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Solar Industry Struggling In China, Following Subsidy Cuts

August 17, 2019

By Paul Homewood


 Funny how the renewable lobby keeps telling us how cheap solar power is.

China’s solar industry is apparently falling apart at the seams, since subsidies were cut last year:


Embattled Chinese solar project developer and building-integrated PV manufacturer Singyes Solar has applied to resume trading in its shares on the Hong Kong exchange.

The company today finally published its full-year results for 2018 and wants to bring an end to a halt in trading of its stock that has been in place since April 1.

If the request is approved by the exchange, trading could resume on Monday and it is tempting to wonder how many investors will hold their nerve until October 2, when the Hong Kong High Court hears a winding-up petition issued by Deutsche Bank’s local branch over what the lender claims is an unpaid US$6.27 million debt.

If Singyes manages to dodge that bullet, its shareholders will face another test of nerve two days later, when the heavily indebted company is due to announce more details of a hoped-for Chinese state bail-out on which the future of the business hinges.

State bail-out

Provided long-suffering independent shareholders approve the plan, Water Development (HK) Holding Co Ltd – part of the Chinese state-owned Shuifa Group – will conduct a HK$1.55 billion (US$198 million) takeover by acquiring more than double the volume of existing Singyes shares in circulation to own 66.92% of the enlarged entity.

That shares subscription holds the key to a debt restructuring battle being fought by Singyes, which is currently in default to the holders of almost US$430 million of senior notes and convertible bonds – a situation exacerbated by Deutsche Bank’s seeming unwillingness to play ball.

The full year figures for 2018 published today also revealed China Singyes Solar Technologies Holdings Limited in May pledged all of its 62.4% holding in Singyes New Materials to secure a one-year, US$12 million loan. Remarkably, the company has also managed to secure commitments for a further RMB1.5 billion (US$191 million) in credit from “two banks in mainland China” – lenders which must surely be state-owned.

Singyes suffered a rapid turnaround in fortunes last year when it appeared to be caught entirely unawares by Beijing’s policy u-turn on solar subsidies. With 90.4% of its business concentrated on the mainland – and RMB1.33 billion of its 2018 total revenue of RMB4.42 billion concentrated in the hands of one, unnamed customer – Singyes was caught cold by the decision of the central authorities to rein in solar incentives.

That policy bombshell saw the revenue generated by the company’s solar project engineering, procurement and construction (EPC) services business collapse from almost RMB1.8 billion in the first six months of last year to just RMB301 million in the second half.



Singyes are by no means the only company affected:


The credit profiles of PV plant operators in China are “weakening,” based on their 2018 financial results, while those of companies that operate wind farms in the country have started to stabilize, according to a recent report by Fitch Ratings. It mainly attributes this to the much “heavier financial burden” that PV project operators have to bear, as well as improvements in the way wind installations are run. But the ongoing delay of subsidy payments to solar developers is also complicating the situation.

We do not expect a quick fix to the subsidy delay,” the ratings agency says. “The shortfalls in the Renewable Surcharge Fund will only grow bigger, as China has been reluctant to raise the CNY 19 ($2.83)/MWh surcharge levied on power consumers to avoid higher electricity prices.”

Most of the Chinese PV operators that reported lower profits last year blamed their poor performance on higher funding costs and the need to take on more debt. Fitch Ratings notes that 76% of the 174 GW of solar that had been installed in China by the end of 2018 was plugged into the grid in the 2016-18 period. However, just 30% of the country’s 184 GW of cumulative wind capacity was installed during that period.

“The solar-panel installation boom in recent years has severely bloated the operators’ balance sheets,” says the ratings agency….

That said, the delayed subsidy payments continue to intensify cash-flow pressures for project developers and operators in China.

“The 98 GW of solar capacity connected in 2017 and 2018, along with a proportion of the 34 GW that came online in 2016, will remain unsubsidized as they have not been included in the government’s renewable subsidy catalogue,” Fitch Ratings says. “Trade and bills receivables of GCLNE, BECE and Panda Green roughly doubled in 2018, which consumed all their EBITDA in the year at the cash flow from operations (CFO) level. Solar farms are barely breaking even on a CFO basis after interest payments without subsidies, indicating that new projects are not helping companies generate cash to repay debt.”

