21 October 2018

Hanergy talks big but doesn’t deliver much

Chinese companies may find it necessary to talk big in order to access funding or to impress local government cadres for policy support. But for investors, taking such talk at face value would be a dangerous thing.

Few would dispute that solar energy has a bright future in China amid the country’s rush to fight pollution and use more renewable power. But as solar energy is a big universe, which is the “planet” that one should bet on?

Hanergy has been one of the contenders vying for attention.

In just five years, the company transformed itself from a hydro-electric power company into the world’s largest thin-film solar product maker, both by building new factories across China and gobbling up other solar firms.

Over past two years, Hanergy has bought the intellectual property rights on Copper Indium Gallium Selenide (CIGS) technologies from Germany’s Solibro and US firm MiaSole. It also acquired the entire equity interest in California-based Columbia Solar Energy.

Among the other initiatives, it inked deals to establish production lines in nine Chinese provinces including Sichuan, Guangdong, Zhejiang, Shandong and Jiangsu.

After the series of moves, Hanergy’s production capacity has leapt to 3 gigawatts a year, according to the China Economic Information Network (CEIN) magazine. And the number will easily triple if all the planned investments materialize.

But does rapid expansion mean Hanergy is enjoying booming business? The answer is ‘No’, according to CEIN which reported that many projects were seriously delayed and well behind production targets.

Dubbed as the biggest project that Shangdong attracted back in 2011, the Hanergy facility there is far from running at full throttle and income is about one tenth the projected figure.

The solar player’s Nanjing project, again, was listed as one of the city’s core achievements. Scheduled to start production two years ago, the factory building was completed recently but production will have to wait until machines are moved in and properly tuned.

Meanwhile, a Changzhou plant nearby saw its first solar battery output come off the production line in 2012, but the revenue last year was short of 20 million yuan, almost nothing given the total planned investment of 12 billion yuan. Another project in Zhejiang only fulfilled one third of the output goal set previously.

Adding all the projects that founder Li Hejun has mapped out, it would easily cost 100 billion yuan. The headline amount is huge, but the actual money put to work may only be a fraction.

The slow progress could be due to the trade frictions surrounding the solar sector, or the still-excess overall capacity. But Hanergy prefers to blame it on its local partners.

“Hanergy usually supplies 30-40 percent of capital for a project; we, of course, hope the local government will chip in as an investor or help secure bank financing to cover the shortfall,” Li said.

The founder has always been super bullish about the solar sector’s prospects. He even wrote a book in which he predicted that China’s solar industry could be worth 3-5 times the value of the auto industry.

Hanergy is also striking high-profile partnerships with companies like IKEA and Tesla. It is also the official solar partner for the upcoming electric car race – FIA Formula E Championship.

But behind all these marketing stunts, Li is still probably scratching his head, searching for a way to make good his pledges.

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EJ Insight writer

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