Renewable firms slow to tap $47bn in credit lines

Chinese wind and solar energy companies have left untapped most of the $47 billion (R387bn) in credit lines made available by the government since 2010, undermining arguments that US rivals are facing unfair competition.

China Development Bank, the biggest lender to solar and wind energy companies, made the money available to at least 15 companies. Of the $29bn in credit extended in 2010 to Suntech Power Holdings, Yingli Green Energy, Trina Solar, JA Solar and Xinjiang Goldwind Science & Technology, only $866 million has been drawn, Bloomberg New Energy Finance said.

US solar manufacturers led by Solarworld asked the Obama administration to slap duties on Chinese companies, saying their competitors are using low-cost credit from state-run banks to dump solar panels below production costs on Western markets. Three US solar companies, including Solyndra collapsed this year due to falling prices for solar cells.

“These credit lines are merely conditional agreements and not concrete loans already drawn by the companies,” said Jessica Ng, a New Energy Finance analyst. “The terms of the credit lines are unclear, and there is little to suggest such loans were far below market rates.”

The US on November 9 opened an investigation into anti-dumping allegations against the Chinese companies. Solyndra received a $535m loan guarantee from the US before it filed for bankruptcy.

“This is certainly not free money,” Robert Petrina, managing director of Yingli Green Energy Americas, said. Yingli had drawn down 4 percent, or $78m, of its $5.6bn “letter of intent” as of June 30, Petrina said.

Ng said she found anecdotal evidence from a few companies indicating the loans were left largely untouched last year. Goldwind drew 2.9bn yuan (R387.5bn) of its loans from the China Development Bank by the end of 2010, and Suntech took $343m of its facility last year, New Energy Finance said.

Goldwind was awarded a $6bn credit line in May 2010, and Suntech a $7.8bn facility in April that year, the analyst said. Goldwind USA chief financial officer David Halligan said there was a “misconception” the loans were “different than any Western lender”. “We face the same scrutiny when seeking approval for projects. We pay a competitive interest rate.”

Suntech’s loans from the CDB “represents less than 20 percent of our total borrowings,” Suntech spokesman Rory Macpherson said. “The $7.8bn is part of a framework agreement, similar to a letter of intent, not an approved credit facility.”

Trina took $66.5m of the $4.7bn in credit the bank extended and Yingli had borrowed $70 000 of its $5.6bn agreement by the end of 2010, New Energy Finance said. JA Solar said it did not take any of its $4.7bn credit line.

China Development Bank, which helps carry out government policies, has drawn increased interest as wind turbine and solar-cell makers it has funded take market share from higher-priced rivals in the US, Germany and Japan. Another study from New Energy Finance showed China would likely take the lead over Europe in terms of money spent on renewable-energy projects, with annual outlays of almost $50bn by 2014. The US and Canada would reach that level in 2020.

“Given that in the US this cheaper financing is being partly blamed for contributing to the downfall of solar manufacturing, it would be surprising for them that much of the credit lines are untapped,” said Environmental Investment Services Asia analyst Lawrence Brader.

Most of the 20 loans Ng tracked to solar- and wind-energy companies since 2008 had interest rates of 2.5 percent to 8.5 percent, which depend on the currencies and loan maturities. Solyndra’s loans since 2008 averaged about 6 percent, Bloomberg calculated.

“The complaints by US manufacturers that China’s state-bank credit lines are cheap loans amounting to illegal aid are not necessarily correct,” Ng said.

The interest rate on Yingli’s loan from the CDB is “in line with both the market rate for US dollar loans, and our weighted average interest rate of 6.44 percent in the second quarter of 2011”, Petrina said.

JA Solar’s current interest rates in China for bank-term loans are in the range of 6.65 percent and above. That is significantly higher than interest rates available in the US,” the company said.

China Development Bank approved most of the $47bn in credit lines in 2010 and some in 2011, Ng said. The credit was earmarked for capacity expansion and overseas business, including power generation projects, she said.

Companies may not have drawn much of the facilities because the debt may not have been cheap compared with alternatives, such as bond and stock sales, Ng said.

CLSA analyst Charles Yonts in Hong Kong said most of the credit used by Chinese solar companies was for manufacturing expansion. Chinese solar companies have to undergo an approval process on a case-by-case basis to access those credit lines.

“Each draw-down has to be negotiated separately, based on normal market terms,” Yingli’s Petrina said.

The agreement with the CDB is not “an open credit line”, JA Solar said.

Bank of China and Agricultural Bank of China also offered credit facilities, and the total funds agreed on in principle has alarmed Western policy makers, Ng said.

US companies that filed an anti-dumping petition complained “Chinese solar-cell and -panel producers benefit from an all-encompassing range of illegal subsidies from the Chinese government, including massive cash grants”.

China is likely to take a more cautious view in the coming months, supporting its clean technology manufacturers to calm trade tensions. Its delay of the official release of its 12th five-year plan for renewable energy may be an example of this “to avoid fanning the flames in light of the US complaint”, Ng said.

China is attempting to deal with its overcapacity problems and will likely consolidate manufacturers so there are “one or two” companies producing 5GW of panels annually by 2015, she said. – Bloomberg