China National Invests $300 Million in Isofoton PV Venture

Isofoton Chief Executive Officer Angel Luis Serrano
Isofoton Chief Executive Officer Angel Luis Serrano. Source: Isofoton SA via Bloomberg

China National Offshore Oil Corp.’s battery unit invested $300 million in a venture with Spanish solar power company Isofoton SA to develop photovoltaic plants across Asia.

China National, the country’s biggest offshore energy explorer, will take a 51 percent stake in the Tianjin, China-based company through its Tianjin Lishen Battery Co. The entity will set up a 150-megawatt manufacturing plant and build power plants, said Isofoton Chief Executive Officer Angel Luis Serrano. Isofoton will own 49 percent and supply the technology.

Isofoton, which furnished solar panels for the Spanish prime minister’s official residence in 2007, is developing plants and shifting its manufacturing to China after subsidy cuts in 2009 gutted sales of its panel unit in Spain. Solar equipment makers are pinning their hopes on orders from China as Germany, the biggest market, reins in support for the industry.

“We need to be in China not as a way to cut costs as the market is understood now but because there will be a real market,” Serrano said at the company’s Madrid office Jan. 31. “It’s the right moment to be there.”

Photovoltaic equipment makers have seen margins collapse over the past year as falling costs cut panel prices in half, prompting 15 of the 17 members of Bloomberg Large Solar Index to post quarterly losses in their most recent earnings statements. The index lost as much as 76 percent last year from its annual peak in April.

Sales Slump

Cnooc Ltd., the oil company’s Hong Kong-listed subsidiary, rose 4.1 percent to HK$16.64 today after saying it plans to boost capital spending by as much as 63 percent this year to start new deepwater fields and acquire more assets.

Isofoton’s sales in 2011 were little changed from the 123 million euros the company reported in 2010, Serrano said. Profit probably will be less than 5 million euros, compared with 10 million euros in the previous year.

The deal provides “financing for our pipeline of 1,000 megawatts in projects,” Serrano said. “The technology will be supplied from either our plant in Malaga or the one we are planning in the U.S.”

Isofoton was founded in 1981 as a spinoff from a Madrid university and has developed projects in more than 60 countries. It’s working on a 100-megawatt panel plant in Ohio, for which it’s hiring about 130 employees.

“We want to increase manufacturing capacity and that will happen in the United States, China and Latin America rather than in our plant in Spain,” Serrano said. “We believe that 100 megawatts allows us to enter the U.S but it’s still small for the market available there.”

Potential for IPO

China may install 15 gigawatts of panels in the next three years, Serrano said, adding that Isofoton may build its own panel factory in the world’s second-biggest economy next year.

Isofoton’s sales slumped 83 percent and losses almost tripled to 226 million euros in 2009. It was taken over by Spanish company Affirma Energy Engineering & Technology SL and South Korea-based Toptec Co. Ltd. in 2010. Last year, Samsung Group said it will invest 50 million euros in Isofoton to manufacture solar cells in its plant in Malaga, southern Spain.

As part of its growth plans, Isofoton may either seek another investor or consider an initial public offering to raise funds before 2015, Serrano said.

Suntech Power Holdings Co. CEO Zhengrong Shi last week estimated China may add 4 gigawatts or more of panels in 2012, and Trina Solar Ltd. CEO Jifan Gao expects 5 gigawatts. That compares with about 2.2 gigawatts installed there in 2011.