Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 9 September.

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CHINA 2014 SOLAR INSTALLATIONS COULD TOUCH 14GW 

China announced a set of incentives for photovoltaic projects connected to the local distribution grid last week, paving the way for a much more robust growth in the second half of this year, and beyond.
 
The National Energy Administration called on local authorities to identify projects in regions where electricity can be distributed to customers living nearby, according to a statement on the agency’s website. The subsidy scheme was expanded from a premium subsidy to include a feed-in tariff option, removing the risk of relying on an off-take contract. 

The scope of projects included in the scheme was expanded beyond rooftop installations to projects built on abandoned and barren land, agricultural greenhouses, intertidal zones and fishponds, as long as they are connected to the distribution grid. The government also said financial institutions should offer discounts on loans for distributed projects.

Bloomberg New Energy Finance responded by revising its 2014 solar installations forecast for China to 13-14GW from 12-14GW. It said: "China commissioned just 3.3GW of PV capacity in H1 2014, including 1GW of distribution-grid connected PV. With the policy updates now official, we are confident that Q4 2014 will see much stronger demand." The fine print of the changes, and the implications, can be read in the Analyst Reaction China readies runway for distributed solar generation.
  
Chinese companies are also expanding globally. Hong Kong-based Shunfeng Photovoltaic International last week agreed to buy the operations and assets of insolvent German developer SAG Solarstrom, to expand in Europe. The Chinese company’s Suntech unit will pay EUR 65m ($85m) for the business.  And the deal is expected to close within six to eight weeks.

"The SAG Solarstrom group is a perfect fit for our downstream portfolio and will strengthen our European presence in the photovoltaic market," Suntech chief executive officer Eric Luo said in the statement.

Shunfeng’s plan to become a global clean energy major has led to a spate of deals, including its $480m acquisition of Wuxi Suntech Power, once the world’s largest panel maker, and the purchase of units from Germany’s Sunways. It is now also expanding into other technologies such as storage.

Moving on from solar, contract electronics manufacturer Foxconn Technology group said it would invest at least CNY 5bn ($814m) in its factories in northern China’s Shanxi province as it pushes into the electric vehicles market. Chairman Terry Gou expects the company’s Shanxi workforce to reach 100,000 this year, with annual output surpassing CNY 60bn, Taipei-based Foxconn said in a statement, citing a speech delivered by Gou in Shanxi’s Taiyuan city. The company did not provide further details on the investment.

Foxconn joins companies such as Tesla Motors and China United Network Communications Corporation that are tapping into China’s drive to boost production and usage of new-energy cars including electric, hybrid and fuel-cell vehicles. 

The world's most populous country and the world's biggest carbon emitter is also on track to establish a national carbon market by 2016, and has rolled out trading in seven regions as a first step. Last week, Shanghai allowed an institutional investor to trade emission permits for the first time, in a bid to boost liquidity on its exchange. An unidentified investor traded allowances to emit 5,000 metric tons of greenhouse gases at CNY 29 ($4.70) each on the Shanghai Environment Energy Exchange on 4 September, the bourse said in a statement on its website. More than 10 such parties have applied to the exchange to participate in emissions trading, it said.

South Korea also reiterated last week that it would start carbon trading as originally planned in 2015, but scaled back targets. The government will aim to reduce emissions by 10% in all industries, a statement from the Finance Ministry said. South Korea had originally planned to cut greenhouse gas emissions to 30% below business-as-usual levels by 2020. 

In Europe, Siemens and Associated British Ports gained approval to start building part of their GBP 310m ($510m) turbine production and installation plant in the north of England. The companies won consent from Hull City Council for construction, assembly and service facilities at Green Port Hull, Siemens said in a statement on its website. The operations are part of plans including a rotor-blade plant. 

There is nervousness in the clean power sector ahead of the referendum on Scottish independence, due on 18 September. A vote for independence could halt work on renewable energy projects that support GBP 14bn ($23bn) of investment, according to a Bloomberg News story. "Projects in the pipeline that are planned in Scotland could get cancelled because who is going to pay?” Doug Stewart, chief executive officer of Green Energy, said in an interview in London. “At the moment, we have the Department of Energy and Climate Change and Ofgem who rule over subsidies, and they are UK bodies. If they didn’t have any jurisdiction in Scotland, how do those subsidies get paid for?”

The main fundraising news of the week came from Glennmont Partners, the clean-energy investor spun off from BNP Paribas. It closed its second renewables fund after raising EUR 500m ($657m). The 10-year fund has exceeded its EUR 450m target with support from existing and new investors such as the European Investment Bank, the London-based fund manager said in an e-mailed statement. “The oversubscribed nature of our second fundraising, and the breadth and calibre of our investors, is a clear signal that the market's appetite for yield and long-term capital appreciation remains healthy,” chief executive officer Joost Bergsma said. Its first fund is now fully invested, he said. 

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Figures for China passenger electric vehicle sales by manufacturer show significant uptake since the start of 2014

Figures for China passenger electric vehicle sales by manufacturer show significant uptake since the start of 2014
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Q&A of the week

Banks warm again to Greek wind market, EDF says

Greece implemented retroactive tariff cuts for renewable projects earlier this year. The tariffs were reduced by 30% on average for solar projects, a move that, predictably, caused that booming market to grind to a halt.

The wind sector got away with a lighter cut of around 10%, and is now the centre of renewables activity in the country, which is set to emerge out of its longest recession.
 EDF EN Hellas, the Greek subsidiary of EDF Energies Nouvelles, is the largest wind company in Greece, with an installed capacity of 340MW. It had to budget for some asset impairments as a result of the policy changes, and faced cash flow challenges as payments for generation were running as much as eight months in arrears. The company is now seeing a return of banks’ interest in the Greek wind market.

'Over the last three months, we signed two mandates to refinance four operating projects. We are also working to get some term sheets for new projects', said Loukas Lazarakis, chief executive of the company in an interview from his office in Athens.

A firm expansion plan is yet to be charted by the company. It is waiting for an end to the recession, a revival in electricity demand and a rise in power prices, before setting new targets.

Q: How are you coping with the 
retroactive cuts? To what extent have they impacted your bottom line?

A: We mainly operate wind projects, and the retroactive cuts in tariffs were not so significant for the non-subsidised wind projects [which did not receive a capital subsidy]. We were lucky in that we were in a position to foresee, soon enough, that the solar photovoltaic business was not sustainable, and we stopped the development of solar projects. The state also imposed a haircut on receivables; we had budgeted some asset impairments. Finally, the cut and haircut was smaller than the calculated impairments.

Q: There is a view that there was no need to include wind in retroactive cuts. Do you agree?

A: Yes. It was not fair because the wind projects were not contributing to the deficit of the LAGIE [energy account]. All the deficit was from solar PV and other market distortions but not from the wind business. It was a political decision to reduce the cut for PV. Everyone knows that in Greece.

Q: What are your company’s expansion plans in Greece now that we are told financing is becoming available for new wind projects?

A: We are the market leader, with the largest installed capacity. What we expect to see is… 
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