Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

[touchring]

http://narrowtranche.blogspot.com/20...market-in.html

The rigged solar panel bond market in Shanghai

A somewhat obscure story hit the tape today that got lost in all the S&P downgrade watch hoopla. A company by the name of LDK Solar Co, a Chinese solar panel firm - yes one the firms that brought down Solyndra - did a 3-year bond issue in Shanghai. Previously the firm sold bonds in Singapore, but this time it had to settle for Shanghai, where the bond market is not very large. The reason is that its current bond in Singapore trades at 50 cents on the dollar - basically where a near-bankrupt company debt would trade. Yet it was able to sell bonds at par in Shanghai. In fact its current debt in Shanghai trades at a premium with a 7% yield.

Bloomberg: The 500 million-yuan ($79 million) sale of three-year notes tomorrow is part of a 3 billion-yuan program by the company to replace shorter-term liabilities. Traders are quoting Xinyu, south-central China-based LDK’s three-year debt at 5,000 yuan per 10,000 yuan bond in Singapore, yielding 49.5 percent, data compiled by Bloomberg show. The company’s 2012 yuan-denominated debt sold in China in October yields 7.08 percent.

The same credit, two different markets, and yields of 49.5% and 7.08? LDK is rapidly losing money due to the glutted solar panel market. How is the 7.08% yield possible? The only explanation is the Shanghai market for these bonds is rigged. In other words the Chinese government is buying LDK bonds to provide support to its solar panel industry. Otherwise the firm would be out of business.

Bloomberg: “In any normal market economy these companies would hit the wall extremely fast,” John Hempton, founder and chief investment officer at Bronte Capital Management, a Sydney-based hedge fund, said in a phone interview yesterday, referring to Chinese companies. “They are shockingly cash-absorbing in a shockingly glutted industry and they are all shockingly indebted. The advantage that they have is they don’t go bust.”

The U.S. Commerce Department doesn't need to dig much further as it investigates unfair trade practices in the solar panel industry by China. The market is telling them where to look. Of course one has to ask the question as to where does such a fine company trade outside of China. The answer is surprising - everywhere. Here are the listings and the ticker symbols from Reuters:

[c1ue]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

This story would much more credible if we hadn't just seen the failure of Solyndra, a company with $500 million in US government loan guarantees.

This in contrast to $79 million in a rigged bond market in Shanghai.

From what I can see, what exactly is the difference?

[lektrode]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

no kiddin, eh?
chinas solar market looking like our RE/mortage markets all of a sudden?

tho i wonder what this will do for retail pricing of PV in The US?
cant get thru at the moment for the latest at my preferred vendor out here...

[don]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

State sponsorship of the productive economy is a Chinese invention? For starters, check out mid-19th century railroad growth in the US. Toot, toot.

[touchring]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

This story would much more credible if we hadn't just seen the failure of Solyndra, a company with $500 million in US government loan guarantees.

This in contrast to $79 million in a rigged bond market in Shanghai.

From what I can see, what exactly is the difference?

$500 million? You're kidding, $500 million can't even buy you a medium sized mall in Shanghai. I don't even consider $500 million a subsidy.

Various sources I've checked that subsidies are in the range of tens of billions or maybe a hundred billion if we include free land, unlimited bank loans and tax holiday.

[c1ue]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

Various sources I've checked that subsidies are in the range of tens of billions or maybe a hundred billion if we include free land, unlimited bank loans and tax holiday.

Really? I'd like to see these sources which state a single solar company in China received tens of billions, or a hundred billion, in subsidies.

Are they building their factories in downtown Shanghai?

[touchring]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

Really? I'd like to see these sources which state a single solar company in China received tens of billions, or a hundred billion, in subsidies.

Are they building their factories in downtown Shanghai?

There's no single solar company in China that received tens of billions in subsidies but I don't know if the entire US solar industry received even 1 billion in subsidies.

[c1ue]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

There's no single solar company in China that received tens of billions in subsidies but I don't know if the entire US solar industry received even 1 billion in subsidies.

Given that the US government gives out $3 billion a year or more for alternative energy development, I guarantee the entire US solar industry has received more than $1 billion in subsidies.

http://www.eli.org/Program_Areas/inn...nce_energy.cfm

Subsidies for renewable fuels, a relatively young and developing industry, totaled $29 billion over the same period.

The period in question: 2002 to 2008

This ignores the $500M+ just for Solyndra, and this also excludes uncounted millions or even billions in state government subsidies.

