Solar Surges on Reports China Increasing Subsidy Support
Chinese solar manufacturers including Yingli Green Energy Holdings Co. (YGE) and Trina Solar Ltd. (TSL) jumped after three separate reports indicated the government is adding financial support for an industry struggling with falling prices.
China allocated 13 billion yuan ($2 billion) in subsidies for domestic solar companies this year, the Xinhua News Agency reported. The Shanghai Securities News said officials may double their target for solar installations. The Ministry of Science and Technology confirmed subsidies for more than 100 developers including Trina and Yingli.
The moves throw a lifeline to the biggest solar-panel manufacturers and their suppliers after a glut of capacity depressed prices and profits worldwide. In recent weeks, the government also extended loans to the industry through China Development Bank Corp. and allowed local authorities to extend support.
Yingli rose 18 percent to $2.14 at the close in New York, the most since Feb. 9. Trina increased 10 percent, and JinkoSolar Holding Co. climbed 19 percent. GCL-Poly Energy Holdings Ltd. (3800), which makes polysilicon that’s the main raw material for solar panels, gained 11 percent in Hong Kong.
“The government is providing subsidies to save the industry,” Wang Xiaoting, an industry analyst for Bloomberg New Energy Finance in Beijing, said in an interview today.
Even with the government support, falling prices are driving down margins and manufacturers aren’t making profits, said Aaron Chew, an analyst at Maxim Group LLC in New York.
“The stocks are generally oversold and given up for dead. When you get positive news like this they rip,” Chew said in an interview today.
Subsidies may help boost shipment volumes as the manufacturers struggle in an “extremely price-competitive” market, said Ben Schuman, an analyst at Pacific Crest Securities LLC in Portland.
“We think it is extremely unlikely that anyone can come close to making money at that level,” Schuman said in an interview. “I don’t see this as evidence that the government has ‘picked winners’ or that the industry is rationalizing,” he said.
China, the world’s biggest maker of solar modules, chose developers with a combined 2.8 gigawatts of capacity to receive subsidies, according to a statement from the Ministry of Science today.
The payouts, under the Golden Sun program, are the second round announced this year. Generators in Jiangsu, a coastal province, will gain the most from the aid as 374 megawatts of capacity, including developments by China’s biggest module maker by market value Hareon Solar Technology Co. (600401), will be located there.
The government may pay at least 15.4 billion yuan for the projects if they are completed by the end of June, Wang said.
China began offering financial assistance for projects under Golden Sun for utility-scale projects in 2009.
The total capacity chosen in 2012, including 1.7 gigawatts selected in the first round, is seven times more than previous years, said Lian Rui, a Beijing-based analyst at research company NPD Solarbuzz.
“China uses the program to offer cash sooner to developers, rather than preferential power prices, to boost installations,” Lian said.
Separately, Xinhua said China allocated a total of 13 billion yuan this year from central government funds for domestic solar installations.
The funds will be spent on solar power demonstration projects with 5.2 gigawatts of capacity, Xinhua said, citing an unidentified official from the Ministry of Finance. China will provide an incentive of 5.5 yuan a watt for projects whose developers will consume the power for their own use.
The subsidies will be raised to 18 yuan a watt for residential systems and 25 yuan a watt for independent photovoltaic power plants, the government-owned news agency said.
China started offering the subsidies since 2009 to bolster the use of solar power. The nation chose 4.5 gigawatts of solar projects eligible for subsidies under the Golden Sun program this year.
The government will focus on selecting large-scale projects and big companies for demonstration projects, Xinhua reported. Two phone calls to the ministry’s Beijing-based press office went unanswered.
Yesterday, the Shanghai Securities News reported the government may boost its target for expanding solar capacity to 40 gigawatts between 2011 and 2015 from 21 gigawatts previously. It cited unidentified industry officials.
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