China Renesola eyes expansion in brighter market

BEIJING (Reuters) - New York-listed Chinese solar wafer maker Renesola will raise capacity next year after a "surprise" market upturn in 2010, a senior company executive told Reuters on Thursday.

"The year 2010 has caught everybody by surprise -- a very good year for solar products," said Julia Xu, the company's chief financial officer.

The company, based in Jiangsu province on China's prosperous eastern coast, would continue to focus on supplying polysilicon wafers to downstream photovoltaic panel producers but would also seek to expand its own solar module output.

"It is fairly certain we will expand in 2011," Xu said.

"Wafers will always be the core focus. Having said that we will probably see our module capacity becoming a quarter to a third of our wafer capacity, and upstream polysilicon will be maintained at 3,000 tonnes."

Renesola suffered operating losses of $90.6 million last year, but fortunes have improved in 2010 after a recovery in demand and prices as well as the offloading of expensive inventories of polysilicon, a raw material amounting to more than half of its total costs.

The company, scheduled to release its second-quarter results in August, said this month that it supplied about 250-260 megawatts of solar wafer capacity from April to June, 20 megawatts higher than anticipated, and full-year output was predicted to reach about 600-650 megawatts.

Net revenues for the second quarter were expected to come in at around $245 million to $255 million.

STAYING OVERSEAS

Renesola will continue to focus primarily on overseas markets, with Chinese demand remaining slow while the government tries to figure out how to encourage growth in the sector.

"It is predominantly an export driven business. China's solar industry is poised to grow very significantly but at the moment the domestic market is still fairly insignificant," Xu said.

Chinese wind power capacity has soared to 16 gigawatts, doubling for three consecutive years, but total solar installations remain negligible at less than 1 gigawatt.

"Solar was too expensive -- it is purely because of pricing. I think when prices continue to drop there is a very big incentive for the government to launch subsidy programmes."

"The government is obviously taking smaller steps for a couple of reasons: first it wants to gather enough data to understand how a solar farm works financially and operationally. Second, it might still think there is room for solar prices to come down and wants to launch subsidies when it makes the most sense."

She said China first needs to ensure it has the grid capacity to handle renewable energy sources and avoid the sort of accelerated capacity build-up that has left many of the country's wind farms unconnected and incapable of delivering electricity to consumers.

Xu said Renesola was not especially concerned by falling solar power subsidies in Europe, one of its major markets, saying it had already done its utmost to cut costs.

"Falling subsidies are a very valid concern and one of the reasons why solar companies have experienced derating from the capital markets," she said.

"But the reality is the demand for solar projects is determined by the returns that developers can make, and there are two variables to that: one is government subsidies and the other is how low the price can go."

(Editing by Muralikumar Anantharaman)