Investors welcomed the news that Goldpoly New Energy (00686.HK) will set up a joint venture with CNPC, the parent firm of PetroChina (00857.HK), to acquire 500 megawatts of solar power plants. But the financial burden arising from the deal should not be taken lightly.
With Beijing’s policy support to prop up the moribund photovoltaic sector, including tariff subsidies and tax concessions, the expected rate of return on the country’s solar farms investment is increasingly stable and even appealing.
However, solar energy requires big upfront investment. From construction of a solar power generation plant with 1 gigawatt capacity to grid connection, the cost could go as high as 10 billion yuan (US$1.64 billion), National Business Daily reckons. Thus, it is logical to assume that the Goldpoly-CNPC venture needs at least 5 billion yuan.
According to the JV shareholding structure, Goldpoly will have a 60 percent stake, implying that it has to contribute about 3 billion yuan. With only HK$39 million (US$5.03 million) cash on hand and HK$1.89 billion in bank borrowings as of June, the deal represents very substantial funding needs.
Apart from the venture with CNPC, Goldpoly also signed deals over the last few months to purchase another batch of photovoltaic power plants with capacity totaling 800 megawatts.
Still, warming sentiment toward the sector may help Goldpoly secure the capital it needs.
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