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CIC to spend HK$5.5b for 20% stake in GCL-Poly

By Li Xiang (China Daily)
Updated: 2009-11-20 08:08

China Investment Corp (CIC), the nation's sovereign wealth fund, said yesterday it would spend HK$5.5 billion ($ 709.67 million) to buy a 20 percent stake in GCL-Poly Energy Holdings Ltd, the first time it has invested in a domestic renewable energy company.

CIC would subscribe to 3.1 billion new GCL-Poly shares at a price of HK$1.79 per share, a discount of 23 percent to the last traded price before the Hong Kong-listed energy company was suspended from trading on Monday.

GCL-Poly, the country's biggest producer of polysilicon, also agreed to set up a joint venture with CIC to invest and develop photovoltaic projects with an initial investment of $500 million. CIC will hold a 49 percent stake in the joint venture, with GCL-Poly holding the rest.

Shares of GCL-Poly surged 14 percent to close at HK$2.63 when it resumed trading yesterday.

Analysts said CIC's investment showed its growing interest in China's solar energy industry, which has seen explosive growth over the past few years.

Additionally, CIC agreed to buy $300 million-$500 million worth of shares in China Longyuan Power Group Corp's initial public offering, Dow Jones reported yesterday, citing unnamed sources. Wind-energy company Longyuan is seeking to raise $1.3 billion in an IPO ahead of a Hong Kong listing on Dec 10.

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"CIC in recent years has showed increasing interest not just in the upstream oil and gas sector but also in alternative energy," said Feng Shun, an analyst at Xiangcai Securities.

China has selected 294 solar power projects for subsidy as part of its just-launched "Golden Sun" program. The projects, with total generating capacity of 642 mW, are expected to cost around $2.93 billion and be ready for use in two or three years, according to the Ministry of Finance.

It is possible that China will increase its solar power generating capacity ten-fold within three to four years, Feng said.

Feng pointed out the transaction would also be beneficial to GCL-Poly's future business as it would help ease the company's financial pressure and boost its market credibility.