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China Longyuan Power Group's sale of US$2.3 billion in shares to the public and its listing on the Hong Kong exchange could hardly have been better timed by what is the country's largest investor in wind power farms.

The government in Beijing announced on November 26, just days after Longyuan Power's listing plans were made public, that it aimed to boost the country's energy efficiency as part of its contribution to the fight against global warming. China pledged to cut carbon dioxide emissions per unit of gross domestic product by between 40% and 45% by 2020 compared with 2005 levels. With coal still playing a predominant part in the country's energy mix, that means an increased role for less-polluting means of energy production - such as wind power.

Longyuan Power listed on December 10th after closing its heavily oversubscribed book to investors on December 2nd. The retail tranche was more than 29 times oversubscribed.

China's willingness to raise the profile of alternative energy sources was already made clear in its 11th Five-Year Plan (2006-2010), where it committed to increase the use of alternative energy resources to 20% of total energy production by 2020, from 7.86% in 2006.

China now ranks fourth in the world for total wind power capacity, and installed capacity may jump tenfold to 100 gigawatts by 2020, from 10GW next year, according to a 2008 plan by the National Energy Administration.

At the core of this growth, the government in 2006 started to establish wind farms in the far-west region of Xinjiang, neighboring Gansu, northern Inner Mongolia, Hebei province around Beijing, and coastal Jiangsu province, with the aim of doubling installed capacity for four consecutive years. As a result, the country has already exceeded its 10GW target for 2010, reaching 12.2GW of installed capacity.

The national power grid has been mandated since 2006 to purchase renewable energy at a subsidized rate, with a premium that is added on electricity produced by coal-fired power plants put in a fund that reached 3 billion yuan (US$440 million) by 2007 to support the subsidies for utility companies to buy renewable energy.

Then in April 2008, the Ministry of Finance said it would give tax refunds for companies importing key components for wind turbines larger than 2.5MW. In August last year, the ministry gave a further boost to the wind-power industry by saying all majority Chinese-owned domestic manufacturers would be awarded up to $88 per kW for their first 50 wind turbines certified and connected to the electricity grid.

The potentially vast domestic market and government subsidies have helped Chinese manufacturers become global leaders, with the country likely to become the world's largest producer of wind turbines by the end of the year, reaching a market value of over $6 billion.

So far, China's domestic wind turbine market is primarily composed of foreign companies and joint ventures, but wholly domestic manufacturers are on the rise, led by Xinjiang Goldwind Science & Technology, Dongfang Electric Corp and unlisted Sinovel Wind Co. The largest foreign manufacturers in China are American GE, Danish Vestas, Spanish Gamesa and India's Suzlon.

As for the latest alternative energy market darling, Longyuan Power, cornerstone institutional investors pledging a stake included China Investment Corp (CIC), the nation's sovereign wealth fund, itself a unit of state-owned China Guodian Corp, was rumored to have purchased $400 million worth of the $2.3 billion initial share sale, thereby ensuring control of Longyuan remains firmly in the hands of the Chinese government, whatever the interest of overseas investors.