China's solar growth facing funding shortfall, reports Reuters

Ambitious capacity expansion plans throughout the Chinese solar industry could spell financial trouble for many Chinese solar companies this year, reports Reuters.

Following the announcement by China’s National Energy Administration (NEA) that it has increased the country’s solar PV goal this year by 70% to 17.8 GW, a number of already heavily indebted solar companies are set to test the confidence of investors in the sector, which has suffered in the wake of a series of global defaults caused by the recent financial crisis.

As revealed last week by IHS, China currently dominates the global solar module industry, but many billions of dollars in investment are required in the coming years if the sector is to be able to maintain its stranglehold on the industry.

However, faced with the prospect of pouring more funds into many debt-laden private businesses, some state banks are wavering, reports Reuters, who claim that the experience of writing off billions of dollars via a series of plant closures and defaults in the past two years has left many fingers burnt.

According to an executive at Industrial and Commercial Bank of China (ICBC), support for the solar sector will only be “limited” this year, particularly as China looks to developed its distributed generation (DG) solar industry – a pivot that requires more small-scale solar projects that experts argue are less appealing to large investors. Small players in China can find it difficult to secure credit from banks, whereas major state firms usually have very few problems.

Despite these fears, China’s PV potential and ambitions could still be met, with Shunfeng CEO Eric Luo confidently telling pv magazine this week that the company is pouring $50 million into new Suntech technology enhancements such as PERC and HJT as it positions itself to take advantage of what is a rapidly changing industry.

A changing industry

This slow evolution of China’s solar PV industry is likely propel further growth and investment, and the signs are that the country’s leading solar companies have already made plans – like Shunfeng – to adapt to these new conditions.

Trina Solar recently teamed up with a trust unit of Ping An – an insurer – on a 1 GW solar PV project over the next three years, with Ping An providing bridge financing in exchange for a 49% share in the projects.

JinkoSolar, as well as Trina, have also announced plans to spin off their power plants for overseas listings to raise capital, and Goldman Sachs has bought $100 million in convertible bonds from GCL New Energy.

However, Yingli Green Energy’s recent announcement that it has enough money to pay off $200 million in medium-term notes has been met within the industry as a sign that the solar giant is seeking to allay fears as to its long-term financial health. Last week, the company eased its financial position somewhat with the sale of vast tracts of idle land that had remained undeveloped under Yingli’s ownership.