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Seeking to Circumvent Possible U.S. Trade Sanctions, China Buys Hawaiian Solar Company

Chinese investment in the U.S. economy up to now has been primarily in the form of U.S. Treasury bills.
 
But, reading the U.S. press and conservative calls for punitive trade tariffs against China, Beijing’s investors have taken a leaf out of Tokyo’s 40 year-old playbook, when similar concerns were raised about Japanese imports. Four decades ago Japan cannily began not only to establish factories in the U.S. for its major U.S. exports, primarily automobiles, but began a cautious policy of investing in struggling U.S. companies, so if and when Congress got more xenophobic Japanese manufacturers could point out that trade barriers would harm American workers as well as Japanese ones.
 
The net result on punishing Japan with restrictive tariffs quickly became the daunting possibility of throwing U.S. workers into unemployment, then, as now, the third rail of American politics, and what Congressman want to be seen as increasing unemployment?
 
The above scenario is behind the recent acquisition by Tianwei New Energy Holdings Co., Ltd. (Tianwei) of Hawaii’s troubled Hoku Corporation, a solar energy product company, a leading provider of silicon wafers, photovoltaic (PV) cells, modules and systems.
 
Last month Tainwei announced the signing of a definitive reseller agreement establishing Tianwei Solar USA, Inc., a wholly-owned subsidiary of, as the primary distributor of Tianwei New Energy's PV modules to the North American market.
 
On 1 December Tianwei started its polysilicon production via Hoku Corp. with an annual capacity of 2,500 tons. Last year China’s National Development and Reform Commission approved Tianwei purchasing 60 percent of Hoku Corp.’s outstanding shares.
 
According to Hoku Corp., “During the three months ended September 30, 2011 Hoku Materials incurred an operating loss of $7.6 million,” as even as of “September 30, 2011, Hoku Materials has capitalized $575.6 million related to construction costs for the Polysilicon Plant and had received $140 million in customer deposits as prepayments under long-term polysilicon supply agreements.”
 
Can you say cash flow problems?

Under the terms of the agreement, Hoku's newly formed subsidiary will market, distribute and sell Tianwei New Energy's full range of UL-listed PV modules in North America. Hoku established offices in Southern California for Tianwei Solar USA, Inc and will initially focus on developing key sales channels within the commercial and residential segments of the distributed generation solar market. Tianwei New Energy already has an established customer base in Europe, in 2010 delivering more than 200 megawatts of PV modules.

Spinning the news, Hoku Corp. CEO Scott Paul said, "We are extremely pleased to continue strengthening our relationship with Tianwei. This new PV products division represents the first of several steps forward in our continued expansion of Hoku's global market presence. It will provide a strong complement to our existing solar projects business, and we look forward to supplying Tianwei New Energy's modules to project developers, PV integrators and utility customers throughout North America."
 
Reciprocating the back rub, Tianwei general manager and now Hoku Corp. director Zhengfei Gao purred, "We recognize Hoku Solar's PV integration expertise, brand strength and market presence in the U.S. North America is an important, growing market in the solar industry, and Tianwei is very pleased to have Hoku leadership in our strategic North American expansion."
 
So, what has China bought?
 
Hoku Corp. consists of three business units: Hoku Materials, Hoku Solar, and Tianwei Solar USA, Inc., manufacturing polysilicon for the solar market from its plant currently under construction in Pocatello, Idaho and now Hoku Solar markets and sells PV modules manufactured by Tianwei New Energy.
 
And the future looks sunny. Tianwei chairman Ding Qiang said that Tianwei signed a distribution agreement with Hoku Corp. to be its distributor for its sales of modules not only in the U.S., but Canada and South American regions as well.
 
And Tainwei is already garnering allies. On 21 December, according to Ding, the U.S.-based Coalition for Affordable Solar Energy wrote to Hoku competitor solar-panel maker SolarWorld asking it withdraw its petition asking the American government to impose heavy tariffs on Chinese solar energy products for unfair trading practices, commenting, "By asking government to interfere and artificially increase the price will only hinder the deployment, cost thousands of jobs, reduce our energy security, and further negatively impact an already shaky economy."
 
Two months ago SolarWorld Industries America, an Oregon company, and six other undisclosed partners filed an appeal to the U.S. Department of Commerce (DOC) alleging unfair Chinese business practices and the DOC replied in November that it would conduct an investigation to determine whether Chinese firms have been selling solar panels in the United States at unfair discounts and receiving illegal government subsidies and a ruling earlier this month by the International Trade Commission concluded that U.S. solar companies were being harmed by Chinese solar imports.
 
Interestingly, SolarWorld Industries America, the largest U.S. solar manufacturer, is now owned by a German company
Many energy analysts have commented that acquisitions of American companies provide a way for Chinese solar energy companies to avoid U.S. trade barriers.
 
Well, duh!
 
The question remains – where were U.S. investors when Hoku Corp. was struggling?

By. John C.K. Daly of Oilprice.com




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