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IN DEPTH: China PV's most powerful

A few years ago, all it took to become a PV manufacturer in China was a factory somewhere — regardless of its original purpose — and a bit of pluck.

Assembling modules from pre-made cells was not exactly rocket science, labour was cheap, and the subsidy-fuelled European market was on fire. And with Beijing singling out solar energy as a critical Chinese industry of the future, hundreds upon hundreds of companies piled into the sector. Telling them apart — to say nothing of their wares — became a nearly impossible task.

But the Chinese solar industry is growing up fast. Two years of blood-curdling losses, the result of overzealous capacity expansion, will do that to a sector. The market downturn has already gone some way towards rationalising the industry, but the Chinese government wants to speed things up. It would like to see a slimmed-down list of bulked-up national champions, with the financial firepower, the technological vigour and the global brand recognition to lead the world into the coming era of solar energy. Few would bet against its success in this endeavour.

Beijing has chosen three tools for shaking out the domestic losers. Firstly, it will impose a variety of new requirements on PV manufacturers — including adequate production scale, technological sophistication and annual R&D spend — that blatantly favour the most established players. Secondly, it will lean on banks to dry up credit for the bottom feeders. Finally, it will use the recent EU settlement — which caps the amount of modules that can be exported from China into Europe each year — to block smaller manufacturers from accessing what remains the world’s most important PV market. This intra-China consolidation should be largely complete by 2015, if not sooner, says Zhun Ma, a Shanghai-based analyst for Lux Research. Perhaps a dozen or so companies will be left.

What will remain is a list of companies whose importance to the worldwide solar industry can scarcely be overstated. These companies will be the global face of China’s renewables sector — an industry whose success or failure bears profound implications for the way China approaches the climate debate. Chinese wind giants like Goldwind have only just started breaking into foreign markets, and their success overseas is anything but guaranteed.

By contrast, China’s leading PV manufacturers have come to dominate the global market with hardly any domestic market to speak of. Already, a Chinese company is the leading module supplier in seven of the world’s ten largest PV markets, according to NPD Solarbuzz. (US-based First Solar remains the top dog in its home market and India, while Sharp retains the lead in Japan.) Beijing’s very recent move to begin fuelling domestic PV installations — China will be the world’s largest market this year for the first time — will only strengthen their hand.

The PV industry remains in a violent state of flux, and one from which even opaque China is not immune. All major Chinese solar companies lost money last year. As the insolvency earlier this year of erstwhile Chinese PV leader Suntech demonstrates, there is no such thing as a sure-fire bet in the solar industry.

Yet whatever the ultimate list of industry winners looks like, expect it to be crowded with Chinese companies.

In that spirit, Recharge has drawn up its list of the ten most durable, powerful PV companies in China today. These are the manufacturers most likely to emerge as winners in the Beijing-manipulated consolidation process, the companies most likely to remain at the top of the global sector for decades to come — shaping not only the PV world, but, increasingly, the energy industry as a whole.

Yingli Green Energy

HQ | Baoding, Hebei province

CEO | Liansheng Miao

Listed | New York Stock Exchange (NYSE) in 2007

2012 revenue | $1.83bn

2012 net result | Loss of $492m

Since the implosion of Suntech, Yingli is the Chinese PV industry’s new 800-pound gorilla. Yingli has taken the art of vertically integrated production to a new level, with its 2.45GW of in-house capacity — from ingots through modules — giving it unprecedented scope for technological evolution and quality control. In Photon’s 2012 annual yield test — which measures how close a module comes to its promised output — Yingli modules placed fifth out of hundreds of entrants, the highest among Chinese suppliers.

Rather than tightening its belt and focusing on profitability, Yingli has used the industry downturn to continue expanding its market share, and its balance sheet reflects this. Yingli’s forecasted 3.3GW of shipments this year is by far the largest among Chinese module makers. But so was its $52m second-quarter net loss. Yingli’s current ratio — a measurement of a company’s ability to pay its short-term debts — is worryingly high, even by the PV industry’s standards.

