric Co., Germany's Nordex SE and Siemens Energy AG unit Siemens Gamesa Renewable Energy SA.

But with Western turbines persistently expensive due to inflated raw materials costs — at an average of €1.3 million per megawatt today, according to Barbaro — Asian suppliers, whose machines would be available at lower prices, are increasingly coming into view.

"We have been in touch for quite some time now with [Goldwind Science and Technology Co. Ltd.] and [Envision Energy Ltd.], for example," Barbaro said on the developer's third-quarter earnings call. "We have not decided yet to buy from them, but of course that's an option that we have."

While Chinese machines are "maybe not as powerful" as the offerings from Western suppliers, the pricing per megawatt is "more competitive," the CEO said.

Still, a major obstacle continues to be getting banks comfortable with lending to projects with Chinese turbines, which is crucial given Neoen's model of raising long-term debt to finance its assets.

"I'm sure it will happen," Barbaro said. "I don't know if it's already a 2023 thing or if we will have to wait [until] 2024 or 2025, but I mean, those guys, I have visited their manufacturing sites in China, their products are certainly good enough."

The CEO also pointed out that Neoen is already dependent on China for its supply of solar panels and, as such, is on board with the prospect of Chinese turbines and their bankability.

"But bankability is in the eye of the beholder, so it's important that lenders give us the green light to buy those turbines," Barbaro said. "Maybe they still need a little bit of time, even if we as an equity investor are already comfortable with those products."

Potential roadblocks

Getting the go-ahead from lenders is not quite the final piece of the puzzle in Western developers opting for Chinese turbines, however.

For one, there is an effort already underway at an EU level to protect the region's struggling domestic manufacturers, with the European Commission seemingly open to implementing trade barriers to help maintain a "fair and competitive international environment."

Barbaro added that the ability to service wind assets is also an important consideration when selecting which turbine manufacturer to go with.

"If you have small wind farms located all over France, you need to have some [operation and maintenance] bases all across the country to properly service those assets — maybe not something that is so easy for a newcomer," the CEO said.

At the same time, larger wind farms of 200 MW or 300 MW typically have dedicated operation and maintenance bases. "That solves the problem right away," Barbaro said.

Another potential roadblock could be around product certification.

"You don't want to be two years late because your product has not obtained the green light from the grid," the CEO said, adding that Goldwind already has turbines in Australia, one of Neoen's main markets, "so it seems that they have been able to get the green light."

Revenue growth

Neoen's revenue in the first nine months of 2023 amounted to €397.5 million, up 12% compared with the year-ago period, driven by the commissioning of new assets.

The developer had 4,769 MW of installed capacity as of Sept. 30, having added 718 MW since the turn of the year. Newly completed projects in 2023 include the 480-MW Western Downs solar project and the 157-MW Kaban wind farm, both in Australia, along with 130 MW of solar and wind capacity in France.

Neoen's project portfolio, not including early-stage projects, totals about 25 GW. It has projects under construction in Australia, Canada, Mozambique and five countries in Europe.

Wind was the chief contributor to revenue with €180.6 million in the nine-month period, up from €141.1 million a year ago. Solar contributed €172.0 million, up 17%.

For the third quarter, Neoen's revenue came in at €120.5 million, down 8% year over year and almost 19% below the S&P Capital IQ consensus estimate.

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