Friday, October 30, 2009

Is Energy the Key to China’s Brand Name Dreams?

By Michael Kanellos, Seeking Alpha

For the past several years, China has wanted to see its companies become more than just anonymous manufacturers in the background. And it seems that alternative energy is giving the country that chance.

Chinese companies are moving rapidly from providing products to acting as integral partners in energy projects in the U.S. China's A-Power Generation (APWR) today announced that it will provide the wind turbines for a $1.5 billion, 600-megawatt wind farm in Texas. The farm itself is being developed by a joint venture formed by Shenyang Power Group, the U.S. Renewable Energy Group and Cielo Wind Power. Shenyang will own 49 percent of the project. Jinxiang Lu is CEO of both SPG and A-Power. Commercial banks in China will provide financing.

The deal marks the first large-scale contract for wind turbines for a Chinese company in the U.S. and the second deal this month that will lead to power plants that will be built and/or operated with Chinese participation in the U.S. In these deals, Chinese companies are effectively going to provide the value-added types of services typically provided by U.S., Japanese or European companies. These deals also give Chinese banks something to do while China gears up.

"Chinese banks are currently not actively lending in the Chinese project finance market due to uncertainty about government regulation; however, Chinese banks are looking to be more active in lending to international projects," wrote Sanjay Shrestha in a research note from Lazard Capital Markets this weeik.

Does this mean that more U.S. jobs are going overseas? Not necessarily, but it might mean working for the U.S. subsidiary of a Chinese company one day.

Last week, China's ENN, which makes thin-film solar panels and develops solar farms, announced it was teaming up with Duke Energy Generation Services to bid on contracts for utility-scale solar farms and large commercial solar projects in the U.S. Duke will bring its expertise in navigating through public hearings and the legal hurdles of getting large-scale projects off the ground along with technology for building them to the 50/50 partnership, while ENN will provide expertise for building solar farms and possibly solar panels, said a Duke spokesman. The various projects could employ panels from different vendors.

Until recently, Chinese companies – Suntech (STP), Upsolar, JA Solar (JASO), Grape Solar – have largely confined their activities in the U.S. to selling equipment like solar panels.

China's presence in the U.S. energy market, though, has been growing. Suntech last year formed Gemini Solar Development with MMA Renewable Ventures to build power plants. Gemini has already landed a deal with Austin Energy.

Suntech, arguably, has become the first company from China to establish a brand in the U.S. Suntech is one of the largest suppliers of solar panels in the U.S. Haier, the Chinese consumer electronics manufacturer, has been selling consumer electronics under its own brand for a few years and even has marketed products with the NBA, but Haier rarely gets mentioned in the same breath as Samsung or Sony (SNE).

Chinese universities and companies have also signed research agreements with their U.S. counterparts.

A few deals have gone the other way. Earlier this year, First Solar signed a deal to build a 2-gigawatt solar farm in China. As part of the deal, First Solar (FSLR) will share some of its expertise on building large solar farms with Chinese officials and companies. The U.S. government is also pressuring China to open its market for export.

No comments: