| HONG KONG
HONG KONG Nov 8 China's loss-making solar panel
makers believe they may have found a way out of their nightmare
- by becoming one-stop renewable energy shops with their own
Manufacturers of solar panels, hit hard by the scaling back
of solar-power subsidies in Europe, are taking advantage of a
new package of government subsidies at home and diversifying
into solar-power generation.
In an apparent bid to prop up its ailing solar panel sector
that has been hit by overcapacity, as well as price and trade
wars, Beijing unveiled a plan in July to quadruple solar
generating capacity to 35 gigawatts (GW) by 2015. Construction
costs are estimated at $50 billion.
Spurred by a package of initiatives from tariffs to tax
breaks, and continued low panel prices due to global oversupply,
many of the country's panel makers are now looking to invest in
solar farms to help return to profitability, industry officials
"Definitely the trend is Chinese manufacturers will make
more downstream investment," said a senior official at Chinese
solar panel maker Canadian Solar. "Now the domestic
market seems to be particularly exciting."
For manufacturers, generating projects mean a predictable
source of demand for their panels. Manufacturers are still
mostly losing money, although panel shipment has improved this
year on orders from China, Japan and the United States.
Solar plant development is a more lucrative business. They
offer an annual gross return of around 10 percent, depending on
the proportion of debt financing and project location.
As solar panel prices tumbled following the 2008 global
financial crisis, many Chinese wafer, cell or modules makers,
like GCL Poly, Canadian Solar and Hareon ventured
into solar power generation projects at home or abroad to offset
Overseas rivals such as SunPower and First Solar
Inc, have also diversified into the higher-margin
business as solar panel prices remain weak.
SHUNFENG EXPANDS CAPACITY
China's panel makers, among the world's biggest producers,
were lured back home this year by the government's plans to
expand the solar power producing industry. The policies have
set off a scramble by the likes of state power producers China
Huaneng Group and China Merchants New Energy Group as well as
manufacturers like Shunfeng, Yingli Green and JA Solar
JA Solar said in August it planned to develop 300 MW of
generating projects in northern China's Hebei province, in what
its CEO Jin Baofang said was a major step "to increase the role
project development plays in our overall revenue mix".
Shunfeng Photovoltaic, a small Chinese solar cell
maker listed in Hong Kong, has said it will enter agreements to
develop 1,079 megawatts (MW) of solar power projects and have
600 MW in operation or under construction by the end of 2013.
To ramp up its own manufacturing capacity aimed at catering
for the expansion of its solar generation business, Shunfeng
last week announced a plan to purchase the main unit of Chinese
solar maker Suntech Power.
Shunfeng has offered 3 billion yuan ($492 million) to take
over bigger rival Wuxi Suntech, the bankrupt unit of Suntech
Power. Wuxi Suntech filed for bankruptcy protection in March,
after its parent defaulted on a $541 million convertible bond -
one of the biggest defaults by a Chinese company.
The deal could increase Shunfeng's solar cell capacity by
five times to over 2,000 MW.
Analysts warn of financial, regulatory and technical risks.
Previous investments in Chinese projects have been hurt by
issues like delays in subsidy payments and poor infrastructure.
Like their overseas peers, Chinese panel makers may
eventually spin off their power plants by listing them or
selling them to funds and insurers to take profit and alleviate
potential funding strains, analysts say. China's top 10 solar
makers have 100 billion yuan in debt, with an asset to debt
ratio above 70 percent on average, state media say.
"What we may see is an increased level of listings and
spin-offs into Hong Kong and elsewhere to try to build up some
sort of vehicles to house these type of assets," said an energy
banker at an international bank.