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How Do Overseas Photovoltaic Projects Avoid Risk?
- Jul 25, 2018 -

Due to the adjustment of photovoltaic policy, domestic PV enterprises have taken overseas markets as a "breakthrough" direction. IHS Markit, an international analysis agency, recently lowered its global PV load forecast from 113GW to 105GW in 2018. The increase in global demand will make up for the decline in the demand for the Chinese market. This year, the volume of installation will continue to increase by more than 10% in 2017.

Against this background, as an important mode of photovoltaic navigation overseas, how does EPC project avoid industrial risks?

Reduce the threshold of "sea"

In recent years, both traditional power and new energy, the proportion of EPC project general contracting mode (namely design, procurement and construction contract mode) has increased gradually in the total amount of foreign contracted projects. Compared with the traditional construction contract mode, the project income is higher, but the risk coefficient is greater, and the contractor needs to be managed through management. Strength, technology, financing strength, implementation experience and other aspects of enhancement and enhancement can effectively implement projects and achieve the established project revenue targets.

It is understood that China's external EPC project has experienced the evolution of various modes, such as labor export, EPC, EPC+F, and integration of investment and construction. "The overseas EPC market has changed very much in recent years, the conditions of cooperation are becoming more and more harsh, the contract price is getting lower and the risk is increasing. At the same time, the model of EPC itself is constantly innovating, and the ecological change of business is very big." Sunshine era lawyer Song Yuxiang told reporters.

In terms of laws and regulations, the biggest change in China's foreign contracting engineering industry in 2017 is the cancellation of relevant control at the national level. The enterprises want to contract for foreign projects, and there is no qualification and threshold requirements in China.

"This is a double-edged sword. It is the gospel for the enterprises that have not been qualified for the general contract, but it also leads to the "going out" of small and medium-sized enterprises, more and more mixed, the competition is more intense, and it may also lead to vicious competition. Song Yuxiang analysis, most of the overseas market projects to take financing models, followed by the financing banks, the EPC contractor will be reviewed, the threshold is cancelled, although the industry has a certain impact on the ecology, but not to cause subversive consequences.

In addition, there is a good good. With the promotion of the decentralization of power, the Ministry of Commerce modified the management method of bidding for foreign contracted projects (Protocol), the quasi system changed into the record system, and the relevant authority was put down to the provincial business department.

"After the" 531 "new deal, half a year is the stage of the demand for photovoltaic industry. The global market demand caused by cost reduction has increased by at least 5%. Ceng Yi, the head of Trina Solar's China component "product +" value group, believes that projects that could not be done before in India, Latin America and other regions can now be put on the agenda. Also, analysts believe that once the photovoltaic costs continue to decline, many markets in Europe, Latin America, the United States, Southeast Asia and the United Arab Emirates can also increase production.

New trends in EPC

"EPC is now showing a new trend in capital pulling projects." A few years ago, Song Yuxiang said, the contractor was simply contracting, and now the trend is "to make money, to make money first", and now most of the major projects are capital operations, including the first funding, the Asian and African countries, which usually require Chinese contractors to finance their banks from China, Pakistan, Bangladesh, and phenanthrene. Similar circumstances have occurred in EPC's project. The owner asked to start the project before closing the financing.

In another case, the EPC project was invested by equity participation, and the contractor shares 10% to 20%. There are many such projects in Egypt. "Because the PV project has 25 years warranty period, the EPC contractor is required to be responsible for operation and maintenance at the same time." Song Yuxiang added that the contractor also assumes that operation and maintenance are the trend of PV projects.

"Financial leasing has been used more frequently in overseas wind power projects. In recent years, it has been gradually used to develop overseas photovoltaic projects."  Song Yuxiang pointed out that, in addition to this, more and more overseas acquisitions, "for overseas investment industry, overseas acquisition is not a new trading model, but for EPC enterprises, it is a new model, not necessarily short-term income, but to expand the platform, the layout of the project."

Increasing market risk

In the interview process, the reporter learned that the overseas EPC market environment is increasingly fierce competition, even reached the place of white hot. This competition is reflected in the EPC contract price, the IPP electricity price is getting lower and the time limit is getting shorter and shorter.

In the last two years, a more typical case was 2016. The Dubai power and water supply agency and the Abu Dhabi Future Energy Company signed a power purchase agreement for the third phase of the Dubai light park 800MW project, with a transaction price of 0.299 cents / kWh, setting the world's lowest global price record.  In 2017, the lowest bid price of 300MW photovoltaic project in northern Saudi Arabia was about 0.12 yuan / kWh, a new low.

"If the IPP price is low, the cost will be transferred to the contractor and the component enterprise, and the profit space will be lower and lower. Some contractors make projects for performance, not even profits. A person who declined to be named told reporters that this was a "very horrible thing".

It is understood that risk management and control capability is another weakness of photovoltaic EPC enterprises. The trading mode and transaction documents of overseas investment projects are complex, and some EPC enterprises have high debt rate, lack of financing ability and lack of overseas investment and financing talents, which leads to the structural risk of the photovoltaic EPC enterprises facing the transformation of foreign investment.