GCL-Poly aquires JiangsuZhongneng

Chinese power company GCL-Poly Energy Holdings said yesterday that it would pay $3.38 billion for a Jiangsu Province solar parts maker controlled by its chairman, in a move to tap into the country’s growing solar energy industry.

China is expected to raise its 2020 solar power generation target more than five-fold to at least 10 gigawatts, or 10 billion watts, enough to power 10 million homes.

The government has said that it will unveil more cash incentives for solar projects to boost China’s renewable energy industry and cut the nation’s carbon emissions.

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Chinese power company GCL-Poly Energy Holdings (HKG:3800) said today it plans to purchase Xuzhou, Jiangsu-based Jiangsu Zhongneng Polysilicon Technology Development for HK$26.3 billion (US$3.39 billion).

GCL-Poly plans to fund the acquisition of China's largest polysilicon and solar wafer maker through US$200 million in cash, selling 10 million new shares, and selling US$250 million of secured notes. GCL-Poly operates 18 co-generation plants for steam and electricity in China's Jiangsu and Zhejiang provinces, in addition to a wind farm and an incineration plant.

Shares of GCL-Poly were up 15.2 percent at the close of trading today to HK$2.88. The deal is expected to close in October.

The news comes as China's newly announced solar incentives are helping to boost a struggling industry.

Analysts estimated in March that China's 140 solar-grade crystalline silicon wafer makers were operating at half their capacity because of factory shutdowns (see Yingli, Longjitaih partner on new 600MW solar cell maker). And Morgan Stanley forecast that polysilicon prices will continue to decrease 60 percent to reach US$50 per kilogram, with wafers falling 35 percent to $0.85 and modules 30 percent to $1.85 (see LDK stock spikes despite dismal Morgan Stanley solar report).

But in late March, the Chinese Ministry of Finance revealed a nearly $3-per-watt subsidy for installed solar that is expected to halve the cost for installations 50 kilowatts or more (see New solar subsidies in China set to reduce installed cost by half).

Jiangsu Zhongneng said it expects to reach 18,000 metric tons of polysilicon production capacity in 2009, with plans to expand to 21,000 metric tons in 2010.