Xinao founder bets 10b yuan on solar energy
Wang Yusuo, founder of liquefied natural gas (LNG) supplier Xinao Gas Holdings, is betting 10 billion yuan on solar energy equipment production, making further forays into this fledgling and costly renewable energy segment.
Mr Wang is capitalising on the state policy of promoting sustainable energy sources. So far, 1.4 billion yuan in private funds have been spent on building a factory in Langfang, Hebei province.
It is expected to start producing thin film solar cells by the end of the year, said the chairman of the Hong Kong-listed, mainland-piped LNG supplier.
The state policy not only boosts demand for equipment on wind and solar power, but also lets investors achieve a viable return through incentives including preferential loans and a system whereby electricity distributors are obligated to buy renewable energy rather than energy derived from fossil fuel, Mr Wang said.
'The return [of my venture] is very high, partly because government subsidies and sweeteners help offset the greater economics of the investments,' he said.
His plan is to expand the venture into a 10 billion yuan investment within five years, with factories to be set up in the group's Langfang headquarters and other cities in Hebei.
Funding would come mainly from a listing on the Hong Kong stock exchange and low-interest loans from China Development Bank, a policy lender, he said.
'We will seek a listing for funding of the venture, probably in Hong Kong in three years,' he said. 'This will differentiate the venture from Xinao, which focuses on piped-gas supply.'
For clientele, Mr Wang targets electricity producers on the back of Beijing's call for Chinese independent power producers to increase green energy investments.
Beijing also wants to increase the nation's solar generation capacity from the existing 80 megawatts to 300 MW by 2010 and 1,800 MW by 2020. Last year, industry policy planner the National Development and Reform Commission granted about 260 million yuan in subsidies to renewable energy power projects, largely related to wind and solar energy.
Although solar power is known as the costliest form of renewable energy - estimated to be four to five times more expensive than power generated from fossil fuels - JP Morgan analyst Carrie Liu projected that the installed capacity of solar power would grow by at least 25 per cent each year in the next three to five years as a result of government support and growing awareness.
Nevertheless, she expects a shakeout in two or three years, given that a certain number of manufacturers have jumped on the solar energy bandwagon.
Meanwhile, a research report from Credit Suisse recently pointed out that competition in solar equipment was intensifying due to the possible entry of large semiconductor manufacturers.