China Clean Energy Offshore Corporate Loans Drop 40% This Year
China Clean Energy Offshore Corporate Loans Drop 40% This Year
(Bloomberg) -- Clean energy companies in China are borrowing less offshore and that’s unlikely to improve anytime soon.
“The pipeline of syndicated loans for Chinese clean energy firms for the rest of the year looks weak,” according to Fang Lei, a Hong Kong-based managing director of China debt origination and advisory at Credit Agricole CIB. Most of the funding requirements have been filled by Chinese banks on a bilateral basis and domestic bond issuance given the unprecedented liquidity provided by the PBOC, Fang added.
For corporate loans, offshore syndicated and club deal volumes for such companies have tumbled 40% to $507 million signed so far in 2020 from a year earlier. It’s also roughly halved from the peak of $1.03 billion in same period in 2017, according to data compiled by Bloomberg.
For project financing, which includes the building, buying or refinancing of clean energy projects in China, the volume reached $9.6 billion this year, according to BNEF data based on deals with disclosed total debt figures. That remains below the four-year average of $13 billion.
Banks’ appetite for lending to such borrowers has dampened as the Chinese government, which has encouraged the growth of renewable energy projects through subsidies, has failed to make full payments in recent years. The delays are weighing on the sector and restricting their ability to borrow more money to fund new generation.
Full subsidy payments from this year’s budget to clean energy power plants approved from 2019 will be prioritized, said the National Renewable Energy Information Management Center in July.
The heavy debt burden and the deteriorating financial situation facing local governments have stopped subsidies from reaching clean energy companies on time, preventing these firms from reducing the high debt levels they built up to meet initial capital expenditure needs, according to Fang. This worsens the credit quality of the clean energy companies, he said.
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