Chinese Billionaire Li Hejun has Swooped on Cheap Western Solar Technology. What's Next?

Friday, 18 October 2013, 18:00 HKT/SGT

HONG KONG, Oct 18, 2013 - (ACN Newswire) - When the world's eyes were fixed on the Beijing Olympics five years ago, China cleaned up the capital's famously polluted air.

Since then, things have gone from the previously bad to the progressively worse. Pollution is sometimes so thick that the American embassy advises staying indoors. This year a study backed by prestigious Tsinghua University found that Chinese living north of the Huai River - an area that includes Beijing - on average die 5.5 years earlier. The nation's current energy and resource mix is toxic.

At his headquarters in the China Olympics Forest Park, trying to do something about it, is Li Hejun, chairman of China's largest clean energy business, Hanergy Holding. Li arrived in the city as a college student in the 1980s from Guangdong Province. Later he found his way into hydropower, acquiring and building small dams back home until he put together what would make his career: western China's Jin'anqiao Hydroelectric Project, the world's largest privately owned hydropower station. The total power business generates $500 million a year of free cash flow for a Hanergy arm, according to Li and a report by Macquarie Securities. "I could stop working," Li smiles in an interview. "I like golf."

But Li, at 46, is a man with a larger mission. He wants to expand his renewable-resource business, in particular solar. More than half of the world's energy will come from renewables in 2035, he predicts. The sun is "everywhere" - even behind that Beijing muck.

For a China dependent on imported oil and battling horrific coal smoke, it's a wonderful big dream, the stuff of new President Xi Jinping's rhetoric. Rather than the silicon-based technology that fostered the rise and fall of many solar companies, including Chinese, Li is focused on what is known as thin-film. It's lightweight but can be combined with other materials to power buildings.

A crash in the price of thin-film technology in the U.S. and elsewhere in recent years has beset still other firms and paved the way for Li to swoop in at vulture prices. Reportedly, a thin-film company that Li bought last year for $30 million, MiaSole, received $500 million of venture funding from, among others, Silicon Valley heavyweight Kleiner Perkins (which didn't respond to a request for a comment). Li in the past year also bought Solibro from German solar equipment maker Q-Cells and Global Solar Energy of Arizona.

"It's very smart," says Gary Rieschel, a managing partner at Qiming Venture Partners in Shanghai, which includes green-tech firms among its $1 billion of investments "You have to take him seriously." Li says he's still looking to buy more businesses.

Assigned prices and tax breaks for solar production announced by the government in September may benefit producers including Hanergy at a time when the country's exports of solar panels have been subject to tariff wars and overcapacity is a problem. Others, too, stand to gain, and their stock prices have moved up.

Hanergy's recent moves brought what had been an obscure if large business into better focus. Based on financials provided by Hanergy and others reviewed by global accountants Ernst & Young, we estimate the value of Li's holding company at $10.9 billion. Hanergy says we are low.

A key question is whether Li, combining the thin-film processes of the businesses he has acquired, can achieve the cost efficiency that eluded their previous Western owners, helping to finally lift China into the world lead in solar technology. "It is potentially something big, big, big," says Elle Carberry, a managing director of the China Greentech Initiative, supported by 100 businesses and organizations including IBM and Lenovo. Li, Carberry says, might have a better chance of commercializing technology, too, because he gets the Chinese government drill better than Silicon Valley VCs who stumbled in thin-film.

Li doesn't hide good ties between government officials and Hanergy, which in 2011 received a visit from now President Xi. The path to Li's office is lined with photos of him with Chinese political heavies. One the company's many slogans is: "Stronger and stronger because of the homeland."

Li's ambitions trace to his modest birthplace in Guangdong. It is a hilly area populated mostly by a group of Chinese known as Hakkas. They are famously frugal, hardworking and culturally bonded, counting Singapore's Lee Kuan Yew among their clan and numbering 100 million in 70 countries.

The ancestral home there is surrounded by farmland with a courtyard and pond in front. His father sired seven children from two wives - and all lived under one roof. Li is the eldest son of the second, and all four kids from Li's mother today work in Hanergy.

Li was one of few students from town to go to college in Beijing. But with his mechanical engineering degree, he decided to take the plunge and become an entrepreneur, like so many Guangdong natives. Even as a college student, he made money as a black-market currency trader and sold cigarettes on the side.

After graduating he sold electronics, including calculators. A teacher from his Jiaotung University, Guo Kai, lent him 50,000 yuan to set up a logistics business. "I thought his plan was practical," the 84-year-old Guo recalls from his home in Beijing. "He wasn't somebody who talked a lot; he went out and did things." Li lost all of the money in the logistics venture but paid him back later.

His first hydro dam was across the same Dongjiang River where he swam in his youth. The financial returns weren't great but at least stable. Soon there nearly ten such power projects, culminating in Jin'anqiao, a $3.2 billion of investment that brought at least 2.4 million kilowatts of capacity. It connected to the grid in 2011.

That surely took considerable guanxi, but Li is sparing with details and no patron is easily determinable. His entr?e in the corridors of power has only grown, however. Though little known among the Chinese public, he is a vice chairman of the All-China Federation of Industry & Commerce, an elite position that puts him on a par with China's No. 1 Richest, Wang Jianlin.

Today, besides its 10 hydropower dams, Hanergy Group has 18 solar power plants, 2 wind power sites and 10,000 employees in 14 countries. It has a Hong Kong-listed arm, Hanergy Solar, and a near-new plant in Guangzhou that awaits equipment from the U.S. that, Li says, will help revolutionize China's thin-film market.

Rather than investing in large power plants that sell to a big-ulility-owned grid, as it has in the past, Hanergy is targeting individual buildings and rooftops with thin-film that connects to building materials to create mini-power stations that don't draw down power from a grid.

China's new policies to boost solar are encouraging development of just that kind of "distributed" power generation. Authorities aren't distinguishing between types of technology-thin-film or the still more popular silicon-based ones, says Patrick Dai, an analyst at Macquarie Securities in Hong Kong. Hanergy is betting on overcoming technological hitches that plagued MiaSole, Solebro and Global before Li bought them at a discount.

Another problem for China's whole distributed energy push could be how to pay for the individual setups; financing programs will need to be implemented, says Junda Lin, also of the China Greentech Initiative. And while no one doubts the profitability of Li's hydropower cash cows, Hanergy Group has dragged its feet on making payments owed to its Hong Kong-listed solar unit. (In October the group set a schedule to clear arrears by the end of the year.)

A critical article in influential Caixin magazine last November said Li had exaggerated what he could do for individual communities where he has been investing in solar. Hanergy dismissed the criticism and said the magazine didn't seek the company's comment.

What's clear here: big dreams, big promises to keep. If thin-film technology is what Li and others tout it to be, they can all come true, especially with his even more powerful supporters. China can be much greener, and Li can be even richer. (Source: Forbes)

Topic: Research / Industry Report Sectors: Daily Finance, Energy, Alternatives, Daily News, Alternative Energy
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