The sun came out on a London-listed solar company, ReneSola, today when it was awarded a deal to develop a $700m (£425m) power plant in northern China, to become operational next year.
Shares in the group surged 19% to 178p on the back of a letter of intent from the Taiyangshan Development Zone to construct a 150MW plant near the city of Wuzhong.
The move is particularly important for ReneSola, which was listed on Aim at 79p in August 2006, because it allows the Chinese firm to move from being a manufacturer of solar wafers, cells and modules into a full-blown scheme developer.
"The emergence of downstream projects in the domestic market represents a significant opportunity for ReneSola to create new revenue streams and expand local market share," said chief executive Li Xianshou.
The contract, which is about the same size as some of the larger wind farms in Britain, also underlines the way China is pressing ahead with its own renewable energy plans amid concern about the country's position as the world's largest carbon emitter.
Li's comments came as former prime minister Tony Blair said after a meeting with Chinese premier Wen Jiabao on Thursday that the country appeared committed to taking stronger steps to contain greenhouse emissions.
A study by some of China's top climate change advisers published this week recommended setting firm targets to limit greenhouse gas emissions and ensure they peak no later than around 2030.
The rise in ReneSola's share price means the stock has now gained 5.5% so far this year, much less than the 35% jump for the index of 100 leading Aim shares. But the current surge in price is a good sign following a fall from a high of 700p reached in November ahead of a global crash in the price of solar wafers as subsidies were cut back and credit for new projects dried up.
Analysts at Goldman Sachs said European manufacturers would struggle to compete in future with Asian competitors and singled out ReneSola, formally based in the British Virgin Islands but with all its manufacturing operations in China, as an attractive investment. Chinese companies had a 30% cost advantage over European firms, said Goldman.
Renesola recently completed the acquisition of rival JC Solar and has been ramping up its annual polysilicon production capacity, which is expected to reach 2,900 tonnes by the end of next year compared to 400 to 500 tonnes over the current 12 months.
The Chinese company reported a pre-tax loss of $2.9m in the second quarter compared to a deficit of $62.8m in the first while earlier in the week German solar module maker Solon reported a bigger-than-expected second-quarter loss and sales also missed forecasts. Three other firms – Q-Cells, Conergy and LDK Solar – also reported big losses last week.
British-based PV Crystalox said on Wednesday that pricing pressure would continue into the second half of 2009, with average pricing expected to be significantly lower than in the first half.
