Auhua Plans to Expand Production of Solar Water Heaters in China

Auhua Clean Energy Plc, a Chinese maker of solar powered water heating systems, plans to almost double capacity at its factories in Shandong Province.

The company will spend about 3 million pounds ($5 million) ramping up production to 150,000 units a year from about 90,000 units now, Raphael Tham, non-executive vice-chairman, said in an interview. It expects the expansion to be complete by the fourth quarter of this year or the first quarter of next, he said.

Auhua makes split solar powered-heating systems that can be installed on surfaces like exterior walls and balconies. They differ from unibody systems that can only go on flat roofs.

The company sold about 77,000 units last year and plans to increase that by about 20 percent in 2014 if the capacity boost goes ahead. Auhua, which mainly installs projects in Shandong, plans to deliver about 10 percent to neighbouring provinces.

“A lot of solar thermal legislation has been mandated from Beijing,” Tham said. “It’s not a subsidy approach but instead Beijing mandated this year that all new building developments must have solar water heating in order to get approvals, so the market is growing.”

Auhua is working with provinces to draw-up legislation for split-unit solar water heating of the kind that was completed in Shandong in August 2012, he said.

China, the main producer of fossil-fuel emissions, is encouraging use of solar to try to curb pollution. The country, also the largest investor in clean energy, in April passed the biggest changes to environmental protection laws in 25 years, including daily fines for polluters if they don’t clean up.

Beijing Smog

Beijing’s air quality in 2013 failed to meet government standards on 52 percent of the days because of pollution and smog, the Ministry of Environmental Protection said in March.

Auhua secured a convertible loan note of 10 million pounds in May and is looking to balance that with equity. It’s in talks with investors for strategic investments, Tham said.

“Some are pure financial investors and some are players that have market access and market access is the key component as this will help us to move out of China,” he said.

The company is working with Istidama Ltd. in Dubai to start selling products in the United Arab Emirates. The region seeks to get 7 percent of its energy from renewables by 2020.

Before it's here, it's on the Bloomberg Terminal.