Xinzhong Energy Development announced on June 27 that it will invest approximately RMB 12 million of its own capital to deploy PV generation systems on the rooftops of facility buildings owned by Tongyu Communication. Both Xinzhong and Tongyu are based in Zhongshan, a city in China’s Guangdong Province. Xinzhong said that this project represents part of its efforts to develop its supply chain and expand its new energy business. The electricity generated by the rooftop PV system will be sold to Tongyu, while any excess will be send to the public grid. This announcement was first picked up by other Chinese news outlets.
Xinzhong also said that the purpose of this investment is threefold: to optimize its strategy for the new energy market, to create new opportunities for profit growth, and to improve its core competitiveness and overall operational capability. On the other hand, there are also three potential risks. First, the rooftop PV systems will be facing the extreme weather conditions that are prevalent in the region (e.g., heavy rain, typhoons, and floods). Second, there will be technical and safety issues that need to be addressed before and during the installation of PV systems. The third and probably the most serious potential risk has to do with changes in government policies related to taxation, preferential loan, and subsidy. Consistency in policy support and financial incentive over the long run is necessary in order to get the project off the ground.
Regarding the effect of this project on the performance of Xinzhong, the company said that the project is an important step forward in the exploration of the new energy market. Once completed, the project is expected to contribute to the company’s profitability and competitiveness. Furthermore, the project will add to the company’s overall operational strength and have a positive impact on the company’s long-term development. Additionally, the sales of renewable electricity to Tongyu will improve Xinzhong’s regular financial results.
Listed on China’s National Equities Exchange and Quotations, Xinzhong has been focusing on the trading of fossil fuels and has a network of filling stations. As for Tongyu, it manufactures networking components and devices such antennas, transceivers, etc.