But with industry leaders set to return to profitability in the next quarter or so, Yingli is clearly in pole position. It is the top module supplier to Europe, China and Latin America, underscoring its grip on present and future markets, and its share of the global market grew to 8.1% in the first half of 2013, up from 7.3% last year. The “strategic co-operation” it unveiled this spring with GCL-Poly will bear future fruit, as will its relationships with China’s State Grid, the kingmaker in China’s renewables sector, and China Power Investment Corporation, the country’s largest solar developer.

Whether founded or unfounded, recent rumours suggesting Yingli is considering acquiring Suntech merely underscore the reality that the global PV industry is watching to see what Yingli does next, rather than the other way round.

Trina Solar

HQ | Changzhou,

Jiangsu province

CEO | Jifan Gao

Listed | NYSE in 2006

2012 revenue | $1.3bn

2012 net result | Loss of $267m

If there is any company that keeps Yingli awake at night, surely it is Trina. Trina has nearly the same production capacity as its larger rival for cells and modules, although only half as much for ingots and wafers (a blessing or a curse, depending on market conditions). What it lacks in scale, however, Trina makes up with its relative financial health. With less than half of the short-term debt of Yingli, it is no wonder that Trina boasts the highest market valuation of any Chinese PV manufacturer.

 Trina has dipped its toe into project development, with a 50MW array under way in Gansu province. But unlike PV companies that seem compelled to constantly try new things, Trina appears more content to quietly and reliably do what it does best — supply high-end modules at enormous volumes to the world’s choosiest customers. Its recent 345MW order for Sempra’s Copper Mountain 3 mega-array in Nevada, and its number-one position in the promising Australian market, highlight what a ferocious competitor it is. There is no such thing as a sure-fire bet in the solar business. But Trina is about as close as it gets.

Canadian

Solar

HQ | Guelph, Ontario

CEO | Shawn Qu

Listed | Nasdaq in 2006

2012 revenue | $1.3bn

2012 net result | $195m

Given its name, and its headquarters near Toronto, Canadian Solar may seem an odd fit for this list. But with more than 90% of its manufacturing in China, and the strong support of government there, Canadian Solar has all the advantages of other major Chinese PV manufacturers — while skirting a few of the disadvantages.

Personifying Canadian Solar’s dual national identity is chief executive Xiaohua “Shawn” Qu, who immigrated to Canada for university. Qu’s fluency in English, his affability and his willingness to engage with journalists and investors, make him stand out among Chinese solar CEOs.

With a module capacity on a par with Yingli and Trina (albeit with a smaller upstream footprint), Canadian Solar would have been near the top of this list no matter what. Yet where the company truly distinguishes itself is in project development. Since entering that game via Ontario’s 2010 Green Energy Act, Canadian Solar has steadily built a 780MW pipeline across the high-margin markets of the US, Japan and Canada, an achievement other Chinese PV companies can only dream of.

Two recent announcements — the completion of 30MW under China’s Golden Sun programme, and a manufacturing partnership with Samsung in Canada — underscore the unique breadth of Canadian Solar’s business.

With the scale and cost structure of a Chinese manufacturer, and the connections and political cover it needs as a developer in the West, it is playing in a league of its own.

GCL-Poly

HQ | Shanghai/Hong Kong

CEO | Zhu Gong Shan

Listed | Hong Kong in 2007

2012 revenue | $2.9bn

2012 net result | Loss of $436m

Because GCL-Poly does not make modules, hardly any of its sales come from overseas — which means it is perhaps the least-noticed major Chinese PV manufacturer beyond China’s borders. Yet there is a case to be made that GCL-Poly is in fact China’s most powerful solar company. And that power is primed to grow in line with the country’s expanding domestic PV market.

GCL-Poly is the world’s largest producer of polysilicon and PV wafers, with a head-snapping 65,000 tonnes and 8GW of capacity, respectively. Uniquely among China’s solar manufacturers, it also owns more than a dozen mostly coal-fired power plants.

