1 Talking Point 5 Week in 60 Seconds 6 China Ink Week in China 7 China and the World 8 Energy and Resources 9 Banking and Finance 10 China Consumer 11 Rail and Infrastructure 12 Economy 15 June 2012 13 Society and Culture Issue 154 17 And Finally www.weekinchina.com 18 The Back Page Outlook overcast? m o c . n i e t s p e a t i n e b . w w w US slaps tariffs on China’s silicon panels as Hanergy acquires a German solar firm Brought to you by Week in China Talking Point 15 June 2012 Light warfare Unfazed by new US tariffs, Hanergy positions itself for solar dominance Panel discussion: Chinese firms are accused of dumping their solar products in America his week WiC introduces the But only a few days before Soli - Billing itself as China’s largest TBayerischer Klaps-Tanz as a bro’s rescue, another German non-state-owned enterprise in management tool. For those more solar manufacturer was in the clean power, Hanergy was estab - attuned to McKinsey terminology, mood for slapping. Its US sub - lished as a hydropower firm in this one translates from German as sidiary led a campaign against its 1994. Later it branched out into the Bavarian Slap Dance. We think Chinese rivals, claiming price wind farms before making a bigger this folk jig is particularly worthy dumping and unfair subsidies. move (not much more than two of study for the bosses of Chinese The US authorities agreed, im - years ago) into solar, with a series solar firms. posing punitive tariffs. Now it of new plants focusing on thin- Why? The dancing style seems to looks like Europe will be the next film panel production. sum up relations with their German battleground for a similar trade dis - The most recent facility broke counterparts. One moment they are pute and the fear is that the Chinese ground in Haikou on Hainan is - arm-in-arm with a friendly chap in response could be aggressive too. land this year and the company lederhosen, the next they’re on the That’s the problem with this par - says that its production there will receiving end of a stinging slap to ticular Bavarian jig: no dancers can take its thin-film photovoltaic (PV) the face. escape being slapped… capacity to around 2GW, making it That follows news last week that the world’s largest thin-film cell German solar firm Solibro was Have you heard of Hanergy? maker. P h o t o saved from financial disaster by a That’s a question also asked by peo - As such, Hanergy’s rise marks a S o u r little-known Chinese peer called ple in the industry – such is the com - wider trend in which Chinese firms c e : R e Hanergy. pany’s rapid emergence as a solar have raced to dominance in solar u t e r s Smiles all round, for that one. panel maker. panels – from just 1% of the world’s 1 Week in China Talking Point 15 June 2012 total in 2001 to 45% in 2010. So is Hanergy going to be hit by the US tariffs? The duties, which are likely to be confirmed in October, were imposed by the US Commerce Department in response to a complaint from seven firms operating in the US, led by Germany’s SolarWorld. Fortu - nately for Hanergy, its own opera - tions don’t fall within the scope of the complaint, which has targeted crystalline silicon solar cells. Hanergy’s own strategy is to build thin-film panels, which rely on amorphous silicon or another substrate technology called CIGS (copper, indium, gallium and sele - nium) rather than the more com - Best Overall Renminbi Products and monly used crystalline silicon. Services Provider Thin-film production is the less es - tablished solar technology and it has its detractors, especially when mainstream silicon prices are lower. But its fans say it will soon reach a similar sunlight-to-electricity conversion rate to silicon-based solar panels. Design-wise it has the advantage too that it can be inte - grated into roof coverings and it Best Bookrunner of Offshore Best Offshore weighs less. Importantly, Hanergy Renminbi Bonds Renminbi Bond House claims thin-film panels will cost a lot less to make in future. Most of the other Chinese solar manufacturers concentrate on sili - con panel production and many have been caught up in the US tar - iff net, with provisional tariffs of 31% slapped on 61 firms. Other companies deemed to have failed to respond to the US Commerce Department’s inquiries were hit Dim Sum Bond House Best Dim Sum of the Year Bond House with much bigger tariffs – in some cases equating to two and a half times their panel prices. The case was based on unfair cost advantages for the Chinese? Industry research suggests that the costs for Chinese firms are between HSBC operates in various jurisdictions through its affiliates, including, but not limited to, HSBC Bank plc, authorised and regulated by the Financial Services Authority, The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (USA) Inc., member of NYSE, FINRA and SIPC, and 20% and 30% lower than those for HSBC Bank USA, NA. 12-043 equivalent American production. 