Chinese Bank Financing used by China's Solar Companies as a Competitive Advantage in India

China’s massive state owned banks have given multi billion dollar credit lines to its China’s solar panel module companies. These credit lines can be used by these companies to give cheap debt to solar projects which are capital intensive. Note one of the biggest hurdles in setting up a solar power plant is to tie up the debt which can form upto 85% of the total capital requirements. Given the high interest rates in India , this makes a huge difference as the returns are lowered if the debt is costly .

China’s solar panel companies can used their government banks backing as a major competitive advantage. Just like  their telecom equipment companies ZTE and Huawei they can use the debt to win contracts over suppliers from India and elsewhere. Chin’a Wind Equipment Companies like Dongfang are also using the lure of cheap loans to win orders.

Like China’s Huawei and ZTE which have captured the Telecom Equipment market using low cost and Chinese Bank Lending,Dongfang is looking to capture the power equipment market as well.Note the proposal to put a 10% import duty on power equipment imports has been put in cold storage.There are a number of  small wind players in India which are trying to find a foothold alongwith India’s largest company Suzlon.The entry of Chinese Wind Companies should ring loud alarm the domestic industry as the Chinese could overwhelm the local industry here.The scale,size and government support of Chinese companies are on a simply different level compared to Indian companies.

Note there is a already a major controversy in the USA over the subsidies and support given to Chinese solar companies and has led to a so called solar trade war between the two . Even USA has used its EXIM Bank to provides millions of dollars in financing of solar farms which are supplied by US Solar Panel producers First Solar. Chinese companies Goldpoly are using the strong billion dollar lines to build solar projects in the Europe as well

GoldPoly,SunOasis,China Technology Development Group Corp have formed a JV to invest $10 billion in European Solar Projects using Financing from China Development Bank and Merchants Bank.Note these 3 companies have integrated facilities from processing of polysilicon into wafers to making solar panels.Its the first time that 3 Chinese companies have combined to promote such a massive project.The 3 companies are not listed in the US stock or HK stock exchange unlike other major Chinese solar companies like Trina,GCL,Suntech,LDK and others.Note China Development Bank (CDB) which is owned by the Chinese government has already extended billions of dollars in credit to Chinese solar panel companies like JA Solar,LDK and others.

US Exim Bank Loans in India

The US Exim Bank too seems to be pulling up its socks in helping American companies win large equipment orders through vendor financing.Note the US Exim Bank had got involved in a huge controversy when it agreed to finance a ultra mega power plant based on coal energy by Reliance Power in India.Despite protests by environmentalists,Exim Bank had gone ahead in financing as it would lead to jobs in America.Note USA is one of the biggest laggards in climate change and the government does not really care much out there.

Now the US Exim Bank has picked on 2 solar projects in India which are going to be built by Amercian companies.One is by the Thin Film Solar PV Leader First Solar and another by a small time Solar Thermal equipment supplier Infinia Corporation. Note the interest rates in India are extremely high compared to the US and vendor financing by a US bank leads to a massive increase in profits for the project owner.

Chinese solar major offers financing for Indian projects

China Sunergy, one of China’s larger solar module manufacturers, is willing to bring investments into solar projects in India, the company’s Chief Executive Officer, Mr Stephen Cai, told Business Line.

Nasdaq-listed China Sunergy, which last year supplied 45 MW worth of modules to two projects in Gujarat, is also interested in entering into strategic partnerships with Indian companies, he said.