Last year, nearly half of GCL’s revenues came from wafer sales, and less than 10% from polysilicon. But that picture may change due to China’s recent decision to impose anti-dumping tariffs on US and Korean polysilicon — a decision surely made with GCL-Poly’s interests in mind. China’s polysilicon sector, like its module sector, is consolidating sharply, and the handful of companies left standing — including GCL and Daqo New Energy — are in line for a windfall.

Then there is the matter of GCL-Poly’s immense project-development arm. With a pipeline of more than 1GW, deep experience operating power plants, and a partial ownership in Hong Kong-listed solar operator Goldpoly, GCL will play a large role in helping to meet China’s medium-term solar targets — a fact acknowledged by the 5bn-yuan ($817m) loan it was given by the China Development Bank this year.

JA Solar

HQ | Shanghai

CEO | Baofang Jin

Listed | Nasdaq in 2007

2012 revenue | $1.1bn

2012 net result | Loss of $270m

JA got its start as a specialist in PV cells, and was the world’s largest cell maker last year, with a nearly 6% market share. Not content to excel in just one segment of the value chain, however, JA’s push downstream into modules has been one of the industry’s big stories of the past few years.

Unsurprisingly, JA’s cells are among the best in the business. And cells are far more complicated to produce than modules, meaning that JA has rapidly transformed into a fierce module competitor. Last year, it leapfrogged onto the global top ten for the first time, and it intends to sell nearly 2GW this year, soaking up its entire output of cells.

JA’s balance sheet is among the healthiest in China’s solar industry, and its projects arm is beginning to throw its weight around — recently announcing plans to develop 300MW in Hebei province. JA appears to have scarcely put a foot wrong during its development, and has all the markings of a heavyweight with staying power.

JinkoSolar

HQ | Shangrao, Jiangxi province

CEO | Kangping Chen

Listed | NYSE in 2010

2012 revenue | $770m

2012 net result | Loss of $248m

Jinko can sell modules just about anywhere, and the momentum behind the company is palpable. No stone is left unturned by its sales team, whether in its home market, mature markets in the West, or emerging markets few rivals have even considered. This aggressive sales and marketing effort is fitting for one of China’s youngest solar superstars.

With 1.5GW of integrated capacity — ingot to module — Jinko is one of the smallest producers on this list, at least for now. But the competitiveness of its kit is not in question, as hammered home by the 600MW strategic co-operation it announced earlier this year with mega-developer China Three Gorges New Energy and the recent 274MW order it received from Spain’s Acciona for projects in South Africa and Australia.

In a sector where many companies are riddled with vast holdings and political obligations, Jinko’s relative nimbleness and lack of historical baggage count for a lot. And unlike its larger rivals, Jinko returned to profitability in the second quarter of 2013 — a tremendous achievement for the company, and a turning point for China’s solar industry.

ReneSola

HQ | Jiashan, Zheijiang province

CEO | Xianshou Li

Listed | NYSE in 2008

2012 revenue | $969m

2012 net result | Loss of $243m

A few years back, ReneSola was a wafer specialist in an increasingly vertically integrated business — and even then it was merely China’s third-largest wafer player (after GCL-Poly and LDK Solar). ReneSola’s two-pronged response was to balloon its polysilicon production and diversify downstream into modules. The first decision, at least, has not proved the utter disaster it has for LDK, while the second has proved a game-changer for ReneSola, and a critical differentiator with GCL-Poly.

Like JA Solar, another latecomer to modules, ReneSola has significant ground to make up. But that’s exactly what it’s been doing. ReneSola still sells a significant share of its wafers to third parties (including many of its module rivals). But, for the first time ever, it sold more modules than wafers during the second quarter of 2013 — a watershed for the company, and it was the world’s fastest-growing module supplier in the first half of the year. Its inverter business — another differentiator — also looks promising.

