Xian de PV should lead the new energy development

Polaris solar PV net news: with step by step and adjusting national solar policy, distributed PV is the 2014, one of the industry’s most important topics. All over the about local policies, debates on photovoltaic roof, on subsidies, how perfect, the industry buzz to Beltane. While the United States is relying on innovative financing, asset-backed securities as an important means for the PV industry has created a new takeoff, this pattern of China PV industry is appealing that captures and new opportunities. To solve these problems, press interview jinkosolar Xian de, Chairman.

Xian de, Chairman

Distributed PV plants three major risks to the investment

Reporter: at present, the industry is most concerned about issues of distributed PV policy, State beginning in 2013 on intensive introduced many policies. Year 8GW goal implementation, there is a need to adjust or refine policies?

Xian de: in fact, 8GW for power resources and planning in China as a whole, is not a very big number. China’s current resources and fully able to support the roof on this scale. But in order to achieve goals, also depends on the trade. Distributed PV is an investment industry to develop first of all to get capital into, no money could not do anything, and to enter an industry, be sure to have a very full, mature business models.

Now we see that throughout the distributed business model is not mature, there are still many shortcomings. When enterprises are doing requires constant communication with banks, hoping to use the Bank’s leverage to pry investment yields, it is most important to investors. And in this communication process, banks are more interested in the project there are no stable elimination groups. For the banks, the ability to eliminate the certainty and continuing operations of the group will affect the continuation and profitability of power plants. When we do distributed, are faced with different customer groups, there is strong State enterprises, hospitals, airports, private enterprise, there are residential users, some are not particularly stable groups, such as small firms, it is likely to cause hardship on our distributed project financing of investment. If you have trouble financing, that distributed a large advance will encounter bottlenecks.

Countries need to consider from this perspective, it should make some adjustments in policy. Personally believe that distributed can also refer to the large ground station system model and subsidy mechanisms. We directly deals with power companies, was to coordinate grid by grid companies eliminate problems. I think that such a policy can better promote the development of distributed in China.

Reporter: China PV industry has just had a tough two years, financing is still one of the development of the difficulties so far. In the next stage of development when financing conditions will improve in the industry as a whole?

Xian de: from a manufacturing point of view, the entire industry is also in the process of adjustment. Financed to a large extent depends on the actual operating situation of the company, and banks want to see or the company’s ratio of debt, cash flow and profits. Banks must be very realistic, good companies will provide higher limits, financing conditions natural is better. From a plant’s point of view, banking concern three aspects, one is the power station itself, including both financial and profit model is no problem, return on investment is still relatively high. Second is the plant’s procedures are complete. For example, land use is no problem, power purchase agreement is not guaranteed. Complete procedures, identify, the risk is manageable, investment income is guaranteed, banks would participate. Third is the strength of investment, asset-liability ratio and operation conditions on the one hand, and other basic conditions is the professional investors, because solar is still a greater demand in specialized industries.

Reporter: compared to the ground station, the current domestic development of distributed PV challenges and risks?

Xian de: large photovoltaic power station’s business model is relatively simple, plant’s investors themselves to develop the power plant issue of electricity sold to the grid, electricity tariffs following the benchmark price policy, a class of region, class II and class III region three electricity prices. Such a simple business model, we can use the investment costs, coupled with power, to calculate return on investment.

Distributed power is a bit more complicated, because it involves three groups. One is to invest in power plants business, second is to eliminate businesses, there is also a power grid. In other words, investment in distributed generation, we must first eliminate groups signed a power-purchase agreement because you eliminate groups of roof, power purchase agreement may offer an electricity discount, or roof of the rental fee. But certain groups not absorptive have been using electricity generated by a roof, such as schools, holiday without electricity, another scenario is that electricity from the roof to dissolve groups than you, then Yu can do it, selling power, power to regulate the electricity and eliminate the conditions. But power prices and eliminate groups of electricity prices are not the same, because desulfurization benchmark price is 4 cents, but we sold it to eliminate groups of electricity price is 8 cents, more than whether it’s generated electricity price, and still eliminate groups of electricity price subsidy to the State 4-2. From such a policy, we can see the following risks:

The first is the question of property rights. Because you are in someone else’s building power plants on the roof, roof rights do not belong to the building if the roof was removed, solar power panels how to deal with it? Second is to eliminate groups of sustainability. For example factories, eliminate no problem. But investment in solar power plants are 20 lease, if the factory went bankrupt, absorptive capacity is lost, this is the risk. The third is to eliminate the uncertainty. Eliminate groups in a factory, it could be this year’s operation is very good, full load fully, that might get the electricity price is 8 cents plus 4 2 Mao, 1 total 2. If poor performance, such as shut down for a month, the entire financial model changed, this one-month electricity bill has only 4 plus 4 2 Mao Mao.

