Hanergy Relied on Chinese Backing in Solar Firm's Meteoric Rise

Hanergy Thin Film Power Group Ltd., the Chinese solar maker under probe by Hong Kong regulators, rode a wave of government subsidies and support as it grew from a bit player into the world’s largest solar company by market value.

Hanergy’s website features several pictures of Chairman Li Hejun meeting with government officials, and Li himself has been a member of the Chinese legislature’s top advisory body since 2008. In that role, he encouraged the government to cultivate innovative industries like his own.

“This industry will be a bonanza that could generate more billionaires along with the government’s policy to promote a cleaner China,” Hu Xingdou, an economics professor at the Beijing Institute of Technology, said in a phone interview. “As the leadership presses to protect the environment and tackle smog, there could be more beneficial policies to draw people into the new energy industry.”

Clean energy is one of seven industries that the National Development and Reform Commission dubbed key sectors for financing and growth in coming years. In March, China raised its solar target for the year, promising to add more than double the capacity that the U.S. did in 2014.

In its midyear 2013 report, Hanergy Thin Film noted that the State Council, China’s Cabinet, had urged lenders to provide credit to solar companies “with profitable orders, advanced technology, independent intellectual property rights and large development potential.”

Company Shares

The company’s shares rose more than six-fold in the past year despite questions about its valuation and revenue before collapsing on May 20. Li owns at least 73 percent of Hanergy’s stock, which was worth about $15.3 billion before shares were suspended following the collapse.

Two of China’s biggest policy banks helped with Hanergy’s financing. China Development Bank extended a 30 billion yuan ($4.8 billion) line of credit to its parent, Hanergy Holding Group, in 2011. The Export-Import Bank of China gave a standby letter of credit to an $82 million loan from 11 banks to Hanergy in December.

“The government’s support of the photovoltaic industry shows they have faith in us, and that trust compels us to create a better way of life for people,” Li said in 2014. “The development of new industries will be impossible without the support of the government.”

Hanergy’s website includes write-ups of Li’s meetings with Heilongjiang province’s governor, Li Zhanshu, who promised policy support. Li went on to be named head of the Communist Party’s General Office, a position that essentially makes him President Xi Jinping’s right-hand man.

Thin Film

“Replacing crystalline silicon with thin film is inevitable,” Li Zhanshu said, according to Hanergy’s website. “Your plan is very good.”

Hanergy also got a pledge of support from Liu Qibao, now head of the Communist Party’s propaganda department. As party secretary of Sichuan province, Liu said in 2011 Sichuan would “give more support to the new-energy sector with favorable policies and financing.”

The investment arm of China’s foreign-exchange regulator, SAFE Investment Co., bought a stake worth billions of Hong Kong dollars in the company, people familiar with the matter said last month.

SAFE Shares

SAFE Investment made the move to add alternative-energy assets to its portfolio, the people said. Another motivation was Hanergy’s possible inclusion in Hong Kong’s benchmark Hang Seng Index, they said.

As well has his role on the legislature’s advisory body, Li is vice chairman of the All-China Federation of Industry and Commerce and chairman of the China New Energy Chamber of Commerce.

“Developing thin film is in accordance with national government strategy,” Zeng Shaojun, secretary general of the chamber, said in a phone interview. “In 2014, we saw lots of financial support for the sector. I personally have people from both policy and financial banks phoning me up just to offer support.”

— With assistance by Zheng Wu, Keith Zhai, and Sarah Chen

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