Saturday, January 19, 2008

Sun rises slowly on China's solar energy sector

Reuters Friday January 18 2008
By Sophie Taylor

SHENZHEN, China, Jan 18 (Reuters) - Solar power equipment makers will have to wait another half-decade or so before China, one of the world's fastest-growing but most polluted economies, becomes a major market for them alongside Europe.

But many are already preparing.

A bevy of U.S.-listed Chinese firms such as SunTech Power and foreign players such as Applied Materials Inc are starting to expand capacity in China, ploughing billions of dollars into factories across the country to capitalise on Beijing's intention to generate a tenth of its power from renewables by 2010.

Executives and analysts warn Beijing first needs to get its act together and come up with an over-arching blueprint for subsidies, tax incentives and other schemes -- as European governments have done -- to drive the sector.

Expansion itself is fraught with risk: this early in its development, some analysts say the sector is getting overcrowded and predict a shake-out benefiting big companies with access to the expensive raw material, polysilicon, and weeding out minor players.

"China is facing the same situation as Spain and Germany faced two years ago," said Bryan Li, chief financial officer of solar cell manufacturer Yingli Green Energy

"The Chinese government is deciding whether to give money to the solar sector. And investors will start to pop up only when the government sets up a clear incentive scheme," added Li.
Executives attending an industry conference in the southern city of Shenzhen this week said grandiose official targets on renewable energy must be backed up by clear-cut incentive schemes, which helped foster booming solar markets in western Europe, particularly Spain and Germany.

Once incentives bring down the price of solar products, the market will follow.

"The main problem right now is that prices are very high. If the government manages to make the price go down, the solar energy sector will expand significantly," said Fred Yeh, chief operating officer at Renesola, which makes silicon wafers for solar panels.


Chinese solar firms such as U.S.-listed SunTech Power, JA Solar Holdings and Trina Solar generate almost all their revenues overseas, with only a tiny proportion coming from the local market.

But they predict a boom before too long.

"We feel that in five years, the demand will be enormous," said Steven Chan, chief strategy officer at SunTech.

China wants renewable energy to make up a tenth of its total energy consumption by 2010. This is an ambitious target in a country where coal -- one of the dirtiest but most profitable types of power generation -- is king.

"Government authorities are facing an enormous amount of pressure to address the currently low returns from renewables projects. Even domestic companies complain the returns are too low and hope there will be some improvements with a new tariff system," Merrill Lynch said in a report.

Most companies seem in little doubt of the government's intentions to prop up the market and make it an attractive investment target. The question is when.


There are signs that more and more domestic and foreign investors are keen to pour money into Chinese renewable energy, despite lower returns compared with western markets at present.
Shares in China's biggest maker of windpower generating gear, Xinjiang Goldwind Science & Technology, soared 264 percent from their initial public offering price last year.

Solar stocks also posted massive gains in 2007 as concerns about climate change and soaring prices of fossil fuels boosted investor interest in renewable energy sources.

SunTech's shares gained more than 140 percent last year, and the firm boasts a market capitalisation of $8.7 billion, pipping Germany's Q-Cells' $8.2 billion. Solar shares have fallen along with global equities at the beginning of this year.

Rapid expansion may result in excess capacity after 2009, prompting an industry consolidation where small and marginal players may be eliminated, according to Lehman Brothers.

But every cloud has a silver lining: firms with more integrated supply chains are likely to survive, hence the likelihood of more supply deals similar to SunTech's $1.5 billion long-term contract with supplier Asia Silicon.

One thing remains clear -- once Beijing makes the decision to clean up its energy sector, change is inevitable.

"The government is now shutting down polluting companies," said Canadian Solar Inc's marketing manager Zhang Hanbing. "And when the government wants to close you down, it will close you down."

China's Yingli plans US plant, beats expansion goal

SHENZHEN, China, Jan 17 (Reuters) - China's Yingli Green Energy Holding Co Ltd plans to spend an initial $20-$30 million on a U.S. manufacturing plant to help it expand overseas sales, a senior executive said on Thursday.

The Miami, Florida plant will mainly manufacture solar modules, Chief Financial Officer Bryan Li said in an interview on the sidelines of a solar technology conference in the southern Chinese town of Shenzhen, near Hong Kong.

Li said the plant should be completed in the first half of next year. He said the $20-$30 million would cover the manufacturing equipment, land and other facilities.

The U.S. market, where the Chinese often struggle to compete on price, may make up 3-4 percent of revenue in 2008, Li said.

"We will start from a 30 megawatt capacity and ramp to 100 MW, and then wait and see the market development in the U.S. and decide whether to further expand," he said.

Yingli is involved in the entire value chain, from the manufacture of ingots, wafers, cells and modules to the final assembly and installation of complete solar energy systems. Focusing mainly on module production in the United States will help limit costs, Li added.

