Hong Kong Property Tycoon Making $533 Million Solar Bet: Energy

Apr 01, 2014 4:37 pm ET

April 1 (Bloomberg) -- A Hong Kong real-estate tycoon has spent the past year accumulating stakes in failing solar companies, piecing together what may become the biggest collection of photovoltaic factories in the world.

Zheng Jianming, also known in Cantonese as Cheng Kin Ming, has spent or pledged about $533 million to buy assets that at their peak were worth almost $20 billion, according to regulatory filings in the U.S. and Hong Kong, where he has a home and office.

The transactions, if completed, would transform Zheng, a newcomer to the solar industry, into one of its most powerful leaders. Another Zheng solar investment in 2012, a 30 percent stake in Shunfeng Photovoltaic International Ltd., has surged more than 2,900 percent and is now worth more than $745 million.

“He’s a bit mysterious and not really well documented in the industry,” said Andrew Klump, managing director at the Shanghai-based consulting company Clean Energy Associates. “If he wanted to be more high-profile he would be. He’s probably going to continue to stay under the radar.”

Zheng declined to comment when contacted at home and through companies he owns, Faithsmart Ltd. and Fulai Investments Ltd. He didn’t respond to questions left in writing at his office and home in Hong Kong. Apple Daily said in December that he’s 48, and his age couldn’t be verified in company records.

Global Oversupply

Klump has never met Zheng and says he knows little of the man. Though he’s identified on press releases announcing his solar acquisitions, almost a dozen solar-industry analysts on three continents said they knew nothing beyond the name when contacted by Bloomberg.

Zheng’s deals would help China consolidate factories responsible for more than half the world’s panels. The solar industry is emerging from a two-year slump that was triggered in part by expanding production capacity among Chinese suppliers. The oversupply of panels ate into margins and eroded profits, and helped push some companies into bankruptcy.

The recovery is driven mainly by increasing demand that’s soaking up the overcapacity. Installations in China alone reached 12 gigawatts last year as the country became the biggest solar market, and may exceed that in 2014. Global installations this year may increase 27 percent from 2013 to 49 gigawatts, according to Bloomberg New Energy Finance.

Solar Holdings

Through various holding companies, Zheng owns 21.6 percent of LDK Solar Co., the second-biggest supplier of PV wafers in 2012. He also owns 30 percent of the Hong Kong-based panel maker Shunfeng, which is seeking to buy Wuxi Suntech. That’s the main unit of what was the world’s biggest panel producer until it was surpassed by Yingli Green Energy Holdings Co. in 2012. Suntech shareholders are scheduled to meet April 7 to vote on the deal.

Owning a stake in all that capacity may help Zheng control the amount of photovoltaic panels entering the market, said Dexter Gauntlett, senior research analyst for energy at Navigant Research.

Merging Suntech with stakes in LDK and Shunfeng “represents one of the largest, if not the largest amount of solar module manufacturing capacity” controlled by an individual, said Gauntlett. “I don’t want to say it’s unprecedented, but it’s definitely not the norm to take such a wide holding in three different companies.”

The three companies complement each other, providing wafers, panels and solar-farm development, Jack Lai, LDK’s chief financial officer, said in an interview today.

While there are no plans to combine the companies, they are starting to cooperate, “almost like sister companies,” Lai said.

Solar Billionaire

The transactions would push Zheng’s power over the industry past Shi Zhengrong, 51, the first solar billionaire and once China’s richest man. Shi was ousted as chairman of Suntech Power Holdings Co. in March 2013, days before the company defaulted on $541 million of U.S. bonds, triggering the bankruptcy filing for its main unit in China.

“You could have one person become the king of solar again,” said Klump.

Zheng served as a researcher with the Development Research Center at China’s State Council early in his career, according to the Beijing News newspaper. He shifted into real estate in Shanghai in 1993, and gained attention in media reports at the time by buying up property in Hong Kong in 2003 during the SARS health crisis as prices plummeted.

He now owns commercial properties in some of Hong Kong’s most prestigious areas known for Michelin-starred restaurants and nightclub operators, according to company documents. Zheng’s home address in Hong Kong towers over Victoria Harbor, where nobody answered the door on three occasions.

Solar Acquisitions

Zheng’s move into solar began in November 2012, when his Faithsmart Ltd. holding company acquired another holding company, Peace Link Services Ltd., which came with a 29.7 percent stake in Shunfeng. The price of the deal wasn’t disclosed.

Shunfeng is based in the I.M. Pei-designed Bank of China Tower, Hong Kong’s most iconic building, and it’s listed as the local address for other Zheng holdings in the city. He wasn’t available when a reporter visited the 30th floor office suite.

Shares of Shunfeng have surged to more than HK$9 in recent trading, giving the company a market value of HK$19.3 billion ($2.49 billion), from 30 Hong Kong cents a share in November 2012, when Zheng took over.

Shunfeng agreed in November to pay 3 billion yuan ($483 million) for Wuxi Suntech. The deal has been approved by the court acting as Wuxi Suntech’s bankruptcy administrator in China. It still needs clearance from shareholders.

LDK Deals

Through Fulai Investments, Zheng paid $50.3 million to acquire his stake in LDK Solar in three transactions from January to July of last year. LDK had $2.78 billion in debt at the end of the third quarter and failed to repay 1.7 billion yuan ($273 million) in bonds that matured Feb. 28.

The company is seeking to restructure the debt and to wind up its business in the Cayman Islands, where it’s incorporated and a hearing is scheduled tomorrow. LDK said operations in China won’t be affected. The New York Stock Exchange began proceedings to delist its American depositary receipts yesterday.

Consolidation within the solar industry are signs “of an industry entering a maturation process,” Robert Petrina, managing director of Yingli’s Americas unit, said in an e-mail. “It is a process that will dramatically reshape the industry landscape.”

‘Fire-Sale Prices’

Ryan Ulrich, a Wuxi-based spokesman for Suntech Power Holdings Co., declined to comment on Zheng.

The instability in China’s solar industry helped Zheng negotiate fire-sale prices, said Angelo Zino, an analyst at S&P Capital IQ in New York.

“A lot of these names, at least the China-based ones, were priced for bankruptcy,” Zino said. “If you’re a long-term believer in the prospect of solar, which Zheng must be, he’s looking to build up investments on the cheap.”

With solar demand catching up with supply, Zino said panel prices are stabilizing this year.

“If we see a massive solar recovery, over time these investments are going to reap great rewards for him,” Zino said. “I don’t know that much about him, but looking at his actions, that’s my guess on what he’s trying to do.”

--With assistance from Justin Doom in New York, Feifei Shen in Beijing and Iain Wilson in Tokyo.