tag:blogger.com,1999:blog-4815867514277794362.post3815189060837951552..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: The extent of Chinese solar subsidies and their implicationsJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-4815867514277794362.post-3775757723805369552011-12-22T08:53:49.498+11:002011-12-22T08:53:49.498+11:00http://www.tirereview.com/Article/95164/another_co...http://www.tirereview.com/Article/95164/another_court_tosses_china_countervailing_duties.aspx<br /><br />Subsidy is probably a moot issue anyhow until after 2016 when China will be deemed a "market economy" based on WTO-accession agreement.H.Z.noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-49509097025104415542011-12-20T10:13:15.445+11:002011-12-20T10:13:15.445+11:00I wouldn't argue that the technology is new bu...I wouldn't argue that the technology is new but you could make a strong case that the industry is.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-86386613640958231182011-12-20T10:12:43.207+11:002011-12-20T10:12:43.207+11:00I wouldn't argue that the technology is new bu...I wouldn't argue that the technology is new but you could make a strong case that the industry is.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-29349640676914089402011-12-11T22:41:06.972+11:002011-12-11T22:41:06.972+11:00It is possible, by fixing your eye relentlessly on...It is possible, by fixing your eye relentlessly on a single sharp landmark, to find your way free and clear even in the midst of a heavy snowstorm. But it really takes an exhausting effort to avoid less distinct distractions which may lead you astray along the path.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-13367044545223119422011-12-06T13:18:33.899+11:002011-12-06T13:18:33.899+11:00Maybe Solyandra was a fraud from inception - maybe...Maybe Solyandra was a fraud from inception - maybe it was NEVER going to be competitive.<br /><br />Whatever - it was a new technology so the subsidized loan to it was WTO compliant.<br /><br />There is nothing in the WTO that stops a government subsidizing a new technology. Come to think of it - I don't think there is anything in international trade law that stops the government subsidizing a fraudulent new technology.<br /><br />I do not need to express a view on whether Solyandra was real or fraudulent to have my view on the trade dispute with China about coventional polysil.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-90601202320814528742011-12-06T10:26:08.332+11:002011-12-06T10:26:08.332+11:00John,
There is no such thing as Solyandra. It is...John,<br /><br />There is no such thing as Solyandra. It is Solyndra. Solyndra was an actual scam (and a fraud) since the beginning - cost of manufacturing (on efficiency-adjusted basis) was not competitive and management knew that it will never be competitive.ECD Fanhttps://www.blogger.com/profile/15715193842462262988noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-52571057970020166692011-12-06T08:12:48.741+11:002011-12-06T08:12:48.741+11:00Dear last anon.
Polysil is not a new technology
...Dear last anon.<br /><br />Polysil is not a new technology<br /><br />Solyandra panels (which were cigs panels - look it up) were a new and hopeful (and failed) technology.<br /><br />If China wanted to subsidize a CIGS panel of a new design then they could do that via government guaranteed loans and still be WTO compliant.<br /><br />JohnJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-3192731720389802542011-12-06T03:00:59.983+11:002011-12-06T03:00:59.983+11:00So solar is a "new industry" to the US, ...So solar is a "new industry" to the US, but not the same to China? What a BS! Those who try to fool around with double standard shall be punished severely.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-53314491239905288992011-12-04T15:25:55.844+11:002011-12-04T15:25:55.844+11:00It amuses me that people presume its cheaper on a ...It amuses me that people presume its cheaper on a fundamental basis in China. One of the major inputs in polysilicon is power which China does not have on the cheap, REC does. Labor is frankly a rounding error in much of this business ex installation - and that labor is not tradable in the sense that you can't use Chinese people to install panels in Cali. <br /><br />And while China may have historically imported a lot of polysilicon they produce a lot more themselves now from companies like GCL Polysilicon. <br /><br />Q cells bonds may be cheap here - but they may go under before this policy shift saves them. For 10-15c its an okish punt I guess.Nemo Incognitohttps://www.blogger.com/profile/07345185457108156269noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-67460702475557415122011-12-04T12:50:00.541+11:002011-12-04T12:50:00.541+11:00A lot of the polysilicon / materials provided for ...A lot of the polysilicon / materials provided for the manufacturing of the Chinese panels come from companies like MEMC / Wacker Chemie / Dupont...so I am not so sure that it will be that easy for the americans/europeans to justify a complaint against Chinese Solar panel companies because you will see lobbying from these companies on behalf of the Chinese. Secondly, you could say the Germans are subsidising q-cells with cheap loans (ever seen where their bonds are trading)....at the end of the day, the solar industry is a nascant industry which benifits from subsidies from both sides and in my opinion the Americans need cheap panels from the Chinese in order to reach closer to grid parity. The jobs that will eventually created in the USA will be on the installation side.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-465075320840219562011-12-03T20:11:10.270+11:002011-12-03T20:11:10.270+11:00H.Z. yes you are abrasive.
