Shunfeng expends capacity

China's panel makers, among the world's biggest producers, were lured back home this year by the government's plans to expand the solar power producing industry. The policies have set off a scramble by the likes of state power producers China Huaneng Group and China Merchants New Energy Group as well as manufacturers like Shunfeng, Yingli Green and JA Solar.

JA Solar said in August it planned to develop 300 MW of generating projects in northern China's Hebei province, in what its CEO Jin Baofang said was a major step "to increase the role project development plays in our overall revenue mix".

Shunfeng Photovoltaic, a small Chinese solar cell maker listed in Hong Kong, has said it will enter agreements to develop 1,079 megawatts (MW) of solar power projects and have 600 MW in operation or under construction by the end of 2013.

To ramp up its own manufacturing capacity aimed at catering for the expansion of its solar generation business, Shunfeng last week announced a plan to purchase the main unit of Chinese solar maker Suntech Power.

Shunfeng has offered 3 billion yuan ($492 million) to take over bigger rival Wuxi Suntech, the bankrupt unit of Suntech Power. Wuxi Suntech filed for bankruptcy protection in March, after its parent defaulted on a $541 million convertible bond - one of the biggest defaults by a Chinese company.

The deal could increase Shunfeng's solar cell capacity by five times to over 2,000 MW.

Analysts warn of financial, regulatory and technical risks. Previous investments in Chinese projects have been hurt by issues like delays in subsidy payments and poor infrastructure.

Like their overseas peers, Chinese panel makers may eventually spin off their power plants by listing them or selling them to funds and insurers to take profit and alleviate potential funding strains, analysts say. China's top 10 solar makers have 100 billion yuan in debt, with an asset to debt ratio above 70 percent on average, state media say.

"What we may see is an increased level of listings and spin-offs into Hong Kong and elsewhere to try to build up some sort of vehicles to house these type of assets," said an energy banker at an international bank.