Shunfeng to quadruple solar generating capacity after acquiring Wuxi Suntech

Following its acquisition of Wuxi Suntech last year, the mainland firmplans to quadruple its power generating capacity by building newfarms

PUBLISHED : Tuesday, 07 January, 2014, 3:53pm
UPDATED : Wednesday, 08 January, 2014, 2:30am

Shunfeng Photovoltaic International, a solar farm developer controlled by Cheng Kin-ming, aims to quadruple its solar power generating capacity this year after acquiring Wuxi Suntech, a bankrupt maker of solar panels.

Shunfeng chairman Zhang Yi said the company aimed to build 3 gigawatts of solar farms this year. It has 0.89GW of installed solar capacity connected to the power grid.

"We aim to add 3GW in each of this year, next year and 2016, so that by the end of 2016 we will have 10GW," Zhang said yesterday.

He estimated that it would cost between 24 billion yuan (HK$30.7 billion) and 27 billion yuan to add 9GW over the next three years.

Zhang said the company was confident of being able to finance the ambitious expansion, since it had been able to fund 80 per cent of the installation costs for past projects through bank loans and the rest using its own funds.

"We already have 1.3 billion yuan of lines of credit outside the mainland and over 1 billion yuan from mainland banks, while several other banks are soliciting to lend to us," he said.

Although the central government has ordered banks not to provide funds to sectors suffering from overcapacity, including generic solar panels, parts and raw materials manufacturing, it encourages them to finance clean energy projects such as wind and solar farms to cut the mainland's reliance on dirty-burning coal as air pollution in major cities worsens.

Zhang said he expected the projects to generate an annual rate of return of 10 to 15 per cent.

CLSA's head of sustainable research, Charles Yonts, said the 3GW annual target was "extremely ambitious for a relatively small private firm" because it was 25 per cent of the mainland's target of adding 12GW of new solar capacity this year.

Shunfeng also faces stiff competition from state-backed power majors on the mainland, which have close relationships with state banks and power grid operators.

One such rival is Hong Kong-listed Goldpoly New Energy, controlled by China Merchants Group, which has 0.53GW of grid-connected solar capacity and has signed framework agreements to acquire up to 7GW in the next five years.

Shunfeng won a 3 billion yuan bid in November to take over Wuxi Suntech, once the world's largest maker of solar panels, which failed in March to meet payment obligations to creditors amid sharp falls in panel prices and industry overcapacity.

Shunfeng has paid 500 million yuan to Wuxi Suntech's administrator, and Cheng has paid 2.5 billion yuan, which will be recovered from Shunfeng later. Cheng is known as a distressed assets buyer, having bought 21.6 per cent of Wuxi Suntech's New York-listed rival LDK Solar last year and 13.6 per cent of Hong Kong-listed shipbuilder China Rongsheng Heavy Industries last month.

Zhang said most of Wuxi Suntech's 2.5GW annual production capacity would be used for building Shunfeng's mainland solar farms this year, while 0.5 to 1GW would be exported to Europe.