However, Fitch Ratings acknowledges that solar and wind operators reduced capex in 2018, as their investment appetite has waned ahead of anticipated cuts to the country’s feed-in tariffs. It believes that some solar operators will probably have to sell off assets to raise liquidity, given the difficulties associated with refinancing at present.



This year the Chinese government is planning to chuck another $435m in subsidies to the solar industry.

Whether this ever gets paid is another matter though, as an estimated RMB120 billion ($17.4 billion)  is overdue from previous subsidy payments:


China’s National Energy Administration (NEA) yesterday confirmed RMB3 billion ($435 million) will be allocated for public solar subsidies this year, according to a report by Reuters.

That draft document, which emerged during prolonged talks between the central authorities and solar industry stakeholders in Beijing, stated RMB750 million of the RMB3 billion would be allocated for rooftop projects, amounting to 3.5 GW of new capacity.

If true, confirmation of the official policy by the NEA would remove any lingering fears the RMB3 billion might have been spread over a longer period as Beijing attempts to pay down what Reuters estimates is a RMB120 billion backlog in overdue solar subsidy payments.



China has quickly realised that money does not grow on trees, and these subsidies have to paid for via higher electricity bills, something the communist party is naturally loathe to do.

If solar power is not even economical in China, where production costs are so low, what chance here?

  1. Gas Geezer permalink
    August 17, 2019 8:40 pm

    Meanwhile back in blighty our own governing classes seem extremely relaxed about higher electricity bills after all when there is a climate emergency to contend with surely cost is an irrelevance.

    • Robert Jones permalink
      August 17, 2019 9:15 pm

      The so-called governing classes are completely relaxed about energy security, ‘climate change’, the mounting costs of energy, the fiasco that is the ‘smart’ meter rollout, the malignant Climate Change Act (2008), the vast opportunities presented by fracking and the self-serving efforts of the Climate Change Committee because they don’t understand any of it. There are few engineer and scientist MPs and probably no economists.

      Let’s face it, the Climate Change scam is this decade’s money-making opportunity where money flows from the many to the few!

      • John Palmer permalink
        August 17, 2019 10:21 pm

        Anyone with a degree in PP&E shouldn’t be allowed near a position of power – at the very least until they’ve done several years of proper work

  2. markl permalink
    August 18, 2019 2:05 am

    It’s not about the climate. It’s about One World Government. Pay attention. You can’t counter the enemy if you don’t know who they are.

    • Graeme No.3 permalink
      August 18, 2019 4:58 am

      If they are as competent as our present governments (including the EU) what is the problem? The concentration camps will be missing on fence, the guards will be on strike and the rest of the staff will be attending courses on Inclusion or Gender Neutrality.

  3. August 18, 2019 9:45 am

    “how many investors will hold their nerve until October 2, when the Hong Kong High Court hears a winding-up petition issued by Deutsche Bank’s local branch over what the lender claims is an unpaid US$6.27 million debt.”

    Deutsche Bank has its own problems. It bought a lot of derivatives during the Banking crash of 2008. I bet Deutsche Bank wished its debt was only US$6.27 million. Deutsche Bank is fast slimming down but may have to be rescued by the German government.
    The Trillions of derivatives that had been built up before 2008 should have been counted as bad bets by the investors and allowed to fail. Instead they continue to exist as toxic debt polluting the financial system. Like the turd in the punch bowl. The Banks should have been nationalised instead of the government purchasing 80% and leaving the existing management system in place , with there bonuses and pensions.
    Billions on quantitative easing is being pumped into the Banks to keep them solvent,
    This money is mostly not entering the real economy. But it does devalue the currency in circulation. Until the derivatives are allowed to fail they will continue to pollute the system and require the continuing bail out of the Banks.

  4. August 18, 2019 9:51 am

    Deutsche Bank’s seeming unwillingness to play ball.
    This Deutsche Bank?

    Deutsche Bank Collapse Could Crash Global Financial Markets
    PUBLISHED JULY 22, 2019

  5. August 18, 2019 10:34 am

    Reblogged this on Climate-

  6. Athelstan. permalink
    August 18, 2019 10:48 am

    Lord, how sad would it be if, the solar panel manufacturing industry in China fell off a cliff?

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