1) I read contracts i...H.Z. yes you are abrasive. <br /><br />1) I read contracts in Chinese. If we want to talk credit, lets talk about yields over swaps. Chinese loans are 200-300bps over risk free vs 3000 bps over for USD bonds. <br />2) Think John has more to say on this point - if you get a default the whole capital structure defaults so spread differentials imply different recoveries. <br />3) No you are wrong do some research and read the actual trade law.Nemo Incognitohttps://www.blogger.com/profile/07345185457108156269noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-45056022879059722032011-12-03T16:34:12.428+11:002011-12-03T16:34:12.428+11:00John,
I am impressed by the quality of your work s...John,<br />I am impressed by the quality of your work so I apologize if I sounded abrasive in my first post. For the sake of argument (it is probably safe to assume that Chinese banks subsidize firms favored by the State):<br />1) Do you read loan covenants from translated copies provided by the filers? Chinese contracts tend to be short and do not spell out a lot of details and contingencies. So seniority would probably largely depend on the local legal practice that I am not familiar with. There could also be structural subordination (loaning to a subsidiary with real assets instead of the holding company). Short maturity could also effectively subordinate other longer maturity debt.<br />2) One could lend at reasonable rate against reliable collaterals (inventory, receivables, real estate) to a company in financial trouble.<br />3) USG DIP financing to GM/Chrysler and cramming down of creditors was also a form of subsidy, probably not consistent with WTO. Indeed a Chapter 11 bankruptcy is generally a form of subsidy to the operating entity when competitors would be happier if the entity is liquidated.H.Z.noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-17936492051117017132011-12-03T10:05:44.727+11:002011-12-03T10:05:44.727+11:00I am aware of Pettis view - the slowly declining C...I am aware of Pettis view - the slowly declining Chinese inflation rate is one of those puzzles I have and do not understand.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-50443273652813783662011-12-03T03:37:27.337+11:002011-12-03T03:37:27.337+11:00John, I suggest you visit
http://mpettis.com/
Fo...John, I suggest you visit<br /><br />http://mpettis.com/<br /><br />For China financial macro take. As Prof. Pettis analysis shows, the entire Chinese economy developes and rests on negative real interest rates, which shift wealth from savers to borrowers.<br /><br />Incidentally we have a similar environment now in the UK and in Germany, as well as the US, where interest rates are effectively below inflation due to central bank policies.<br /><br />It will be hard to take the Solar Panel companies to task over the interest rate regime of the PBoC, especially as the FED is effectively doing the same.Finsternoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-1854635241031320262011-12-03T00:39:50.428+11:002011-12-03T00:39:50.428+11:00Can you clarify exactly what your yield to worst g...Can you clarify exactly what your yield to worst graph is showing? I am not used to reading Bloomberg (is that what it is?) screens.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-23339197592384042962011-12-02T18:21:24.754+11:002011-12-02T18:21:24.754+11:00Lending at a rate below an illiquidity-influenced ...Lending at a rate below an illiquidity-influenced market rate for existing debt is a benefit, to be sure, but it is not an illegal trade subsidy. It is something governments do in normal course; witness the Fed's emergency loans to US banks. In any case Chinese solar firms are borrowing at rates that would be reasonable in the absence of financial distress, 6-10% in RMB terms. That's only an unfair subsidy to those firms that should fail in the long run, not the more cost competitive Chinese players such as Trina or Yingli. Arguably their bonds (and equity) are mispriced, as they are viable concerns in the long run. It's a little unfair to use a market price that includes substantial implied default risk as a proxy for true economic borrowing costs.Jhttps://www.blogger.com/profile/13414667979184626760noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-52964034616842639892011-12-02T17:27:45.382+11:002011-12-02T17:27:45.382+11:00Look at the top graph. It is yield to worst I thin...Look at the top graph. It is yield to worst I think.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-7306588638511096402011-12-02T17:04:30.811+11:002011-12-02T17:04:30.811+11:00This may make me look like an idiot, but it is bet...This may make me look like an idiot, but it is better to find out: You should yield to worst instead of option adjusted spread in your comparison of rates. Wouldn't OAS clear out the convertible issue letting you not worry about how the TSL bond traded well over par?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-37115742918989870542011-12-02T16:42:32.376+11:002011-12-02T16:42:32.376+11:00I have read the loan covenants. The short term fun...I have read the loan covenants. The short term funding is all unsecured and ranks next to the above mentioned corporate debt - in some instances parallel.<br /><br />Also the incremental loans are effectively all unsecured and subordinate.<br /><br />I am not as sloppy as you think. Lets call it a 2-3 percent not 30-50 percent differential.<br /><br />JohnJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-49307279720623702011-12-02T16:36:43.277+11:002011-12-02T16:36:43.277+11:00Bank loans are secured. Based on your logic, a con...Bank loans are secured. Based on your logic, a consolidation of credit card debt (20+%) into mortgage (4% for first lien, higher for second lien) would be an illegal subsidy. You may get somewhere with your arguments but they clearly need to be refined as you ignored the issue of collateral and control contained in credit terms.H.Z.noreply@blogger.com