I have mentioned these risks, banks will see, this is the reason why bank capital was not in the industry right now. I suggest that the grid should shoulder this responsibility, since the network itself has assigned to dissolve the obligation, this place is no absorptive capacity, can be adjusted to a different place to go. If a factory has gone bankrupt, with no business, but the power is still in, it should still be adjusted to other factories inside and power to bear that responsibility.

Reporter: 2014, the policy supports efforts to strengthen, the industry itself also appeared with new vitality. Investment new energy PV plants financing innovation raised an important topic. Innovative financing, asset-backed securitization in China has not even got a chance?

Xian de: China new energy is far more emphasis on investment in large power stations, as mentioned earlier, large ground power station’s business model is a more mature, so banks are also willing to give loans for such projects. As far as asset securitization in PV power plant, first to attract more low-cost funds into the industry is certainly a good sign, but we want to make clear, PV product property is more suitable for this kind of financing models. Because PV upfront, but future earnings are very stable and not under the influence of too many external factors. For example, we can compare the coal and electricity markets, the coal price fluctuations have an impact on station operations and bottom line, this is the volatility of external factors. Solar energy is the Sun, this will not be a big fluctuation, electricity and a stable income and asset securitization this model is suitable for the development of this industry. But to achieve this we must first have a common trading platform, could make solar power as an asset in this trade. However, the current financial environment in China and there are many policy issues, the propulsion of this model takes a long period of time. Abroad especially United States utility assets securitization has done very mature, home and it took a long time to build a better system, and platform.

Caution photovoltaic business transformation

Reporter: it is understood that the apt utility business will be split listed, how apt on the future planning of the sector? After adjustment, PV manufacturers shifted to lower station to the energy supplier’s restructuring in the direction of this trend are increasingly?

Xian de: from the perspective of sitech, pre-we are manufacturers, and if we entered the field of power plant and raw materials would become an energy supplier, which are two completely different business models. Why do we want it to be listed? Because our management believes that jinko’s type of business investment also has manufacturing, which both parts failed to distinguish between our company and not correct understanding of capital markets, we believe that the apt market is still undervalued. Sitech is a United States company, United States investors is not sensitive enough for power plant investment in China policy, and we are still in the manufacturing sector, accompanied, resulting in some assets are not properly assessed, but our operations are actually very good. Therefore, apt to split these two business model on sale.

Power plant investment business from the start and now has more than two years, after a trial and error process, we remain cautious advance in this section. At present, we have completed and holds a 200MW power plant assets, in 2014 we plan to finish a 400MW power plant construction, in addition to the project reserves a 1GW. Sitech attaches from the manufacturer to the transformation of energy suppliers, this strategic direction is very important for us. Sitech in PV manufacturing sector has consolidated its own advantages, but extends to the downstream development paths and irreversible, the spin-off plan will be completed at the beginning of the end of 2014 to 2015, at which time we will build a more sophisticated financing vehicles.

Manufacturing enterprises to enter the market is currently one of the more obvious trend, jinko is relatively early in the industry to do this thing. In this transformation, we are more concerned about the company’s cash flow problems, PV power plant with very large upfront investment, and operation and maintenance costs were relatively low, follow-up to the enterprise’s cash flow is very considerable. Manufacturing companies transition to a power station operators, should pay more attention to its assets turnover, from photovoltaic products to power stations, the industry’s asset turnover is fast, so as to guarantee the company’s cash flow.

Reporter: industry: after a deep restructuring and bankruptcy, company pulled through, and continue to consolidate the advantages, such as sitech. How do you evaluate the current landscape?

Xian de: from manufacture supplier, PV manufacturing in China has formed a complete industrial chain, complete industrial chain means that the cost advantage. Coupled with the current Chinese solar manufacturers have mastered advanced techniques, overall, China PV manufacturing remains in a leading position in the world. Application markets, Europe and the United States have a better structure and better financial platform, this is the basis for sustainable and stable development of their, United States, and Europe, next will be sustained and steady development stage. But the Chinese market is facing a lot of problems, primarily changes in policy, issued subsidies need to be funded through policy rules in place, of course, the grid of construction need to continuously improve. 35GW is not a big amount, but behind 35GW of how sustainable development is a challenge to both the Government and the industry leaders and grind our wisdom.

Photovoltaic industry beginning in 2014, the market demand is rising every year, 2013 demand between 35GW to 36GW, 2014, this trend will continue, followed by increase in demand may have 15% to 24%. But the problem still exist, for example United States double reverse trade, market pressures and channel need to be addressed. In addition, the advancement of the greatest focus is distributed in China policy. In my view, should lead the development of the new energy industry of the photovoltaic industry.

Original title: Xian de, Chairman of jinko interview: PV should lead the new energy development

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