GCL pins hopes on solar farms for profit

Maker of raw materials for solar panels moves downstream after slipping into the red

PUBLISHED : Monday, 25 March, 2013, 12:00am
UPDATED : Monday, 25 March, 2013, 3:37am


GCL-Poly Energy, the world's largest maker of raw materials for solar panels, plans to build 500 to 600 megawatts (MW) of solar farms overseas and on the mainland.

The firm aimed to start building up to 300MW of solar power plants this year, mainly in the United States and South Africa, chairman Zhu Gongshan said. It also plans to build as much as 300MW of plants on the mainland and has a project pipeline of more than 1,000MW of plants.

After selling 140MW of plants in the US last year, GCL targets to sell 300MW of plants this year.

"On the mainland, we will consider keeping the stakes in some of the more lucrative projects while selling others," Zhu said.

By expanding into downstream solar farm development and construction, GCL aims to partially offset the low profitability of production of polysilicon and solar wafers, which have suffered from sharp price falls amid oversupply.

On March 14, the firm posted a net loss of HK$3.52 billion for last year, against a profit of HK$4.27 billion in 2011, after booking HK$1.08 billion of write-downs on fixed assets, goodwill and other assets.

It sold 5.6 gigawatts (GW) of wafers last year and had 8GW of production capacity.

The industry downturn saw the bank creditors of Suntech Power, the mainland's largest maker of solar panels, last week ask a court to declare it bankrupt after it missed payment to bondholders. Zhu said the impact on GCL was limited as Suntech accounted for less than 5 per cent of its sales.

GCL's gross profit margin dived to 7.8 per cent from 33.2 per cent in 2011. The average selling price of wafers tumbled 53.7 per cent to 25 US cents per watt as production cost declined 41.7 per cent to also 25 US cents. The average price of polysilicon slumped 56.4 per cent to US$20.8 per kilogram while production cost fell 5.6 per cent to US$19.70 per kilogram.

With production of the materials barely profitable before accounting for fixed costs, the firm rolled out cost-saving measures, including cutting senior management's salary by 30 to 50 per cent. It also streamlined its management structure, Zhu said. He would not provide an estimate of cost savings for this year.

Beijing is expected to impose anti-subsidies and anti-dumping duties on polysilicon imports from the US as early as next month, and Zhu said polysilicon prices had risen from US$15 per kilogram in the fourth quarter of last year to US$18 in the first quarter of this year. This also helped lift wafer prices by 9 per cent, according to a BOC International research report.

Still, analysts are not optimistic that GCL will return to the black this year. It is projected to record an HK$86.4 million net loss for the year, before turning to HK$942 million of profit next year and a profit of HK$756 million in 2015, according to the average estimate of 28 analysts polled by Thomson Reuters.