On Monday, mainland China-listed Xianjing Goldwind Science & Technology said it was scrapping its potentially $1.2 billion float, blaming “the deterioration in market conditions and recent unexpected and excessive market volatility”.

Investors told Environmental Finance that Goldwind’s valuation – at 18-21 times projected 2011 earnings – was at a significant premium to the company’s global peers.

“We felt it was very expensive, at a time when a lot of growth is behind it,” said Simon Powell, head of sustainable research at brokerage CLSA Asia-Pacific Markets in Hong Kong. While the company is likely to continue to hit double-digit growth rates, “the market is going to slow down a bit” from levels of growth seen in 2007-09, he added.

The IPO was to finance international expansion, but Powell noted investor scepticism about the ability of Goldwind to win export orders, adding that “it’s becoming a buyers’ market [for turbines], both inside and outside China.”

Goldwind is China’s second largest turbine maker, but has almost no revenues from international sales.

“The challenge is reaching international quality standards,” said Treasa Ni Chonghaile, alternative energy portfolio manager at KBC Asset Management in Dublin. India’s Suzlon attempted a similar strategy five or six years ago, but ran into serious problems with its blades. “Wind developers at the moment are not really going with Chinese providers – ther e are still concerns about quality.”

Lee Clements, an investment manager at Impax in London, said that the combination of its majority ownership of Germany’s Vensys – with potentially breakthrough gearless wind turbine technology – and its access to cheap financing from Chinese banks could help it compete in Europe and the US, but likely not as quickly as its IPO advisors were predicting.

He added that, while the outlook for the wind sector in 2011 and 2012 is strong, investors are becoming increasingly cautious on market growth in 2010.

“It’s a high-quality name and we were impressed with its management,” said Charlie Thomas, manager of the Ecology fund at Jupiter Asset Management in London, who has recently met with the company. He shared concerns about valuation, especially given its internationalisation strategy.

“I wouldn’t be surprised if they came back later in the year,” he added.

“If volatility were to ease, the appetite for something like this would be a lot higher,” added Ni Chonghaile. “But they would have to come back with a much better price level to win investors’ trust.”

Clements at Impax noted that Goldwind’s A-Share listing, in Shenzen, tied the hands of its bankers, as they were limited in the discount they could offer to investors in Hong Kong. Clements said that the A-Share was trading around 24 times earnings.

He also said that the offering is competing for investors’ attention with the planned float of China Agricultural Bank, potentially the largest IPO ever, at up to $28 billion.

The failure of Goldwind’s float, and wider volatility in equity markets has raised questions over other flotations in the sector, with Goldwind competitor Sinovel planning a domestic IPO later this year.

However, Clements said that, although investors are becoming more selective in the renewable energy IPOs they back, the Asia-Pacific region – which has accounted for around 70% of clean-technology IPOs since the start of last year, according to Impax – is likely to generate further listings in the sector.

Mark Nicholls