April 19, 2011 / 1:41 AM / 8 years ago

TPG bets on solar with $150 million China Comtec investment

HONG KONG (Reuters) - Private equity firm TPG Capital said on Tuesday it is investing up to $150 million in China’s Comtec Solar, betting on rising demand for renewable-energy technology.

Shanghai-based solar wafer maker Comtec said it will use the funds from TPG to raise output and upped its 2011 production forecast for wafers by 40 percent to meet strong demand.

Global solar power demand should grow 20 percent this year to 20 gigawatt, according to HSBC estimates, thanks to strong demand from Europe and rising orders from markets such as Canada and India.

Clean energy is also expected to see a renewed interest from countries eyeing alternatives to nuclear power after the crisis in Japan.

TPG will invest up to HK$1.17 billion ($150.4 million) to buy convertible bonds and warrants of Comtec in its first China-based solar investment.

The private equity firm would control a 21 percent stake in Comtec if all the bonds are converted and warrants exercised. The investment also gives TPG two board seats, said the firm’s managing partner for Asia, Stephen Peel, responding to a question at a press conference.

Peel, speaking on the sidelines of the same event, said the investment in Comtec was the result of 18 months of research and analysis in the renewable-energy sector.

TPG vice president Donald Huang said the firm had looked at around 50 wafer makers before investing in Comtec.

Peel said the firm was looking for more opportunities to invest in renewables, while Huang said TPG may look at assets higher up the value chain, including solar cell or module manufacturers.

MEETING DEMAND

Comtec expects wafer production to reach 1,400 MW by the end of this year or the first quarter of 2012, up from its previous forecast of 1,000 MW, Chief Executive Officer John Zhang said at the press conference.

“For the whole of this year, average selling prices of wafers will not fall more than 10 percent. From the start of this year until April, prices have been revised downwards once,” Zhang said.

He said the average selling price for wafers has fallen to $0.88 per watt so far this year from $0.9 per watt last year.

“We think for the whole year, prices will drop to around $0.8 per watt from $0.9 per watt last year. This is quite regular.”

Zhang said a drop in production costs would be more than the fall in average selling price, helping keep the solar firm’s gross profit margin relatively stable.

“Comtec’s production costs are likely to drop 15-20 percent this year,” said Zhang, also the firm’s chairman.

Comtec competes in wafer manufacturing with ReneSola and LDK Solar.

Shares in Comtec have surged about 89 percent in the past 12 months, outperforming its peers. They shares were suspended on Tuesday ahead of first-quarter earnings due to be released on the same day. The stock closed down 2.9 percent in Hong Kong on Monday.

($1 = 7.777 Hong Kong Dollars)

Additional reporting by Alison Lui and Elzio Barreto; Editing by Muralikumar Anantharaman and Vinu Pilakkott

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