(Adds analyst comments, background, updates share activity)
By Jim Bai and Leonora Walet
BEIJING, July 21 China has launched an
unprecedented and long-awaited plan to offer subsidies for
utility-scale solar power projects, sparking a rally in shares
of Chinese solar panel makers on Tuesday.
Shares of top Chinese panel maker Suntech Power Holdings Co
Ltd STP.N soared 10 percent, Yingli Green Energy Holding Co
Ltd (YGE.N) climbed 14 percent, Trina Solar Ltd TSL.N rose 10
percent and JA Solar Holdings Co Ltd (JASO.O) was trading 7
Beijing's bid to boost the solar energy sector could draw
more than $10 billion in private funding for projects and put
China on track to become a leading market for solar equipment
in the next three years. [ID:nHKG193]
As the world's top greenhouse gas polluter, China is trying
to catch up in a global race to find alternatives to fossil
fuels, blamed for carbon emissions affecting the planet's
Expectations of such a move by China have underpinned a
rally in Chinese solar stocks for much of this year.
Several analysts warned on Tuesday, however, that the
subsidy program, although positive, would not lead to a
near-term pickup in solar panel demand. The solar industry has
suffered this year from a lack of available financing for
renewable energy projects due to the financial crisis.
"The China news, in our view, is providing good PR for
China-based companies," FBR Capital Markets analyst Mehdi
Hosseini wrote in a note to clients. "Yet, in our opinion, it
may be insufficient to offset the expected shortfall in 2009
earnings expectations. We simply do not believe that the full
extent of disappointing results is baked into stock prices."
The Ministry of Finance said the government will subsidize
50 percent of investment for solar power projects as well as
relevant power transmission and distribution systems that
connect to grid networks.
For independent photovoltaic power generating systems in
remote regions that have no power supply, the subsidy will rise
to 70 percent, the ministry said in an announcement on its web
Grid companies are required to buy all surplus electricity
output from solar power projects that generate primarily for
the developers' own needs, at similar rates to benchmark
on-grid tariffs set for coal-fired power generators.
To qualify for the subsidy, in addition to other
requirements, each project must have a generating capacity of
at least 300 kilowatt peak, while construction will have to be
completed in one year and operations will have to last for at
least 20 years.
The government plans to install more than 500 megawatts of
solar power pilot projects in two to three years -- a program
Oppenheimer & Co analyst Sam Dubinsky said in a client note was
"not big enough to offset industry oversupply."
The global economic recession and a pullback in subsidies
in Spain and Germany have led to an oversupply of solar panels
that has driven down prices and hurt panel makers' profits.
The total generating capacity in such pilot projects in
each province in principle should not exceed 20 megawatts, the
In March, the Finance Ministry said it would provide 20
yuan per watt peak (Wp) of subsidy for projects attached to
buildings that have capacity of more than 50 kilowatt peak,
which could cut the power generating cost by around half to
about 1 yuan per kilowatt-hour.
China is expected to raise its 2020 solar power generation
target more than fivefold to at least 10 GW. With incentives,
analysts expect over 2 GW in new solar capacity will be
installed as early as 2011, up from just over 100 MW in 2008.
JA Solar climbed 29 cents to $4.88 on Nasdaq, Yingli Green
Energy rose $1.58 to $12.98 on the New York Stock Exchange,
Trina Solar climbed $2.55 to $28.95 and Suntech closed $1.61
higher at $17.80 on the New York Stock Exchange.
(Additional reporting by Eadie Chen in Beijing, Nichola Groom
in Los Angeles, and Anna Driver in Houston; Editing by Ben Tan,
Derek Caney and Bernard Orr)