China Alternate Energy Invests Overseas 中国替代能源企业海外投资一石两鸟

By newsdoug on April 18, 2012

Longyuan breezes into Canada Having diffused a potential trade war with the US over unfair subsidies, China’s alternate energy firms are moving quickly to show they can be important investors in the markets where they do business rather than simply selling their products there, as evidenced by 2 newly announced deals in the wind and solar sector. Interestingly, both deals are in Canada rather than the US, with the first seeing solar panel maker Canadian Solar (Nasdaq: CSIQ) announcing a relatively major new solar power plant joint venture with local partner SkyPower. (company announcement) The second deal is seeing alternate power plant operator Longyuan Power (HKEx: 916) building a major new wind farm, with General Electric (NYSE: GE) announcing it will sell about 50 turbines to the project. (company announcement) Both announcements are relatively straightforward, with each seeing the Chinese company put up investment dollars to build and operate locally-based power generation projects that will help develop the alternate power market. In Canadian Solar’s case, the company is essentially buying a big stake in a number of solar power projects already begun by SkyPower, essentially giving SkyPower some cash to develop additional projects. In Longyuan’s case, this alternate energy arm of one of China’s top power producers is not only putting up money to develop this major new wind farm, but is also showing its commitment to buying equipment for not only from Chinese but also other foreign equipment producers like GE. These latest 2 announcements come just a week after another major solar panel producer, Suntech (NYSE: STP), announced another US solar project at Edwards Air Force Base in California, underscoring it would supply the project with panels manufactured at its US-based factory in the state of Arizona. (previous post) The Chinese firms have embarked on their public relations campaign, most likely with encouragement from Beijing, following the latest developments in an ongoing dispute with the US and Europe over what the western nations believe are unfair subsidies from Beijing. That dispute saw the US open an investigation last summer that could have resulted in large punitive tariffs. But in the most recent development, tariffs recommended by the Obama administration were small and appear to be largely symbolic, indicating Washington wants to avoid a trade war in the important alternate energy space. (previous post) So now it’s China turn to show some good will, and this recent string of announcements appears to be part of that campaign. What’s interesting is that these latest moves by Canadian Solar and Longyuan could actually be not only good for PR, but could also be smart longer term investments if they can eventually be sold to professional alternate power plant operators. Billionaire investor Warren Buffett made it clear last year that he sees potential in the area, investing $2 billion last year for a solar plant in California. (previous post)

Bottom line: A new Chinese wave of investment in western alternate energy projects is largely a PR exercise to diffuse a recent trade dispute, but could also be a good longer-term investment.

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