Based in Baoding, China, Yingli made its U.S. stock market debut last June and is now using the cash raised to increase capacity. It expects to reach overall capacity of 600 MW in 2009, a year ahead of its previous 2010 target, Li said.

Yingli reached capacity of 200 MW in mid-2007.

The solar energy industry is growing rapidly in China, where a number of firms, including Suntech Power, have listed on U.S. exchanges, tapping in to skyrocketing interest in renewable energy, but there is a risk now of oversupply.

Yingli's shares almost quadrupled from their listing last year, but this year have slid 31 percent to $26.76 at Wednesday's close.

China's solar energy companies are mainly export-driven, with Germany and Spain typically grabbing the largest part of revenue due to generous government support and incentives in the European countries.

Li expects the proportion of revenue coming from overseas in 2008 to amount to 97-98 percent of the total, slightly higher than 94 percent in January-September last year.

China's LDK Solar sees 08 profit up third

SHENZHEN, China, Jan 17 (Reuters) - Solar wafer maker LDK Solar Co Ltd expects its net profit to exceed $200 million this year, about a third higher than the company's forecast for net profit of more than $150 million in 2007, its chief financial officer said on Thursday.

The company, based in China's central province of Jiangxi, aims to quadruple its wafer production capacity to 1,600 megawatts by 2009 from 400 megawatts now to meet robust demand.

LDK is likely to overtake Norway's Renewable Energy Corporation ASA to become the world's largest wafer maker in terms of shipment in three years' time, Jack Lai, chief financial officer told Reuters on the sidelines of a solar technology conference in the southern city of Shenzhen, near Hong Kong.

"Our target is to become the largest and the most cost-effective solar wafer maker in the world," Lai said.

"We are growing faster than REC, although REC is growing very aggressively. There is a chance that we could exceed it in three years' time."

LDK has forecast wafer shipments of 510 megawatts to 530 megawatts in 2008, and 1,050 megawatts to 1,150 megawatts in 2009.

The company, which manufactures and sells solar wafers to be used to build panels and arrays, has been diversifying its customer base by signing a string of contracts with solar cell companies in Europe and the United States, including German's Q-Cells AG.

Sales from Chinese clients, such as Suntech Power and Solarfun Power Holdings, accounted for 30 percent of the company's total turnover in 2007 from 70 percent a year earlier.

Thanks to such contracts, LDK has essentially sold out all of its shipments in 2008 and 90 percent of shipment next year, Lai added.

"We aim to sell to the top 20 solar cell makers in the world."

The company's gross margin has been declining due to a tight supply environment for polysilicon, a key raw material which accounted for 80 percent of LDK's costs.

Polysilicon prices have shot up recently as solar cell and semiconductor companies scramble to secure supplies of it.

To better secure the raw material, LDK plans to spend $1.2 billion to build two polysilicon plants in Jiangxi, with a total capacity of 16,000 tonnes by 2009, Lai said.

Their combined polysilicon output is expected to be 5,000 to 7,000 tonnes in 2009.

Some analysts are worried that polysilicon prices will have eased by the time the plants start production, but Lai shrugged it off, saying there was no sign that the price will fall significantly in the near future.

The company has forecast gross margins between 26 percent to 31 percent in 2008, rising to 42 percent to 50 percent in 2009.

To match its ambitious expansion plan, LDK will boost its headcount by more than 50 percent to 10,000 by the end of this year from 6,500 now, he added.

LDK Solar Inks 10-Year Deal With Neo Solar Power For Supplying Multi Crystalline Solar Wafers

Thursday, January 17, 2008; Posted: 02:04 PM

(RTTNews) - Thursday, LDK Solar Co., Ltd. , a manufacturer of multi crystalline solar wafers, announced signing a ten-year contract to supply multi crystalline solar wafers to growing Taiwan-based Neo Solar Power Corp. or NSP.

As per the agreement, LDK will receive cash deposit from NSP and pricing will be fixed for the whole contract period. During the currency of the contract, LDK Solar will deliver about 500 MW multi crystalline solar wafers to NSP and its delivery would commence in 2009.

The Xinyu city, China-based company's Chairman and CEO, Xiaofeng Peng, stated, "We are very pleased to expand our partnership with NSP through this additional wafer supply contract, as a key supplier to NSP, LDK Solar is proud to contribute to their manufacturing of high-quality solar cells."

JA Solar Holdings signs supply agreement for M.SETEK

January 17, 2008: 08:43 AM EST

NEW YORK, Jan. 17, 2008 (Thomson Financial delivered by Newstex) -- JA Solar Holdings Co. (NASDAQ:JASO) Thursday said it had signed a polysilicon supply agreement with M.SETEK Co.Under the terms of the agreement, M.SETEK will supply 458 metric tons of polysilicon to JA in 2008.Financial terms of the agreement weren't disclosed.