I See through Everything

In the reception room at headquarters.

Du Wenbin, the bespectacled general manager of the Nandian Shantou Branch, said with a smile, "General Manager Jiang, we at Southern Power are very optimistic about the Bamboo Mountain pumped-storage reservoir project you’ve applied for. We were wondering if we could explore an in-depth collaboration?"

"What kind of collaboration do you have in mind, General Manager Du?" Jiang Miao asked, wanting to hear his proposal.

"Our proposal is that once your company’s project is complete, you could lease a portion of the reservoir’s capacity to us for peak-shaving and valley-filling at a rate of 500 yuan per kilowatt per year," Du Wenbin explained, laying out the specifics of the potential collaboration.

Nearby, Han Zhendong leaned in and whispered to Jiang Miao, "General Manager Jiang, that’s the market rate. For example, the capacity price for the Changling Mountain pumped-storage power station is 499.96 yuan per kilowatt."

Perhaps fearing that Jiang Miao might refuse, Du Wenbin quickly added, "If your company needs electricity, our grid can offer you a discounted rate of just 0.4 yuan per kilowatt-hour."

"Round the clock?" Jiang Miao’s eyes brightened.

"Of course," Du Wenbin confirmed with a nod.

Jiang Miao considered this for a moment. "Our hydroelectric station has a designed capacity of only 250 megawatts. After accounting for our own usage, we can probably lease 150 megawatts to your company. However, that’s just the current situation. If we expand in the future, we might find that we need that capacity ourselves."

Du Wenbin was prepared for this concern. "I understand your worries, General Manager Jiang. How about this? We can include a clause to renegotiate the leased capacity every three years."

"Three years is too long. Let’s make it two. We’ll adjust it every two years."

"We can do that."

The two parties quickly reached a preliminary memorandum of understanding.

Under the agreement, Hailufeng Company would lease 150 megawatts of capacity from the Bamboo Mountain pumped-storage reservoir to the Nandian Shantou Branch at an annual rate of 500,000 yuan per megawatt.

This meant that, as long as the leased capacity remained unchanged, Hailufeng Company would earn 75 million yuan in annual rental income.

Of course, this collaboration was also profitable for Southern Power. After all, with an installed capacity of 150 megawatts, and subtracting about half a month for annual maintenance, the station could operate for 350 days a year. Generating power for 12 hours a day, it could produce 630 million kilowatt-hours.

Southern Power’s costs would be the 75 million yuan rental fee, plus the 840 million kWh of electricity needed to pump the water, in exchange for generating 630 million kWh.

On the surface, it looked as if Southern Power was taking a loss of 210 million kWh and 75 million yuan.

But that wasn’t the right way to calculate it.

This is because the on-grid tariff for solar and wind power sold to the grid by power generation companies is generally 0.2 to 0.3 yuan per kWh. Daytime solar power, in particular, sells for only about 0.19 yuan.

In other words, the 840 million kWh that Southern Power used for pumping would cost about 0.2 yuan per kWh, for a total of 168 million yuan. Adding the 75 million yuan rental fee, their total cost comes to 243 million yuan.

Meanwhile, the average electricity price in the Lingnan Region last year was 0.465 yuan per kWh. The power generated by a pumped-storage reservoir is typically sold at peak-hour prices, which is 0.55 yuan per kWh. At that rate, 630 million kWh is worth 363 million yuan.

After subtracting costs, the gross profit is 120 million yuan.

This was why Southern Power had rushed over, eager to collaborate, the moment they heard Hailufeng Company was building a pumped-storage reservoir.

The reason was simple: it was profitable.

After seeing off the people from Southern Power, Jiang Miao and Han Zhendong turned to discussing the general contracting price for the comprehensive Bamboo Mountain project.

A vice president from Jianfang Company came in person, but he was mainly there just to sign the contract. Han Zhendong was the one handling the finer details.

"General Manager Jiang, we’ve broken down the total project cost into four parts. The first part is the Bamboo Mountain pumped-storage reservoir. After our company’s review, the quote for this is 1.42 billion yuan."

"Go on," Jiang Miao said, flipping through the project cost estimate provided by Jianfang Company.

"The second part is the aquaculture farm at the Bamboo Mountain Reservoir. Per your company’s requirements, the total quote is 530 million yuan." Han Zhendong picked up a bottle of mineral water, took a long drink, and continued.

"The third part is the Baisha Fu land reclamation and aquaculture farm. This part will cost 1.56 billion yuan."

"The fourth part is the six-lane asphalt road from Jinting Bay to Magong Town, with a total length of 6.3 kilometers. The cost for this part is 252 million yuan."

"Added together, the four parts total 3.762 billion yuan."

More than ten minutes later, Jiang Miao closed the cost estimate report. "There are no issues. We’ll go with this price."

The vice president from Jianfang Company, Hu Guodong, who resembled a Maitreya Buddha, could barely suppress his grin. He quickly stood up. "Thank you for your trust, General Manager Jiang! Our company will absolutely complete all projects while guaranteeing both quality and quantity."

Jiang Miao reminded him with a placid smile, "The project schedule is 42 months, but you must ensure the quality. If there are any issues with the quality, it won’t be good for any of us."

"Please rest assured, General Manager Jiang. I’ll assign people to supervise twenty-four hours a day," Hu Guodong pledged, patting his chest.

Jiang Miao simply smiled without a word. ’He wasn’t about to take the man at his word. A third-party supervision firm was a must. Furthermore, he couldn’t let that firm handle the final acceptance inspection; he’d have to hire another, separate third party for that.’

After both parties signed the contract, the first 10% advance payment for the project was quickly transferred from the Shanmei City Rural Commercial Bank to Jianfang Company’s corporate account.

The payment came from the Shanmei City Rural Commercial Bank because Hailufeng Company had chosen to finance the project with a loan.

The total loan was for 5 billion yuan over a five-year term, with an annual interest rate of 3.4%.

Clearly, the Shanmei City Rural Commercial Bank had offered extremely favorable terms for this loan. Typically, the annual interest rate for such a construction loan would be 4.3% or higher.

Hailufeng Company received such a low interest rate because of its significant local influence and exceptional profitability.

With a week still left in September, the company had already generated 237 million yuan in revenue for the month, and it was projected to exceed 300 million.

Eel fry accounted for 90% of this revenue.

This was thanks to the recent upgrades to the indoor cultivation facilities at the Salt Town Farm, which had boosted the monthly production capacity of eel fry to 120 million.

The company’s other business segments were also gradually gaining momentum.