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Cheap Finance Strategically being used to Export Chinese Renewable Energy Products – Sinovel wins largest wind turbine order 1 GW from Mainstream with CDB Funding

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Cheap Financing by massive state owned Chinese Banks like China Development Bank (CDB),China Construction Bank etc is being used as a strategic weapon to push Chinese renewable energy exports.Note cheap financing has always been used by big nations like Japan and USA to push exports by their domestic companies.United States EXIM Bank has been financing solar projects in India at very cheap interest rates to help First Solar sells its Solar Panels.Similarly China too has started using the huge balance sheet of its state owned banks to push its large green companies.Note CDB has extended almost $35 billion in credit lines to big  Chinese solar companies like Suntech,Trina,Yingli,LDK and others.These credit lines can be used by renewable energy companies to finance the projects of their customers.Note Chinese Banks had bankrolled massive power equipment purchases in India being made by Dongfang and Shanghar Electric Groups.

Note Financing is a very potent weapon especially in emerging countries like India and Africa where capital is scarce.In the latest development,Sinovel which is the biggest wind turbine supplier in China has entered a deal with renewable energy developer Mainstream Energy to build a round 1 GW of Wind Capacity in Ireland for 1.5 billion pounds .Financing will be done by CDB providing an easy source of cheap funds for this wind energy project.Note Wind and Solar Farms require massive amounts of debt financing as their capex cost forms almost 80-90% of the total lifetime costs.Smart Enterpreneurs are benefiting from this cheap financing as their project is totally dependent on these low interest funds.Note many of these projects would never see the light of the day without the financing.Its a form of subsidy that is being given by the green company countries to help push their exports.

The Chinese Wind Power Market is getting saturated with 50% of the global wind capacity installed in China in 2010.There are signs of trouble with smaller players near to getting bankrupt as price wars in the highly competitive market take their toll.Even Sinovel which is the biggest company has been facing reduction in orders recently canceling payments to American Superconductor (AMSC).Note unlike Solar Panels,Chinese Wind Turbines have very little marketshare in the global market excluding China.Recently the bigger companies like Dongfang and Goldwind  have managed to win small wind equipment orders in India and China.However this 1 GW order is by far the largest foreign order for a Chinese company

Mainstream in €1.5bn deal for Irish wind farm project

BUSINESSMAN EDDIE O’Connor’s Mainstream Renewable Energy is joining forces with a Chinese manufacturer and bank to invest up to €1.5 billion in Irish wind power projects.Mr O’Connor, the company’s chief executive, confirmed yesterday that the company is planning to build wind farms in Ireland with a total capacity of 1,000 mega watts (MW), the equivalent of between two and three average-sized power plants, over the next five years.He estimated this would involve a total investment of about €1.5 billion over the period. Mainstream has agreed a deal with Sinovel, China’s biggest manufacturer of wind turbines, to supply the hardware needed.According to Mr O’Connor, the China Development Bank is likely to provide part of the funding, along with his company, which he said now has considerable cash resources, although he did not give any details.

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Abhishek Shah

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