GCL-Poly Energy, a Hong Kong-traded power plant operator, is proving that some of China’s savvier dealmakers are waking up to the potential of green power – not to mention the ramifications of Bejing’s recent “buy China” edict – with a deal announced Tuesday to buy a Chinese solar-cell parts maker controlled by its chairman for HK$26.4bn ($3.4bn) as it seeks to expand in the green energy sector.
There may be something we don’t yet know, but the deal so far has shown that among China’s dealmakers, Zhu Gongshan, chairman and controlling shareholder of GCL-Poly, is possibly the man of the moment.
The deal could also fan fears among foreign companies about Beijng’s “buy China” exhortation to Chinese companies carrying out projects linked to stimulus measures. Environmental technology is a key beneficiary of China’s massive stimulus spending.
GCL-Poly said it would buy Jiangsu Zhongeng, a supplier of polysilicon and wafers used by the solar industry, from Zhu, the FT reports on Tuesday. To fund the purchase, GCL-Poly – which listed in Hong Kong at the end of 2007 – will issue 10bn new shares at HK$2.20 each, a 12 per cent discount to the company’s last closing price. It will also issue US$350m in secured notes and pay Zhu US$200m in cash.
Zhu, who reportedly helped build Jiangsu Zhongeng into China’s biggest supplier of polysilicon, the costliest component in solar panels, and his family control more than 50 per cent of Jiangsu Zhongneng, reports Bloomberg. The deal will also raise Zhu’s stake in GCL-Poly from 34.47 per cent to 56.17 per cent.
Morgan Stanley, meanwhile, currently the second largest shareholder, will see its holding drop from 15.72 per cent to 1.45 per cent, adds the FT.
Shares in GCL-Poly, which have already surged this year, jumped as much as 20 per cent on Tuesday and were 18 per cent higher at HK$2.94 by midday.
Zhu said the acquisition would allow GCL-Poly to build large-scale solar power plants in the future as the Chinese government encouraged development of a low-carbon economy with more incentives or subsidy programmes.
Charles Yonts, a renewable energy analyst at CLSA, told Bloomberg on Tuesday that GCL is “tapping into the expectation that there will be major backing for the solar industry in China.”
Indeed, foreign companies are increasingly eyeing China’s nascent “green” market – among them, Siemens, which expects to gain orders worth Rmb 20bn ($3bn) from China’s stimulus package over the next three years, Richard Hausmann, chief executive of Siemens North Asia told Dow Jones. About half those orders are expected to be in response to China’s demand for environmentally friendly and energy-efficient technologies, he added.
Related links:
‘Buy China’ policy set to raise tensions – FT
Forget Treasuries, is copper the future for China? – FT Alphaville