Kate Mackenzie Counting on increased Chinese solar subsidies

A Hong Kong-based company has made a $3.4bn acquisition of what is believed to be China’s biggest supplier of polysilicon for solar panels, and the key figure involved in the deal is counting on more government incentives for solar.

China has earmarked 350m RMB for green projects in its stimulus package, but details on exactly how much will go on truly green projects are difficult to pin down. China’s support for solar has so far been fairly limited; subsidies introduced in March only covered rooftop installations, and reports earlier this month of Chinese government introducing feed-in tariffs apparently only concerned one 10MW plant.

But as China’s deals to secure fossil fuel supplies show, it takes security and stability of its energy supplies very seriously, and its ambitious renewables targets fit into this goal. GCL-Poly’s chairman was confident that government support for solar is set to expand:

“While many types of resources on earth are being depleted every day, the supply of sunlight is endless and is not subject to price fluctuations,” said Mr Zhu.

“We expect the PRC government to initiate more incentives or subsidy programmes to encourage the adoption of solar power going forward.”

As FT Alphaville points out, it could make Western companies hoping to sell clean technology systems to China a little more nervous of ‘buy China’ edict and other claims of preference for local suppliers that have upset some foreign wind turbine manufacturers.

The deal is somewhat curious: GCL-Poly will buy Jiangsu Zhongeng, a producer of polysilicon and wafers, from Zhu Gongshan himself.

GCL-Poly will issue 10bn new shares at HK$2.2 each, representing a 12 per cent discount to the company’s last closing price. It will also issue US$350m in secured notes and pay Mr Zhu US$200m in cash.

Morgan Stanley, GCL’s second-biggest shareholder, will see its stake heavily diluted to 1.45 per cent from 15.72 per cent, while Zhu’s stake will rise to 56.17 per cent from 34.47 per cent the company said.

Related links:

GCL-Poly to buy solar assets for $3.4bn (FT, 23/06/09)
A nice, green day for GCL-Poly (FT Alphaville, 23/06/09)