China Securities Regulatory Commission (CSRC) has approved the first two new energy real estate investment trusts (REITs) that are expected to raise RMB10bn (USD1.44bn) in total, as reported by Caixin on March 3. State Power Investment Corporation (SPIC), one of China’s five major electricity generation firms, plans to raise more than RMB7.16bn (USD1.03bn) from the REIT underlain by its 500-megawatt (MW) offshore wind power project in Yancheng, Jiangsu Province. Another government-backed renewable energy investor, Beijing Energy International [0686:HK], aims to raise RMB2.68bn from the REIT underlain by a 300MW solar power station in Yulin, Shaanxi province, and a 100MW station in Suizhou, Hubei province.

The new energy REITs provides a new financing channel for China’s fast-growing renewable energy projects, especially when the government is phasing down subsidies for renewables. China’s wind and solar power installations surged from 118GW in 2014 to 635 gigawatts (GW) in 2021, while the overdue government subsidies for renewable energy projects accumulated to RMB400bn (USD59.7bn) by the end of 2021. Therefore, China halt subsidies for most of wind and solar projects in the past two years and established two special purpose companies in August 2022 to use bonds and other instruments to pay off overdue subsidies. Under the existing guidelines for REITs issuance, new energy projects with an operating time of over three years, an asset value of no less than RMB1bn (USD144.2m), as well as a stable cash flow from diversified sources would be allowed to securitize their electricity generation assets.

Sources:

https://www.caixin.com/2023-03-03/102003913.html

https://www.yicaiglobal.com/news/china-first-two-new-energy-reit-projects-bag-over-usd15-billion

https://www.statista.com/statistics/279504/cumulative-installed-capacity-of-solar-power-in-china/

https://chinadialogue.net/en/digest/china-special-purpose-firms-to-tackle-unpaid-renewables-subsidies/

https://www.reuters.com/business/energy/china-stop-subsidise-new-solar-power-stations-onshore-wind-projects-2021-2021-06-11/