July 15 (Bloomberg) -- Chinese solar manufacturers rose as the world’s biggest maker of panels announced plans to boost the power it gets from the sun, a move that may help the industry cut a supply glut and increase profits.
China plans to add 10 gigawatts of solar power a year during the next three years, according to a statement from the State Council posted on the government’s website today. Both Xinyu-based LDK Solar Co. and Wuxi-based Suntech Power Holdings Co. rose more than 19 percent in New York trading.
The plan would boost China’s solar capacity fivefold to more than 35 gigawatts installed by 2015. Added demand will help alleviate industry oversupply that contributed to a 20 percent plunge in the average price of solar panels last year, according to data compiled by Bloomberg.
“I think they’re going to sustain these high levels of growth and soak up some of the excess capacity, maybe getting up to 8 to 9 gigawatts a year,” Angelo Zino, an analyst at Standard & Poor’s in New York, said today in an interview.
China will provide credit support to profitable photovoltaic manufacturers and encourage restructuring and overseas investment, according to the statement. It didn’t specify what period the government will consider to measure profitability.
“While the Chinese government is determined to boost the domestic market, it is not sufficient to eliminate oversupply,” said Wang Xiaoting, a Beijing-based analyst at Bloomberg New Energy Finance. “Panel prices will stay stable in 2013.”
Chinese manufacturers will follow in the footsteps of First Solar Inc. and SunPower Corp., who have pursued development of large-scale solar projects to reach higher margins, Zino said.
“If you’re going to buy China solar names, you buy them in the belief that they become more vertically integrated, turn themselves around and become more profitable,” he said. “I don’t think it eliminates oversupply, but it continues to shrink that demand-supply difference over time.”
China will also offer tax breaks to solar companies that acquire others, merge or reorganize their operations, the State Council said. The government has encouraged makers of polysilicon, the raw material used to make panels, to form partnerships or combine with “advanced chemical enterprises.”
Suntech’s American depositary receipts gained 17 percent to $1.35 at 1:34 p.m., the biggest intraday rise since May 21. LDK climbed 18 percent to $1.72. Both ADRs are equivalent to one ordinary share.
In Chinese trading, Risen Energy Co. jumped 10 percent, its daily limit and the most since Feb. 18, to 6.71 yuan in Shenzhen. Hareon Solar Technology Co. closed 4.4 percent higher at 6.47 yuan in Shanghai.
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