The Founder of Hanwha SolarOne Transferred Shares of Solarfun
Hanwha Chemical Seeks to Double Sales on Solar, Rechargeable Battery Plans
Reported by China Jeil Economy Daily - September 1. 2010
The current Chinese domestic bid price for solar power is estimated is being quite low. If the supply cannot follow the demand in the future, it is possible to miss a great opportunity to generate profit. This is why Hanwha Group is planning to expand its investments in the solar industry in China.
Many large enterprises have not entered into the Chinese solar market yet. As the Chinese market size grows faster, however, the Korean conglomerate has started to expand its business in China. “Many companies have grown in the Chinese PV industry, but large enterprises have not yet entered the PV industry. The small and medium-sized venture corporations have led the investments in this industry.” Kisuk Kim, Chief Manager of the new business department in Hanwha Group, China, commented on this in a newspaper interview yesterday. “Hanwha Group hopes that it can help develop the PV market further in China since it requires a large investment in the future.” Hanwha Group became the largest shareholder of Solarfun by acquiring a 49.99% stake in it for $3,666.7billion USD in cash (434billion Korean won).
The former largest shareholders, the founder Mr. Yonghua Lu and Good Energies, have transferred all of their shares to Hanwha. Hanwha Group is planning to expand the capacity of module production in China up to 4GW by 2015. This will be 4 or 5 times of the current production capacity.
Encashment of the Founder’s Equity
Hanwha SolarOne is the world’s 4th largest module manufacturer, and has an annual production capacity of 400MW for both ingots and wafers. Its PV cell production capacity is 500MW, and its module production capacity is 900MW. The company has a total asset value of approximately $776million USD. Hanwha SolarOne’s 1st and 2nd shareholders, Good Energies and Mr. Lu, previously held 30.33% and 13.29% of the shares. Mr. Lu has not explained the reason for his encashment of the shares until now. “The current Chinese domestic PV market is small, but the PV industry is expected to grow as the domestic market gradually expands. SMEs do not have capabilities to invest in those circumstances.” Hanwha Group ranked 358 among the world’s Top 500 companies with a revenue of 191billion RMB and a total asset value of 496billion RMB in 2009. It operates 50 domestic affiliates and 67 overseas subsidiaries and sales offices in the manufacturing & construction, finance, services & leisure sectors. A Hanwha official shared that, “Hanwha SolarOne needs a partner with the capability to hold domestic sales, which are expected to experience explosive growth, as well as international sales. It needs a partner that can expand them. Mr. Lu has received cash from this share transfer.” With this share transfer, Good Energies and Mr. Lu have encashed $288.7 billion USD. In the 2nd quarter last year, Hanwha SolarOne has recorded a loss of 320million RMB, and in the 2nd quarter this year, Suntech has recorded a loss of $191 million USD. At the same time, competition in the domestic market is growing more intense as the speed of development in the largest solar markets, Germany and the Czech Republic, is slowing down. The Chinese domestic market has started in this business, but there is relatively little support from the government. As a result, the accomplishments of these companies were not enough to generate a profit in the past.
Confidence in Future Prospects in the Chinese PV Market
Hanwha Group is sure about the long-term future of the Chinese PV market, even though the support of the price in the domestic market is currently small. A Hanwha official mentioned that there is an oversupply of Chinese domestic PV, but the solar industry will grow over 30% every year, meaning that supply shortages will actually occur in the near future. This is the grid parity in which the cost of solar energy and the energy produced by fossil fuel will be equal. The grid parity has already been reached in Italy, and will be reached by 2016 in California and in the U.S. Other parts of the world are expected to realize grid parity in 2020.” A Hanwha official Explained that, “The bid price in Chinese domestic PV market is relatively low, but if we do not enter the market now, we could miss the chance to expand into it once it fully blooms in the future. That is why Hanwha plans to expand its investments in China more than it had before.”
According to the IMS research report, as the major European markets, Germany and the Czech Republic are slowing PV plant development, the market share of Europe, the Middle East, and Africa is expected to shrink by 31% and the market share of the Asia-Pacific region is expected to increase. The Asian solar market is expected to grow by 45% in the next 5 years with a total installation amount of up to 10GW. In 2014, China will be the largest PV market in the world. Following the acquisition of Hanwha SolarOne, Hanwha Group will push to raise the production capacity of the Qidong plant, and it will also build new PV plants in other areas in China. Hanwha Group plans to realize its goal of 4GW production in the next 5 years with the expansion of Hanwha SolarOne’s manufacturing capacity, not by the extra acquisition of other companies.
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