“The success of this IPO is another stride towards a thriving clean energy market, a priority sector with vast opportunities for many investors in China today,” says head of DLA Piper’s capital markets practice, Liu Wei.
In July, Hong Kong-listed GCL-Poly Energy, a leading integrated green energy company, acquired Jiangsu Zhongneng Polysilicon Technology Development, one of the world’s leading suppliers of polysilicon and wafers to companies operating in the solar industry. Upon completion of the acquisition, valued at US$3.4bn, GCL-Poly will become the first Hong Kong-listed large-scale polysilicon manufacturer and one of the world’s five largest polysilicon suppliers.
Shanghai-based Comtec, a leading solar silicon material manufacturer, is reported to be raising US$150m from its IPO, scheduled for the end of 2009. “There is no question that there will be a consolidation in the Chinese solar power industry generally, “ said partner and head of Milbank’s global securities group, Douglas Tanner. “In addition to M&A, we would expect there will be issues of intellectual property and lots of finance work as the industry expands.” Tanner led the legal team that represented the target company in the GCL-Poly deal.
Leading Chinese domestic firms have also recognised the opportunities in the green energy market, particularly those who have worked closely with investment banks, PE and venture capital funds. Zhong Lun recently teamed up with Baker & McKenzie to advise Zhaoheng Hydropower in its US$57.5m capital raising, led by Olympus Capital Holdings Asia. The firm has gained tremendous exposure by simply following the footprint of its investment bank and PE clients.
“Affected by the global financial crisis, private equity investors are more cautious in doing deals. However, we have seen an increase in investor activities and deal flows in recent months. [The] green energy sector has certainly been gaining lots of attention,” said Zhong Lun partner, Gong Lefan.
“There is definitely an increase in renewable energy investment, mostly driven by the government being very pro-active in this area”Sarah Stokoe, Gide Loyrette Nouel
He attributes the investment momentum in the sector to recent government policy initiatives and the stimulus package, as well as the rise of Chinese domestic clean-energy and technology companies. “Investment in this sector not only makes [a] positive impact on the environment and economy, but also makes perfect business sense,” Lefan said. “Not surprisingly, PE and venture capitalist investors and investment banks have tremendous interest in it.”
Global Law Office is another Chinese firm that has experienced a sharp increase in the volume of investment in this area. The firm has represented CDH in its investment in LDK Solar, which completed its IPO on the New York Stock Exchange. It also acted for New Horizon in its investment in Gold Wind Technology, completing its IPO on the Shenzhen Stock Exchange.
Global Law Office is currently involved with ET Solar’s IPO plan. “Green energy projects are very popular in the capital markets, and we expect related work to become a more important part of our firm’s practice,” said Beijing-based partner, George Niu.
The Chinese government reaffirmed its commitment to create a green energy path to prosperity. It announced in May that it will invest more than RMB2 trillion in renewable energy sources, as part of its new energy industry stimulus plan. Consequently, the demand for legal expertise in relevant areas will definitely rise.