In fact, I'd bet that the US subsidizes Chinese solar manufacturers far more than China does via US solar install subsidies.

[lektrode]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

....
This ignores the $500M+ just for Solyndra, and this also excludes uncounted millions or even billions in state government subsidies.

In fact, I'd bet that the US subsidizes Chinese solar manufacturers far more than China does via US solar install subsidies.

must say mr c1ue, when you're right, you are right and altho i was somewhat baffled by your arguments against the subsidies flowing to the alt-energy sector, its beginning to make sense - at least from your perspective, mentioned elsewhere on the tulip, that 'drowning problems in money' isnt a solution (particularly when its the beltway making the decisions, using borrowed money that now is causing untold problems, even as it not only debases the value of our currency/savings, wipes out real incentives to save/invest (gold being 'insurance') and results in corruption of the marketplace by our 'friends' on wall st?)

here's an interesting take on what apparently is really happening:
Subsidizing Wall Street to Buy Chinese Solar Panels

http://online.wsj.com/article/SB1000...863392956.html

OPINION / DECEMBER 8, 2011

By T.J. RODGERS

At the end of the recently released film "Margin Call," ( http://margincallmovie.com/ )the chairman of the fictional investment bank that triggered the mortgage-backed securities meltdown sits in his executive dining room, looking down on the Hudson River sunset while enjoying a steak and an expensive bottle of Bordeaux. Why not? He has just saved billions for his shareholders by dumping the firm's entire "toxic loan" portfolio in one hectic trading day. Just before giving a bonus to the brilliant analyst who foresaw the meltdown only hours in advance, the chairman predicts, "There's going to be a lot of money made coming out of this mess."

Wall Street understands how to make money, up-market or down. "Margin Call" may fuel Occupy movement ire, but in creating mortgage-backed securities, Wall Street did nothing other than facilitate home-financing access to the next tier of less-qualified home buyers, as demanded by every president since Bill Clinton. After that, the bankers did exactly what their shareholders wanted: bundle those risky loans into securities, sell them to lock in the profits, and dump the risk right back onto the federal government—where it belonged.

My purpose is not to debate the morality of mortgage-backed securities but to update the Law of Unintended Consequences with the corollary Law of Misguided Subsidies: Whenever Washington disrupts a market by dumping subsidies into it, Wall Street will find a way to pocket a majority of the money while the intended subsidy beneficiaries are harmed by the resulting market turmoil.

The recent crash in mortgage-backed securities was a near-repeat of the savings-and-loan crash of the 1980s, in which Washington insured the S&L industry but failed to set limits on high-risk loans. When the bubble burst, Washington paid Wall Street the insurance money while homeowners lost huge sums in real-estate hell. Wall Street understands how to manage risk; the federal government and consumers do not.

Consider the current 30% federal solar energy subsidy. A home solar system with 60 solar panels produces about 15,000 watts of power, enough to completely offset the $6,000 annual electricity bill of a typical upscale California home. The system costs about $90,000 prior to the 30% federal income-tax credit, which reduces its cost to $63,000. After a simple payback period of about 10 years, the homeowner literally enjoys free electricity for the remainder of the guaranteed 20-year system life, a very profitable 10 years.

But what if that $27,000 tax credit, the accelerated-depreciation tax savings, and most of the hefty post-payback profits went to Wall Street firms with a "tax appetite," not the homeowner? That's just what happens with the majority of new home solar-system installations today.

Washington and consumers are both notoriously shortsighted investors. Washington thinks in two-year election cycles, and consumers will usually choose a financially unfavorable option if it offers no money down. Today's most successful pitch for home solar financing goes like this: "Why pay a lot of money when you can get your solar system installed free and immediately reduce your utility bill?" Most homeowners find that proposition compelling. They ignore the fine print: "You must give your tax credit and depreciation to us and sign a long-term contract to buy power from us at prices just below market."

Today, most new home solar systems are purchased by special Limited Liability Corporations (LLCs) that are specifically created by Wall Street firms to purchase home solar systems and to sell power to the homeowner on a cell-phone-like contract. The homeowner does not mind giving up the tax benefits as long as the "free" system reduces utility bills.
However, when the system is paid off and the monthly LLC profit jumps to 100% of the electricity bill, the LLC solar electricity price to the homeowner is maintained just below market—and the profit really begins to roll into the LLC. Since the risks to the LLC grow as the solar systems age, many banks offload their risk by selling the LLCs before their 20-year lifetime is up, locking in much of the long-term profit. There is now a growing market for what might be called "solar-backed securities." Wall Street understands the time-value of money; the federal government and consumers do not.

