Reuters: Global Markets: Solar stocks shine as China extends support for battered industry

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Solar stocks shine as China extends support for battered industry Dec 12th 2012, 16:20 Wed Dec 12, 2012 11:20am EST (Reuters) - Chinese solar stocks shot up on Wednesday after reports indicated that the Asian country had taken steps to further its support for the ailing industry. Shares of Trina Solar Ltd (TSL.N) and Yingli Green Energy Holding Co (YGE.N) surged more than 20 percent in morning trading, while those of JA Solar Holdings Co Ltd (JASO.O) were up 14 percent. Shares of JinkoSolar Holding Co Ltd (JKS.N) and Suntech Power Holdings Co Ltd (STP.N) rose about 10 percent. The stock movement is a knee-jerk reaction to the news that China is extending its support for its domestic solar industry, said Aaron Chew, analyst at Maxim Group. China has allocated 13 billion yuan ($2.1 billion) to boost its domestic solar market this year, state news agency Xinhua reported on Wednesday. (link.reuters.com/ryg64t) "That amount will basically be used to target the development of 5 gigawatts (GW) of solar domestically," said Chew, who is already expecting the Chinese market to grow to 7 GW next year. The disclosure about the hefty investment comes a day after the news agency said China may almost double its upper limit for solar power capacity to 40 gigawatts (GW) by 2015, quoting an industry insider. (link.reuters.com/tyg64t) China in September raised its 2015 target for solar power capacity by 40 percent to about 21 GW, the third rise in just over a year. "This (the 40 GW installation capacity) would put China firmly in the league of being No.1 for solar demand," said Chew. These measures come on top of a number of incentives already launched by China, whose state-run banks have extended billions of dollars of credit to solar companies. The handouts have sparked a European Commission investigation into illegal state subsidies. JinkoSolar earlier this month said its Swiss unit will get up to $1 billion over five years from China Development Bank CHDB.UL to fund solar projects outside China. China's export-focused solar panel industry has been battered by paltry demand in top consumer Europe and recently imposed import duties in the United States. They are also suffering from margin erosion due to a sharp drop in panel prices. "Just because you sell more megawatts at zero percent margins doesn't mean you'll make more money. China will be able to absorb more capacity next year, but it doesn't change the economics of solar," Maxim Group's Chew said. Debt loads have mounted at most Chinese solar companies with cash flows continuing to dwindle. LDK Solar Co Ltd (LDK.N) on Wednesday said it entered into discussions with certain creditors to get flexibility with respect to certain terms and conditions of its offshore debt. LDK's shares were up 16 percent. (Reporting by Swetha Gopinath in Bangalore; Editing by Maju Samuel) Link this Share this Digg this Email Reprints

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