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July 25, 2006 4:55 pm

Chinese solar group raises $50m on AIM

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A Chinese company that recycles silicon wafers to be used in solar panels has raised $50m from an initial public offering in London.

ReneSola, which was only founded a year ago and has a valuation of $150m on AIM, is the latest Chinese company in the country’s fast-growing solar sector to attract interest from overseas investors, although turbulent market conditions forced it to scale back the amount of money raised.

The company, which recycles silicon from wafers used to manufacture semi-conductors, has benefited from the current shortage of raw materials needed to make solar panels.

Based in Zheijiang province near Shanghai, ReneSola plans to use the funds to significantly expand capacity and hopes to treble sales next year.

From having 16 furnaces for recycling silicon at the start of the year, the company plans to have 90 by the year-end. The silicon wafers it produces are used in photovoltaic cells which are the main component of solar panels.

Although China recently resumed IPOs on its mainland stock markets, the exchanges are dominated by state-owned companies, which has forced private sector companies to look for overseas listings.

A recent high-profile example was the flotation last year on the New York stock exchange of Suntech, the Chinese solar panel maker, which raised $455m and was heavily over-subscribed. China Biodiesel, a renewable energy company from Fujian province, raised £8m with an AIM flotation last month.

Booming demand for solar panels in Europe and the US has created a shortage of silicon wafers, allowing suppliers to enjoy strong profit margins and insist on pre-payment from most customers.

The solar industry in China is hoping that the country’s mounting energy needs will lead to a surge in demand for solar power. The government has set a target that 15 per cent of energy should come from renewables by 2020, however analysts believe that costs of solar energy will need to fall by roughly a half for demand to really take-off.

ReneSola claims to have developed proprietary technologies that allow it to efficiently recycle silicon and given that the inspection and testing process is labour-intensive, the company argues that there is a cost advantage to doing this type of work in China.

The company’s nominated adviser and broker in the IPO was Westhouse Securities. Before selling the 33 per cent stake to investors, the company was controlled by two senior managers, with Diverso Management, a China-based investor in renewable energy, owning 10 per cent.

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