China government advances plan to help solar sector

SHANGHAI Wed Sep 26, 2012 1:27pm IST

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SHANGHAI (Reuters) - China on Wednesday advanced plans to try to prop up its once high-flying solar industry by asking all provinces to provide blueprints by mid-October for how they will increase solar in their power mix by 2015.

The export-focused solar panel industry has been hit by both excess manufacturing capacity and waning foreign demand. Companies have slashed prices as stockpiles grow, and major solar panel makers such as Trina Solar Ltd (TSL.N) and LDK Solar Co Ltd LDK.N have recently announced plans to cut jobs.

The China Securities Journal reported on Wednesday that the National Energy Administration had asked all provinces to report by October 15 their plans for implementing a pilot scheme to supply electricity via small solar panel power generators by 2015.

Beijing, Shanghai, Tianjin, eastern and coastal regions will be the first few regions to implement the solar panel power generation pilot scheme, the paper said.

China plans to develop 21 GW of solar capacity between 2011 and 2015, HSBC said in a report on Wednesday.

"Filtering that national target down to the provincial level is important, as it is the only way solar farm operators will actually get their projects built and connected to the grid," said Charles Yonts, a solar analyst with brokerage CLSA.

"If anybody doubted Beijing's seriousness about hitting the 2015 target, this would serve to assuage those doubts."

Many small Chinese solar companies are believed to have closed, and analysts say remaining firms will be able to stay open only if government lenders keep lines of credit open despite gloomy forecasts.

Policymakers in Beijing said last year they wanted to see a healthier industry develop, with a smaller number of large, strong players, but Yonts said there has yet to be any meaningful moves toward major consolidation.

The paper reported on Tuesday that the China Development Bank Corp CHDB.UL, a policy bank that lends at Beijing's behest, would prioritize loans to 12 top solar companies to give financial support to the struggling Chinese solar industry.

The bank declined to comment and the National Energy Administration could not be reached for a comment.

Beijing has already provided billions of dollars in credit lines and other support to its solar industry through state-run banks, prompting the U.S. government to impose import duties this year after some U.S. manufacturers filed a trade complaint.

The European Commission this month launched an anti-dumping investigation into Chinese panel exports.

LDK Solar, which cut 5,000 jobs earlier this year, received help in July when the government of Xinyu city, in Jiangxi province, said it would use taxpayer funds to repay the company's loans.

(Reporting by Melanie Lee, John Ruwitch and Samuel Shen; Editing by Daniel Magnowski)

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