SinoFortone plants break new ground

Company is pioneering involvement in UK power stations with a biomass project

SinoFortone is venturing into unchartered waters as the first Chinese company to participate as a majority stakeholder in the construction of British power stations.

In October, the company signed a deal with British partner Orthios Eco Parks to invest 2 billion pounds ($2.9 billion; 2.7 billion euros) in two 299-megawatt combined heat and power stations that will generate electricity from imported plant waste.

The project will use former industrial sites in Anglesey and Port Talbot in Wales, turning them into eco-parks.

Since October, SinoFortone has signed agreements with the governments of 13 developing economies to take the same technology there after the UK.

"The UK has a lot of cutting-edge technology, as it is an innovative country, but projects of this scale could be hard to find funding for," says Peter Zhang, chief executive of SinoFortone.

"Although we are participating in the construction, we do not expect the majority of the profitability to come from the construction process, because a big portion of the construction work is actually subcontracted to local firms in the UK, and our part is to a large extent a learning process that allows us to gain experience in a Western market."

Orthios was founded 10 years ago by Sean McCormick, an architect, and Lewis LeVasseur, an engineer. SinoFortone is the UK arm of Liaoning Fortone, a private construction business in Shenyang.

The technology to be deployed is unproven, although Orthios, which originated the system, had received planning permission and approvals prior to SinoFortone joining the project.

Since SinoFortone came on board as majority equity partner, the project participants have signed an agreement with British energy firm Centrica to sell electricity from the new power station at a set price for the next 15 years, reducing investment risks significantly.

Zhang says the first of the two power stations, on the island of Anglesey, could start construction as early as next year, and his staff will be primarily in charge of the process. The electricity will light homes and excess heat will be used to warm indoor ponds growing seafood and hydroponic crops.

In 2014, a research report by law firm Pinsent Masons and think tank the Centre for Economics and Business Research showed that China has the potential to invest 105 billion pounds in UK infrastructure by 2025 across sectors including energy, property and transport. This figure is calculated by identifying the yawning gap between the UK's current infrastructure needs and the amount of investment the government has planned.

Danae Kyriakopoulou, a senior economist at the Centre for Economics and Business Research, says SinoFortone's investment in Wales is an important example of how China is increasingly using its resources to invest in high-innovation, knowledge-driven economies.

"Appropriately for an economy in the phase of industrialization, China has traditionally focused its investment on resource-rich economies that have in exchange provided it with the raw materials it needed to fuel its development," Kyriakopoulou says.

"However, China is now looking beyond the purely financial returns to its investment as it seeks to move up the ladder in the global chain of value-added."

Ian Wood, energy and infrastructure partner of law firm King & Wood Mallesons, says one promising factor for SinoFortone's investment is the UK government's policy support for biomass energy, which makes investments in this sector a "safe bet" with few changes to subsidy regimes.

Zhang says that SinoFortone's capital investment capability gave it an edge in securing the deal, but it also has two other major advantages - first, its construction efficiency and know-how, and second, the ability to bring the same project to other developing countries.

In the construction process, it uses modular construction methods. "Normally, for a power station like this that generates 299-mw of power, construction would take about two years. But as we can construct individual units of 60-mw power generation capacity in China, and bring them to the UK, we can complete the projects much quicker.

"The additional benefit of modular construction is that once each of the 60 mw units is ready, we can put it in place and use it to start generating power, rather than waiting for the whole project to be finished and start the power generation all at once," he says.

cecily.liu@chinadaily.com.cn

( China Daily Africa Weekly 01/22/2016 page30)