China's Green Stimulus: A-Power, First Solar May Get Big Chunk

Includes: APWR, FSLR
by: Kelvin Schulle

Following President Obama's 17% CO2 cut by 2020, China pledged a 40-45% greenhouse gas cut by 2020, an astonishing number for most analysts. We know China is leading the green way to the future, its wind and solar energy technologies are leading the world. If you are an environmentalist, it is easy to understand why China has committed itself to the green technology. Thousands of people die in China from air pollution related diseases every day, the highest number in the world.

Speaking of the $454B green stimulus package, it is even larger than China's first $680B package because it is targeting the green energy sector only. The green stimulus will be used in a similar way to how the government injected the first stimulus money into their economy. Companies with government support will get a big chunk (over 20% of the first stimulus went to State-owned companies reportedly). In the wind energy sector, Goldwind technology is a major player in China, the company is listed in the Shanghai stock exchange, with a revenue of RMB6.5B in 2008, and expected to reach RMB10B in 2009. The newcomer in China's wind energy market is Shengyang's A- Power Energy Generation (NASDAQ:APWR); the company has grown exponentially in recent years with support from local government. The company is targeting over 2GW capacity in 2010 to meet Chinese market demand. The company is also expanding overseas, in places such as North America and South America, Africa, the Mid-East and South East Asia. We would expect the two companies to get wind farm contracts of over $50B in the coming years.

The solar sector should also get a boost as well, First Solar (NASDAQ:FSLR) already signed a 2GW contract in inner-Mongolia, this could be part of the $454B green stimulus. Chinese domestic names should also get a big chunk of the stimulus cash. In the next decade, we may see a few renewable energy companies from China going strong globally, much like we saw Google's (NASDAQ:GOOG) growth in the early internet age.

Disclosure: Author is Long FSLR