GCL-Poly Energy to buy China solar parts maker for $3.4 Billion
June 23 (Bloomberg) -- GCL-Poly Energy Holdings Ltd., the Hong Kong-traded power company whose shares quadrupled this year, agreed to buy a Chinese solar-cell parts maker controlled by its chairman for HK$26.3 billion ($3.4 billion).
The company will pay for the purchase of Jiangsu Zhongneng Polysilicon Technology Development Co. mostly by issuing new shares at HK$2.2 each, 12 percent less than the closing price before today’s Hong Kong stock exchange announcement. GCL-Poly jumped as much as 20 percent.
GCL-Poly, chaired by founder Zhu Gongshan, is buying a company more than 10 times its own market value as China seeks to spur investment in renewable energy. The country, the world’s largest emitter of greenhouse gases, plans a fivefold increase in its capacity to produce electricity from sunlight by 2020.
“GCL is tapping into the expectation that there will be major backing for the solar industry in China,” said Charles Yonts, a renewable energy analyst at CLSA Ltd. Jiangsu Zhongneng is the nation’s biggest supplier of polysilicon, the costliest component in solar panels, according to Yonts.
GCL-Poly’s shares rose 15 percent to close at HK$2.88, the highest since Jan. 16 last year, while the Hang Seng Index fell 2.9 percent. The Hong Kong-based company sold shares in November 2007 at HK$4.10 a piece.
Acquisition Funding
GCL-Poly will fund the acquisition of Jiangsu Zhongneng, based in the eastern province of Jiangsu, by selling $350 million of secured notes and issuing 10 billion shares at HK$2.20 each. GCL-Poly will pay $200 million in cash. Zhu and his family control more than 50 percent of Jiangsu Zhongneng, according to the statement.
On completion of the deal, Zhu’s stake will rise to 56.17 percent from 34.47 percent while Morgan Stanley’s stake will be diluted to 1.45 percent from 15.72 percent, the company said.
China plans to increase its solar generation capacity to 10 gigawatts by 2020, from a previous target of 1.8 gigawatts, to help reduce the country’s reliance on coal, Li Junfeng, secretary general of the Chinese Renewable Energy Industries Association, said May 12. One gigawatt can power 100 factories.
The nation, which is closing older coal-fired power plants in favor of cleaner energy sources, said March 26 it will offer 20 yuan ($2.93) per watt-peak of power output for solar projects with at least 50 kilowatt-peak of capacity.
Solar Shares
“Backed by strong government support the future of the solar industry is promising and the group is well-positioned to capitalize on these opportunities,” Zhu said in today’s statement. “We expect the government to initiate more incentives or subsidy programs to encourage the adoption of solar power going forward.”
GCL-Poly shares have more than tripled since the mainland government’s March 26 announcement on solar project subsidies. Hong Kong-listed China Singyes Solar Technologies Holdings Ltd. also more than tripled in the same period while solar-cell parts maker Solargiga Energy Holdings Ltd. more than doubled.
The MAC Global Solar Energy Index, which tracks public companies that specialize in providing solar energy products and services, has climbed 8.7 percent in the same period.
GCL-Poly operates 18 cogeneration power plants in China, one incineration and one wind power plant, according to the statement. Most are in the eastern provinces of Jiangsu and Zhejiang. The Jiangsu Zhongneng transaction is subject to shareholders’ approval, it said.
Jiangsu Zhongneng’s annual polysilicon production capacity is expected to reach 18,000 tons by the end of 2009 and 21,000 tons by the end of 2010, GCL-Poly said.
