China's Leading Solar Player Gets Big Bank Boost (GCPEF, TSL, STP, JASO, YGE, LDK, FSLR, SPWRA, TAN)

The China Development Bank has provided the country’s largest polysilicon maker with two new credit facilities totalling $713 million. GCL-Poly Energy Holdings Ltd. (OTC: GCPEF) can add that total to the $303 million it received in loans during 2010. The company did not say what it plans to do with the funds.

The infusion highlights the discrepancy between non-Chinese solar when it comes to government support for the solar industry. China has determined that building a world-class solar industry is a strategic imperative and coughed up nearly $30 billion in loans last year to its leading solar panel makers. Trina Solar Ltd. (NYSE: TSL) received $4.4 billion, Suntech Power Holdings Co. Ltd. (NYSE: STP) received $7.3 billion, JA Solar Holdings Co. Ltd. (NASDAQ: JASO) received $4.4 billion, Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) received %5.3 billion, and LDK Solar Co. Ltd. (NYSE: LDK) received $8.9 billion. Most of these funds were directed at expanding manufacturing capacity as a way to drive down costs.

The recent bankruptcies of Solyndra LLC and SpectraWatt, Inc. in the US, plus the decision by Germany’s SolarWorld to shutter its US manufacturing stand in stark contrast to the beneficence of the Chinese government. The Chinese loans come with extremely low interest rates, and although they are supposed to be paid back, it is not unheard of for the government to cover losses.

The low-cost Chinese loans do tilt the playing field in favor of the Chinese solar industry, and competitors don’t much like it. But even the generous loans can’t make up for the problems that some of the Chinese firms have faced this year.

Suntech shares, for example, have fallen from a high near $11/share to below $5/share and LDK shares have fallen from a high over $15/share to below $5/share. Price erosion is the culprit, as module prices have fallen more than 40% during 2011.

But that has not stopped China from investing billions in expanding manufacturing capacity in an effort to get ahead of the falling prices by growing production. Companies such as First Solar Inc. (NASDAQ: FSLR) and SunPower Corp. (NASDAQ: SPWRA) do not have access to equally attractive loans and are faced with trying either to keep up with capacity increases or driving down costs in order to remain competitive.

Even technological superiority can’t make up the difference in cost, although First Solar’s thin-film technology remains the low-cost leader. Crystalline silicon module prices continue to fall and threaten to flood the market with enough modules to increase pricing pressure even more.

In the first hour of trading this morning, Suntech’s shares are up about 1.5%, at $4.68, after setting an all-time low on Friday. The 52-week range is $4.60-$10.64. LDK shares are off almost -6.5%, at $4.96, after being downgraded from ‘Hold’ to ‘Sell’ at Argus. The 52-week range is $4.65-$15.10. First Solar shares are off nearly -3.5%, at $86.94, after posting a new 52-week low this morning. The 52-week range is $86.73-$175.45. SunPower shares are down more than -3%, at $12.36, in a 52-week range of $11.20-$23.36. The Guggenheim Solar ETF (NYSE: TAN) is down almost -5%, at $4.77, a new 52-week low. The 52-week range is $4.77-$9.34.

Paul Ausick