China: Capital markets re-embraces PV industry

Driven by both of the central government and the rising market, state-owned banks such as China Development Bank (CDB), Industrial & Commercial Bank of China (ICBC) and China Construction Bank (CCB) are starting to provide credit for new PV projects. Venture capital players and insurance funds are also seeking investment opportunities in the area. The development marks a sharp turnaround from just several months ago.

The Chinese PV industry has suffered eight seasons of recession since 2012. But from 2014, with more and more favorable policies set by Beijing and in view of the growing domestic PV market, especially the PV power station sector, the whole industry has gradually recovered.

New PV capacity reportedly reached 12 GW in 2014, of which 10 GW was from utility-scale ground-mounted power plants and 2 GW from distributed installations. In 2015, the PV market is expected to improve further, with an estimated growth rate of more than 10% compared to 2014. This means a huge demand for investment.

Sicheng Wang, researcher at the National Development and Reform Commission (NDRC) Energy Research Institute, estimated that by the end of 2020, annual PV installations will range between 10 GW and 15 GW, with an estimated yearly capital investment of $17 to $25 billion.

The Energy Efficiency Credit Guidelines, a government document recently published by the China Banking Regulatory Commission (CBRC), encourages banks to provide commercial loans to PV firms based on reasonable risk control and explores innovative ways to secure business guarantees.

In addition to traditional bank loans, other innovative means of investment are being considered, such as asset securitization, which pledges future earnings as collateral and allows the sale of securitized assets on the stock market for a rapid return of capital investment. This is highly welcomed by commercial banks due to a higher turnover rate of funds. But some industry observers say that asset securitization will not be easy for the distributed PV segment for a number of reasons, including the property rights PV plant owners and the price rate of generated electricity. Nevertheless, itÂ’s clear that all parties involved are seeking a clear and mature business model.