Friday, November 30, 2012

China Development Bank Renews Solar Support, Journal Says

China Development Bank Corp. plans to renew a pledge of support for 12 solar companies, an indication the government is pressing for consolidation within the industry that’s suffering from excess capacity.
The state-owned lender is preparing to recommend stronger financial support for Suntech Power Holdings Co. (STP), Trina Solar Ltd. (TSL) and Yingli Solar Co., the official China Securities Journal reported, citing an unidentified person. It also named Hareon Solar Technology Co. (600401), Shanghai Chaori Solar Energy Science & Technology Co. (002506) and Sungrow Power Supply Co. (300274), without disclosing the other six companies in line for priority funding.

The disclosure may point to a lever the government will use to ensure the companies that dominate the global solar industry survive a 44 percent plunge in cell prices in the past year that has gutted margins across the industry. Neither the bank nor the companies named confirmed the report.

“This is important to the industry that only 12 selected companies can receive state support, indicating the government’s intention to speed up industry consolidation,” said Jessica Ng, an industry analyst at Bloomberg New Energy Finance in Beijing. “It seems like Suntech, Trina, and Yingli will survive from this with, while LDK may be struggling to get on the list.”

Solar Support

China Development Bank has extended $43.2 billion in credit lines to 12 Chinese solar companies since 2010, according to data compiled by New Energy Finance. That helped ensure Suntech, Trina and Yingli became three of the world’s top five solar module makers, pushing out German and Japanese companies that formerly led the industry.

Not included in today’s report were LDK Solar Co. Ltd. (LDK), JinkoSolar Holding Co. Ltd. (JKS) and JA Solar Holdings Co. Ltd. (JASO), which also rank among the top 10.

The report may indicate how the government will support recommendations from the State Council in July that set a target for raising the country’s solar installations to 50 gigawatts in 2020 from about 3.6 gigawatts now.

The Securities Journal, founded by the state-run Xinhua News Agency, said China Development Bank will soon submit the recommendations to the National Development and Reform Commission for approval.

Control on Loans

Lending to the rest of the industry will be strictly controlled and the bank won’t provide financing solely for the expansion of manufacturing capacity, the newspaper said.

As state policies encourage consolidation among China’s solar companies, the bank will support acquisitions of smaller firms by larger ones, the Securities Journal said.

Two calls to Feng Qihua, a spokeswoman for China Development Bank in Beijing, went unanswered. Suntech’s spokesman Rory Macpherson declined to comment. Two calls and an e-mail to Yingli officials weren’t returned.

The solar industry is grappling with an oversupply after Suntech and its rivals boosted production capacity, sending the cost of panels tumbling. The average Chinese module price has plunged about 35 percent to 77 cents a watt from a year earlier, according to Bloomberg New Energy Finance data.

The European Union on Sept. 6 opened a probe into whether Chinese manufacturers of solar modules sell products at a loss, following a U.S. decision earlier this year to hit the Chinese industry with anti-dumping duties as high as 250 percent.


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