2 Week in China Talking Point 15 June 2012 But the complaint from the group So why buy a firm in high-cost Ger - generated by green producers at led by SolarWorld is that the Chinese many? higher prices. couldn’t afford to sell panels at According to Jason Chow, senior Struggling with budgetary condi - these levels without subsidies, es - vice-president of Hanergy Industrial tions, the government has been try - pecially preferential loans, cheap Photovoltaics Group, the prize is ing to reduce the payouts on these land as well as tax exemptions, in - Solibro’s thin-film technology – its feed-in tariffs. centives and rebates. expertise in CIGS, particularly – Another difference: solar mar - The Chinese response is that its where Hanergy sees scope to drive kets like Germany’s are now deep manufacturers have got prices production costs down a lot more into a painful period of consolida - down through savings that come in future. tion. But in China, the mood re - from more efficient production, es - After the completion of the ac - mains robust – unsustainably so, if pecially via scale and vertical inte - quisition, Solibro will increase its you ask some commentators. gration. They also bridle at the yearly capacity to 100 MW to supply Solar firms retort that they ex - accusations of industry subsidies, customers in Europe. But although pect to get another boost from re - pointing out that governments in Hanergy bosses say that Solibro’s newed stimulus spending in the Europe and North America have de - plant in Thalheim will stay open, sector this year. Of course, that voted billions of dollars to con - the goal is surely to replicate pro - would do little to convince Solar - sumer incentives and production duction at home in China, bringing World and its fellow consortium credits designed to get more con - costs down further. members that their complaints of sumers to switch to solar. That’s because China already has unfair competition are off the mark. too many solar panel producers, Meanwhile the Chinese firms see How about the Hanergy business which has led to the global glut in investment opportunities and even model? supply and falling prices. The sur - plan to buy struggling North Amer - Hanergy’s rapid rise has led to ques - vivors will be those who can get to ican and European panel makers. tions in the Chinese media too, es - lowest-cost production, or strike out In Germany’s case the first Chi - pecially about how it is funding its on their own with a more propri - nese bid for a struggling solar com - expansion. etary technology. pany was in January, when LDK The firm’s bosses say they rely on With its thin-film strategy, Han - Solar purchased Sunways. Now cash flows from their other busi - ergy is hoping it will be able to do Hanergy has made its move too. ness lines, most notably hy - both. “The industry is obviously in con - dropower. They have also been able The Solibro takeover also high - solidation. With more companies to access financing from the China lights some contrasting experi - filing for bankruptcy, that means Development Bank (CDB), starting ences in the industry. While mergers and acquisitions are neces - with a loan of Rmb4.3 billion ($674.8 Chinese panel production has risen, sary and will become the norm,” million) in 2010. A further Rmb30 there is still hardly any domestic Hanergy’s Chow told reporters. billion credit line was extended by market for the final product, with CDB in November last year. But it’s levels of local installation still low. But what happens next with the also likely that the local govern - Usha Haley and George Haley told anti-dumping action? ments hosting Hanergy’s new fac - the Financial Times last month that The tariffs look like being confirmed tories have been footing some of the country’s current solar manu - in the US in October, despite warn - the early bill. facturing capacity is 32 times ings from opponents that they will The problem, says Liu Wenping, greater than China’s domestic con - have little effect in boosting the vice president at Hongya Shidai In - sumption. business prospects of US-based solar vestment Advisory, is that working Of course, it doesn’t bode well manufacturers. out the terms of this financing is that China is exporting 95% of its That’s because the duties apply to tricky.