Weineng Group (01608), which has highly flexible container generator sets, has occupied a large number of private power generation markets in Southeast Asia and is carrying out global expansion. The company also relies on the government to provide land and power generation raw materials, its ibo business gross profit margin is as high as 57.4%, full-year net profit also showed rapid growth. The company also had a more in-depth communication with the public at the results conference on March 27.

Zhitong Financial APP learned that Weineng Group's earnings for the whole of 2017 increased by 14.0% year-on-year to HK $1.746 billion, gross profit increased by 15.9% year-on-year to HK $576.8 million, net profit increased by 49.2% year-on-year to HK $331.3 million, and net interest rate increased from 14.5% to 19.0%. Basic earnings per share is HK12.99 cents, and the company will also pay a final dividend of HK1.76 cents per share.

According to the announcement, Werneng has made significant progress in opening up new IBO business markets and continues to infiltrate existing markets, including the first project in Peru with an installed capacity of 79.8MW with a contract term of 20 years, and two new projects in Indonesia with installed capacity of 54.0MW and 20.3MW respectively, as well as expansion into Brazil, China and the UK.

The following is the Q & A record of the performance meeting organized by Zhitong Financial APP.

Q: how many projects does the company have in its IBO business, what is the scale of its own installation, and where is the main project coverage area? How are the orders for SI?

A: the former IBO section has about 11 projects, with a total of 661.2 megawatts, mainly distributed in Indonesia, Myanmar, Bangladesh and Peru. In terms of SI, it has an annual growth rate of about 10%, and this part of our business is basically the largest in Asia.

Q: what is the company's position in the major Southeast Asian markets? How do you view the current market space in Southeast Asia?

A: when we went public at that time, we did an industry survey. We were the owners and operators of the largest private gas-fired power stations in Southeast Asia, such as Myanmar and Indonesia. Apart from the local government, our power supply capacity in the local market is the first.

According to market statistics, the current electrification rate in Myanmar is about 26%, and about 74% of the people have no electricity. I have had the experience of a power outage as soon as I got off the plane at the airport, which is quite frightening, and now their government is preparing to increase this electricity generation rate from 26% to 50% in 2030, about 12 years. Therefore, we think there is still a lot of room for this market.

Q: we can see that there is a great difference in gross profit margin between the two parts of the company's business. Could you elaborate on it? Why do we still keep these two modes of business coexisting?

A: indeed, the gross profit margin of SI business in 2017 is 21.4% and 57.4%. The reason why we decided to do this six years ago is to see that many of our downstream do not generate electricity, we help others to generate electricity, but they actually do not know anything, so they consider doing it themselves.

Of course, if we do not do SI, our whole system is not as efficient as our competitors, then we will not be able to win so many projects, which are actually two businesses that complement each other.

Q: what is the cost of a single container generator? What is the average kilowatt-hour cost? How much is the annual maintenance cost?

A: the average cost per megawatt is about $450000 per megawatt, and the average cost per container generator is 1.56MW. In fact, due to the continuous improvement of our technology, each machine can now reach 2 megawatts, which should be something that no competitor can do for the time being.

I don't have specific figures on the cost of kilowatt-hour at the moment. For example, in Indonesia, for example, using our gas to generate electricity is only more expensive than coal-fired electricity and cheaper than other types of electricity.

The maintenance cost is not much. For example, each machine needs about 70,000 hours of power generation before it needs to be overhauled. If it is open 24 hours a year, it is about 8,000 hours. If it is not opened 24 hours, the time for overhaul is even longer.

Q: what is the plan for the future development of globalization?

A: at present, Southeast Asia is definitely one of our major markets. apart from Southeast Asia, we have already entered Latin America at the beginning of this year, such as Peru, which is already generating electricity. By the end of this year, we should also have projects in Brazil. It will also enter China, that is, the biogas project mentioned just now; in the follow-up, we will also enter mature markets, such as the United Kingdom.

Q: the company's first project in China was biogas. Why not the original fuel or gas?

A: first, if we follow the market model in Southeast Asia, the government will have to generate electricity in a very short time, but China has gradually entered a mature market. As far as power generation is concerned, there is actually no shortage of electricity in China. But many coal-fired power projects are already very old, and according to the 13th five-year Plan, this part is slowly facing cuts.

We feel that distributed power generation is a direction in the future, but we also need to find a suitable entry point, because if we continue to use Southeast Asia, it will still be difficult in the domestic market, so the entry point we are looking for is the concept of turning waste into energy, so we used biogas for our first project.

Q: can you tell us something about the operation of the domestic biogas project?

A: in the domestic market, we are working with a relatively large local private enterprise. When they operate, they will produce a lot of biogas, and our power station is nearby, so we can use this part of biogas to generate electricity. In addition, we can also provide the steam they need for the whole production process. As a whole, it is a good project to convert waste into energy. At present, our electricity is only supplied to that cooperative enterprise.

Q: where is the company's container generator manufacturing base? Will the globalization strategy increase transportation costs?

A: before, we would do some production things, such as some parts, but now we basically only do assembly. We have an assembly plant in Shenzhen, which is assembled and transported to the area where the project is put into operation. At present, the transportation cost of the company has dropped.

Q: can you tell me more about the fund jointly established with CITIC Pacific? Such as future use.

A: Citic Pacific is already our shareholder. He now holds 8% of our shares. From this fund, the current size is about 160 million US dollars. We and CITIC Pacific contributed at 50:50. At present, it is mainly aimed at projects in Belt and Road Initiative's country, or the Chinese market. In addition, if the industry can help us in the main business, then we will consider it.