Trina Says Delays in China Solar Subsidy Payments Hurt Industry

  • Finance director says investment at risk as payments stall
  • Trina sees up to 800 megawatts of new solar farms this year

Trina Solar Ltd., the world’s biggest supplier of photovoltaic panels, said it’s suffering delays in subsidy payments from facilities it operates in China and that it’s concerned the issue will damage the industry.

China’s wind and solar developers are getting much less than they anticipated in the handouts because of complicated application procedures and a mismatch between incentive levels and surcharges slapped onto electricity bills to fund the subsidies. The issue, left to continue, could constrain the nation’s capacity to generate power from nonpolluting sources and eat into cash flows of developers.

"We’ve originally penciled in a 12-month delay for receiving the government subsidy, but now it seems uncertain whether we will get it within that time-frame," Teresa Tan, chief financial officer of Trina, said in an interview. “This is a negative factor that threatens the development of our industry.”

The comments amplify concerns that solar developers have been voicing about the unpaid subsidy bills. In August, the government’s National Center for Climate Change Strategy and International Cooperation estimated the shortfall may be 30 billion yuan ($4.7 billion) to 40 billion yuan.

Installations Grow

Tan also said she expects Trina to bring 800 megawatts of new solar plants into operation this year, an indicator that Trina for now is coping with the payment delays. Trina’s net income has been growing since the third quarter of 2013, when it halted two years of losses stemming from a global plunge in the cost of panels.

China has poured huge amounts of money into clean forms of power generation, vowing by 2030 to get 20 percent of its energy from renewables and nuclear. Investment in China’s renewables industry rose 15 percent from a year ago to almost $28 billion in the second quarter this year. That’s more than double level in the U.S., according to Bloomberg New Energy Finance.

China is targeting 100 gigawatts of solar power by 2020, triple the 33 gigawatts it had at the end of 2014, BNEF data shows. Both the central and local governments have promised various subsidies to help achieve the target, spurring companies including Trina and JinkoSolar Holding Co. to invest more in building their own power projects.

The move also helped panel producers to broaden sources of revenue and soak up some of the manufacturing capacity.

Trina operated about 200 megawatts of solar farms at the end of 2014 and saw another 700 to 800 megawatts coming on stream by the end of this year, Tan said.

Banker Views

The Changzhou-based company financed its power project investment through two rounds of fund raising in the U.S. capital market last year, Tan said. The delay in subsidy has already altered the U.S. investors’ perception of China-based assets and their valuations, making any further financing activity there nonviable, she said.

The company can still tap into loans or some other credit products such as financial leases as the world’s banking community has shown rekindled interests in the solar sector, Tan said.

“There’s a sharp turn in bankers’ attitude to our industry: from throwing money at everyone, to completely tighten their purse string, to now differentiating among players in this sector -- a welcoming trend no doubt,” Tan said.

Eventually the subsidy delay will be solved “because otherwise there won’t be any investment" in China’s solar power without payments, Tan said.

— With assistance by Feiwen Rong, and Feifei Shen

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