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In the News

Bright outlook for solar sector

Country set to become world's largest market as Europe sees contraction

China, the world's largest solar panel producer, is likely to become the largest market for solar devices in 2012 as Europe, the largest importer of Chinese panels, sees its market for the products contract.

China's capacity to generate solar power is expected to double to about 5 gigawatts this year, according to Solarbuzz, a US-based solar industry consulting firm.

Solarbuzz said there was "upside potential" that could mean the addition of more than 6 gW. The firm said there was a 25 gW photovoltaic project pipeline in China as of the end of February.

China's installed solar capacity reached 2.75 gW in 2011, according to Solarbuzz.

Europe accounts for more than half of China's module market. Major solar markets including Germany, Italy, Britain and France have cut subsidies over the past year.

Meanwhile, the United States has imposed duties on Chinese panels, denting the competitiveness of Chinese companies.

As a result of the shrinking overseas market, China is pursuing domestic demand through targeted policies.

The national feed-in tariff stands at 1 yuan (16 US cents) per kWh this year, with several areas such as Liaoning and Shandong provinces providing higher rates.

The Ministry of Finance has issued standards for subsidies for on-grid electricity from renewable sources, including solar power.

The standards specify subsidies of 0.01 yuan per kWh for on-grid electricity transmitted up to 50 kilometers, rising to 0.02 yuan for 50-100 km and 0.03 yuan for more than 100 km.

Under the government's Five-Year Plan for the Solar Industry (2011-15), the nation aims to reduce the cost of solar power to 0.8 yuan per kWh by 2015 and 0.6 yuan per kWh by 2020.

Domestic PV companies are expanding into the downstream sector through cooperation with local governments.

LDK and JA Solar, leading module makers, signed agreements with the Jiuquan government in Gansu province to develop solar farms.

LDK will invest 3.5 billion yuan to develop 200 megawatts of module production lines and 200 mW of solar projects.

JA Solar will invest 1.8 billion yuan to build 100 mW of solar cell production lines, 100 mW in module lines and 100 mW of solar projects.

Yingli also signed an agreement with China Power Investment to cooperate in solar project development. It has said it expects to sell 2,500 to 2,600 mW of modules in 2012, including 900 mW domestically.

That sales goal, if achieved, would make China the largest market for Yingli for the first time.

Web link: http://www.chinadaily.com.cn/cndy/2012-04/12/content_15027485.htm

Origin ready to shed more of its APLNG project

ORIGIN Energy is considering further sales of its equity in the Australia Pacific Liquefied Natural Gas project in Queensland to help pay for its expansion.

The energy firm last month left the door open for further reductions in its stake in APLNG after selling down its equity to China's Sinopec, leaving Origin with a 37.5 per cent stake, from 42 per cent previously.

Origin yesterday said funding choices for a second processing train, including additional equity raisings, would depend on factors such as the cost of project finance and the timing of a decision to proceed with the second phase. The two-phase project, a joint venture with US energy giant ConocoPhillips and Sinopec, is expected to cost $US20 billion ($19.18bn). This includes $US14bn for the first processing train.

Origin said the financing facilities it had in place meant there was no intention to raise additional equity for train one and other committed projects.

The joint venture is targeting a final decision to proceed with the second train by about mid-year.

The decision was previously expected by the end of this month but the schedule slipped because Sinopec needed more time to obtain Australian and Chinese government approvals for its equity purchase.

Sinopec has also agreed to buy LNG from the project, where exports are slated to commence in late 2014.

Shares in Origin finished up 5c at $13.15.

Web link: http://www.theaustralian.com.au/business/mining-energy/origin-ready-to-shed-more-of-its

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial, intellectual property, and labor and employment matters. For further information on any issue discussed in this edition of China Finance Lawyers Alert or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com and Mongolia www.lehmanlaw.mn.

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© Lehman, Lee & Xu 2012.
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