China Longyuan Power's August Output Surge: A Glimmer of Optimism Amid Earnings Slumps?

China Longyuan Power Group’s recent operational performance has sparked cautious optimism among investors. In August 2025, the company reported a consolidated power generation output of 5.3 million MWh, marking a 5.6% increase from the previous month and a 2.4% year-on-year rise in July, driven by robust growth in wind and photovoltaic (PV) power generation [1]. Wind power output grew by 6.38%, while PV generation surged by 105.92% year-on-year [3]. These figures highlight the company’s ability to capitalize on renewable energy expansion, particularly in solar, which has become a critical growth driver.

However, this operational momentum contrasts sharply with the company’s financial underperformance. For the first half of 2025, China Longyuan Power reported a 13.8% year-on-year decline in net profit and a 12.1% drop in profit before taxation [4]. Q2 2025 results fared no better, with revenue falling 18.6% to RMB15,657 million and net profit attributable to equity holders declining 14.4% to RMB3,519 million [1]. This divergence between output growth and earnings contraction raises critical questions about the sustainability of the company’s business model and its ability to translate operational success into financial health.

Operational Strengths: Renewable Expansion and Capacity Growth

China Longyuan Power’s operational resilience stems from its aggressive expansion in renewables. By August 2025, the company had increased its installed capacity by 13.8% year-on-year to 41,149.45 MW, with wind power capacity rising 9.6% to 30,443.52 MW and PV capacity surging 65.5% to 10,699.83 MW [2]. This growth is further underscored by the 71.37% year-on-year increase in PV power generation in Q2 2025 [1]. Such progress aligns with global trends in renewable energy adoption, where solar and wind are projected to dominate future energy markets [5].

The company’s diversification into innovative projects, such as the world’s first deep-sea floating wind energy project integrated with marine ranching, also signals a forward-looking strategy [4]. These initiatives could position Longyuan to benefit from long-term industry tailwinds, even as near-term financial pressures persist.

Financial Pressures: Debt, Tariffs, and Curtailment

Despite operational gains, China Longyuan Power faces significant financial headwinds. The company’s net debt stands at CN¥126.5 billion, with a debt-to-EBITDA ratio of 5.1, reflecting a heavy reliance on leverage [2]. This debt burden is exacerbated by declining revenue and profit margins. For instance, the average on-grid wind power tariff fell to RMB0.43/kWh in 2025, down RMB0.007/kWh from the previous year, while the average wind power market pricing system (MPS) tariff dropped 9.4% year-on-year [2]. These pricing pressures, coupled with rising wind power curtailment rates (4.4% in 2025) and declining utilization hours (585 hours, down 55 hours year-on-year), have eroded profitability [2].

Policy shifts further complicate the outlook. The transition to a fully market-based pricing mechanism for renewables, effective June 2025, has increased price volatility and intensified competition [2]. In response, Longyuan reduced its 2025 installation target from 7,480.7 MW to 5,000 MW, signaling a strategic recalibration to manage financial risks amid uncertain market conditions.

Broader Industry Context and Strategic Implications

China Longyuan Power’s challenges mirror broader trends in the renewable energy sector. JPMorgan analysts note that second-quarter 2025 performances in China’s clean energy sector were “divergent,” influenced by project timing and high base effects [6]. While solar and wind capacity additions are accelerating globally, companies like Longyuan must navigate near-term pain points, including high capital expenditures, regulatory shifts, and margin compression.

For investors, the key question is whether Longyuan’s operational momentum can offset its financial vulnerabilities. The company’s focus on optimizing asset efficiency, expanding digital platforms, and pursuing high-quality development suggests a recognition of these challenges [1]. However, with net debt-to-equity ratios remaining elevated at 196.1% in 2024 (projected to decrease to 174.8% by 2027) [2], patience may be required to see strategic initiatives bear fruit.

Conclusion: A Delicate Balance

China Longyuan Power’s August output surge offers a glimmer of optimism, particularly in its solar segment, which is growing at an extraordinary pace. Yet, the company’s earnings slump underscores the fragility of its financial position amid rising costs, pricing pressures, and policy-driven volatility. While the renewable energy sector’s long-term prospects remain robust, investors must weigh the risks of near-term underperformance against the potential for future growth. For Longyuan, the path forward hinges on its ability to balance aggressive capacity expansion with prudent debt management and operational efficiency—a delicate act that will define its success in the years ahead.

Source:
[1] China Longyuan Power Reports Revenue Decline Amid Growth [https://www.theglobeandmail.com/investing/markets/stocks/CLPXF/pressreleases/34290864/china-longyuan-power-reports-revenue-decline-amid-growth/]
[2] China Longyuan Power (916 HK) 1Q25 Results [https://www.minichart.com.sg/2025/04/30/china-longyuan-power-916-hk-1q25-results-cautious-outlook-amid-rising-curtailment-policy-shifts-and-earnings-forecasts-1/]
[3] China Longyuan Power Group Corporation Limited Reports Consolidated Power Generation Results for the Month and Year to Date Ended July 31, 2025 [https://www.marketscreener.com/news/china-longyuan-power-group-corporation-limited-reports-consolidated-power-generation-results-for-the-ce7c5ed3d98dff25]
[4] China Longyuan Power Group says power generation for August on a consol basis amounted to 5.3 million MWh [https://www.marketscreener.com/news/china-longyuan-power-group-says-power-generation-for-august-on-a-consol-basis-amounted-to-5-3-millio-ce7d59ded189f02d]
[5] Power Generation Industry KPIs for Investment Professionals [https://visiblealpha.com/utilities/power-generation/power-generation-kpis/]
[6] Broker Focus: JPMorgan's Report on China's Clean Energy Sector [https://news.futunn.com/en/post/59319286/broker-focus-jpmorgan-the-performance-of-china-s-clean-energy]