If polysilicon prices rise dramatically in response to the anti-dumping tariffs, then ReneSola’s polysilicon unit may yet prove a long-term asset. But at the moment the division is uncompetitive and weighing on its margins. Also, as the only tier-one PV player in Zheijiang province, industry sources suggest it may be under pressure to acquire smaller, neighbouring companies. It is hard to see the benefits in doing so.

H

anwha SolarOne

HQ | Qidong, Jiangsu province

CEO | Ki-Joon Hong

Listed | Nasdaq in 2006

2012 revenue | $590.4m

2012 net result | Loss of $251m

On its own Solarfun — as SolarOne used to be known — would probably not have made this list. Indeed, with 830MW of shipments last year, the company is the smallest module supplier to have done so. But its destiny was transformed in 2010 when South Korean industrial giant Hanwha acquired a controlling stake (and changed its name). As part of the Hanwha Group — the world’s third-largest PV manufacturer after its acquisition last year of Germany’s Q-Cells — SolarOne is impossible to ignore.

Its executive suite may be packed out with Koreans these days, but its 1.5GW of module capacity lies entirely within China. Much like Canadian Solar, SolarOne benefits from its association with two different countries — a fact underscored by the unlikely combination of the Bank of Beijing and the Korea Development Bank on its list of major lenders.

Hanwha has kept its cards close to its chest regarding things like a potential integration of SolarOne and Q-Cells. What the final contours of SolarOne will look like is anyone’s guess. SolarOne’s competitors quietly worry that the backing of Hanwha puts it in a far stronger position to play the long game required by PV industry dynamics than they themselves are in. And they are almost certainly right.

The Hanergy Group

HQ | Beijing

CEO | Li Hejun

Listed | No

2012 revenue | Unknown

2012 net result | Unknown

Two years ago, many in the renewables business had never heard of the Hanergy Group. (Their mistake, considering it is China’s largest privately owned generator of renewable energy, with 6GW of hydropower capacity.) That began to change in 2011 when it acquired a controlling stake in Hong Kong-listed Apollo Solar, one of China’s leading PV production-equipment suppliers, since renamed Hanergy Solar.

Meanwhile, the Hanergy Group quietly amassed 3GW of in-house module production capacity. Then, last summer, Hanergy acquired Q-Cells’ thin-film subsidiary Solibro — and it continued its buying spree this year by snapping up US producers MiaSolé and Global Solar Energy. All three utilise copper-indium-gallium-selenide (CIGS) technology, widely seen as the thin-film make-up with the best long-term potential to compete with traditional crystalline-silicon PV.

As a private enterprise — a rarity in China’s PV sector — the full extent of the Hanergy Group’s finances is unknown. The jury is still out on the long-term competitiveness of CIGS, and most of Hanergy Solar’s revenues at present come from kitting out its parent company’s factories — not exactly a recipe for long-term success. But thanks to steady revenues from its hydro assets, it is fair to assume that the Hanergy Group has more time and options than its pure-play solar rivals.

And with a fleet of module factories, majority ownership of Hanergy Solar and one of the largest pipelines of PV projects in China, the sheer scope of its solar empire is truly awesome. Add to that its acquisition in May of ascendant UK system-integrator Engensa, and it is clear that Hanergy is one of the most exciting and unpredictable players in China’s solar sector today.

The Chint Group

HQ | Shanghai

CEO | Cunhui Nan

Listed | No

2012 revenue | Unknown

2012 net result | Unknown

On the basis of Astronergy alone, its wholly owned module production company, Chint would not make this list. But add Astronergy to Chint’s in-house PV inverter business — recently named one of the two most competitive in China (the other being Sungrow) — and the Chint package begins to look compelling.

Chint’s self-designation as “the General Electric of China” may be a bit overheated. But it is one of China’s largest private enterprises, and its range of businesses — from power-transmission kit to automotive parts — gives it much thicker legs than most Chinese PV manufacturers.

As PV becomes increasingly integrated into China’s broader power system, the opportunity for integration and cross-pollination among Chint’s various divisions will be significant, giving it avenues for research and growth that China’s typical PV manufacturers simply don’t have.

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