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Chinese Dam Builder Expands Reach in Solar Modules

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Reposted from The New York Times


Keith Bradsher  |  January 9, 2013  |  The New York Times


Chinese Dam Builder Expands Reach in Solar Modules

HONG KONG — The solar panel industry may face severe overcapacity and collapsing prices this winter, but that has not stopped a Chinese hydroelectric dam-building company from buying two Western producers of an alternative solar technology.

Hanergy Holding Group, a privately held company based in Beijing, announced Wednesday that it had completed its acquisition of MiaSolé, a struggling, 100-employee manufacturer of thin-film solar modules based in Santa Clara, California.

The deal follows Hanergy’s completion in late September of its acquisition of the 400-employee thin-film solar unit of Q Cells, an insolvent German solar company. The two deals have allowed Hanergy to acquire at low cost an array of patents developed at the cost of hundreds of millions of dollars of venture capital investments.

Thin-film solar modules use more exotic materials than conventional solar panels, which are made from polycrystalline silicon and tend to be blue. Most thin-film modules are slightly less efficient at converting sunlight into electricity than conventional panels, but the thin-film versions are much lighter, which makes them easier to mount in locations that may not support the weight of conventional panels.

Supporters of thin-film technology also contend that it is newer and has the potential for considerable further efficiency gains that may not be possible for conventional panels, which have been heavily researched for decades.

Chinese regulators have begun discouraging the banks from making more large loans to the solar panel sector, after sometimes-frenzied investment over the past four years led to a 17-fold increase in Chinese solar manufacturing capacity. That led to a three-fourths drop in the price per watt and caused bankruptcy or severe production cuts at a dozen North American solar producers and a dozen European producers.

Li Hejun, the chairman of Hanergy, said at a news conference in Beijing that the company’s hydroelectric dams produce several hundred million dollars a year in free cash flow, so Hanergy can finance its own investments in solar, which already include six thin-film solar factories, plus three more under construction.

“Everyone knows about the overcapacity in solar energy industry in China, but for us industrial insiders, this overcapacity is but a relative one,” he said, adding that the overcapacity is “among those with no technology — for those who have technology, the situation is the opposite.”

John Carrington, the chief executive of MiaSolé, said in a telephone call that he believed there would still be demand for thin-film modules. “There is a lot of overcapacity, but I don’t know if there is overcapacity for really good, efficient technology.”

Hanergy actually reached its agreement to buy the Solibro subsidiary of Q Cells in June and signed its agreement to acquire MiaSolé in late September. After obtaining government approvals in China, Germany and the United States, Hanergy completed the Solibro deal at the end of September and the MiaSolé deal at the end of December, but delayed its news conference until this week in the hope that it would attract more attention, people involved in the deal said.

Hanergy reportedly agreed to pay just $30 million for MiaSolé, but Mr. Li said that this was only what Hanergy had repaid to MiaSolé’s creditors. Mr. Li did not indicate a price in his remarks in Chinese, but his translator unexpectedly added a phrase in English when translating his remarks, saying that the purchase price had been about one-tenth of the $1.2 billion that MiaSolé’s board initially sought for the company. The exact amount was complicated by Hanergy’s investments during the deal process to help keep MiaSolé running.

More than 90 companies looked at MiaSolé after the company realized early last year that it needed far more money than its investors were willing to provide if it wanted to continue developing its technology, but the company attracted few bidders. Its investors, mostly venture capital firms, including KPCB and Vantage Point, had put in more than $550 million.

The company has a single factory in California with an annual production capacity of 160 megawatts of thin-film panels. By comparison, coal-fired power plants tend to be built in 600-megawatt units and nuclear power plants in 1,000-megawatt units.

Mr. Li said he planned to keep MiaSolé’s manufacturing and research operations and staff in California, sending only two Chinese executives to join them. Hanergy also plans a larger factory in China using MiaSolé’s technology, he added.

Hanergy’s main business lies in building large hydroelectric dams, including a project in northern Myanmar that has been criticized by environmental groups, who object that it would flood a large area to export electricity to China.

The MiaSolé acquisition, though small in dollar terms, comes at an already politically sensitive time in Washington. It stands at the intersection of two hot-button issues: Chinese acquisitions in the United States and the Obama administration’s support for clean energy.

Mr. Carrington said MiaSolé had not taken any grants or loans from the U.S. Department of Energy. Republicans have excoriated the administration for having the Energy Department lend more than $500 million to Solyndra, another California solar power company that failed in August, 2011, as it was unable to compete with lavishly financed Chinese competitors.

Mr. Carrington said MiaSolé needed a strategic partner with the deep pockets that would allow it not just to manufacture solar modules but also to build and finance the solar power projects that would use them.

Thin-film technologies tend to rely on a variety of rare minerals, with the exact minerals varying from company to company. MiaSolé’s product relies on indium, which is mined in tin and is in short supply around the world right now.

Mr. Carrington said that, “based on MiaSolé’s current output, we are confident of the indium supply.” He declined to comment on whether enough indium was currently available to meet the greater needs if Hanergy opens a much larger factory.

Alan Crawley, the president of Hong Kong-based Pacific Ore, Metals and Chemicals, a trading company specializing in rare minerals, said that there were ample deposits of indium around the world that could be mined, but only if indium prices rise. “If the price doubled or tripled, there’d be plenty,” he said.

Patrick Zuo contributed research from Beijing.


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