One of the largest solar-system installers in the U.S., SolarCity Corp., uses the LLC strategy and currently buys a majority of its solar panels from the low-cost Chinese supplier, Yingli. Thus when President Obama said that we must subsidize our solar industry to remain competitive with the Chinese, it would have been more accurate to say that we subsidize Wall Street to create employee-less corporations that buy and install Chinese solar panels in the U.S. Wall Street and consumers understand that free markets are borderless; Washington does not.

Just last week, the U.S. International Trade Commission found the Chinese solar industry guilty of "dumping" solar panels in the U.S. Tariffs are likely to be levied against Yingli and others. Here then, is a practical guide to the Obama administration's nonsensical solar policy: Washington gives tax breaks to Wall Street to fund LLCs that buy solar panels from the Chinese to "help" the American solar industry, while the ITC threatens to levy a tariff on those solar panels, which would raise the price of solar energy to U.S. homeowners.

In short, Wall Street pockets the money and consumers get higher solar-energy prices.

We should stop reflexively indicting Wall Street "greed" and focus instead on Washington as the disruptive force in one market meltdown after another. Solyndra, the poster child of the Law of Misguided Subsidies, borders on irrelevancy compared to the full impact of bad economic policy.

Mr. Rodgers is the founder, president and CEO of Cypress Semiconductor.

altho i still say that putting the subsidies (means tested) directly into the pockets of the residential consumer still makes sense - not a tax credit, but a check to RE-IMBURSE the homeowner for some % the install of the PV system - this then allows the buyer to due his own due dilligence, choosing the best deal for HIS money, allows him to pocket _all_ the savings, encourages the much needed switch-over from coal-produced electric, encourages the small biz community (PV contractors, suppliers etc), CREATES JOBS IN THE US, while allowing the citizenry to pull the electric utilities' & banksters vampire-fangs out of our necks (never mind reduce imported oil) - and if the chinese want to subsidize all this for US?

lets lettem have at it... and a great start would be to dump the subsidies for corporate amerika that serve only to fatten their bottom lines AT OUR EXPENSE.

[c1ue]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

lektrode, great find.

T.J. is a very irritating person, but also very smart.

altho i still say that putting the subsidies (means tested) directly into the pockets of the residential consumer still makes sense - not a tax credit, but a check to RE-IMBURSE the homeowner for some % the install of the PV system - this then allows the buyer to due his own due dilligence, choosing the best deal for HIS money, allows him to pocket _all_ the savings, encourages the much needed switch-over from coal-produced electric, encourages the small biz community (PV contractors, suppliers etc), CREATES JOBS IN THE US, while allowing the citizenry to pull the electric utilities' & banksters vampire-fangs out of our necks (never mind reduce imported oil) - and if the chinese want to subsidize all this for US?

lets lettem have at it... and a great start would be to dump the subsidies for corporate amerika that serve only to fatten their bottom lines AT OUR EXPENSE.

The point I was making was that China's present market share in solar is high, and increasing. The jobs thus being created by the many many billions of solar install subsidies (the tax credits above) are largely being created in China - because the sum total of subsidy + consumer cash paid for solar is going in fraction to exactly China's solar market share in the US.

This is particularly noteworthy because solar installations in China as just about nil.

[touchring]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

The grass on the other side always appear greener.

[lektrode]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

The grass on the other side always appear greener.

more please, mr touchring (expand/why)?

[touchring]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

more please, mr touchring (expand/why)?

What I'm trying to say is that there is no way to have a rationale argument because the grass is always greener on the other side.

But there is one ultimate way to find out which system really is better.

That's is to put up the American and Chinese citizenship for auction with the exclusive term - you can't be citizens of both countries at the same time.

[c1ue]

Re: Chinese solar manufacturer gets unlimited financing from Chinese govt via the bond mkt.

That's is to put up the American and Chinese citizenship for auction with the exclusive term - you can't be citizens of both countries at the same time.

Actually, you can. Neither nation 'allows' it, but it is a "don't ask, don't tell" situation.

The analogy is ridiculous though.

For one thing, being an American is being part of a richer society.

I'm sure a Swiss citizenship would auction for more than an American one, so what?