Hanwha gains foothold in solar energy business

Hanwha Group has paved the way to gain a strong foothold in the solar energy industry by acquiring a 49.9 percent share in a leading solar cells manufacturer based in China for 434 billion won ($370 million), and becoming its main stock holder.

The “strategic relationship” with the NASDAQ-listed firm Solarfun Power Holdings, which was announced Wednesday, is part of Hanwha Chemical’s long-term plan to expand its presence in the global solar industry.

Solarfun is a manufacturer of solar cells, solar modules, ingot and wafers with distribution networks and local staff in Europe, North America, and Asia. It has facilities capable of 500MW cell production, 900W module production and 400W ingot and wafer production. The size of the solar module production is ranked fourth worldwide, and the rest are within the world’s 10 largest.

Hanwha Chemical, an affiliate of Hanwha Group, has chosen solar energy as one of their key growth platforms, constructing a 30MW cell production facility in Ulsan in 2009. The acquisition of a foreign firm is the leading chemical firm’s first expansion into the global solar industry, the company said.

Hanwha Chemical Chief Executive Officer (CEO) Hong Ki-joon said in a statement, “Solarfun, with its low-cost manufacturing base, complements our existing solar business and immediately provides economies of scale, a factor which is essential to be a leader in the solar industry.”

Solarfun CEO Peter Xie spoke of the deal in a separate press release, “Hanwha Group’s substantial financial resources, extensive global relationships and proven expertise in building energy projects will be invaluable to Solarfun as we continue to expand our business and penetrate new markets.”

The market reacted positively to the deal. The stock price of Hanwha Chemical opened higher Wednesday at 21,650 won _ 400 won higher than the closing price on Tuesday.

Daishin Securities analyst Ahn Young-mi published a report encouraging investing in the chemical firm’s stocks, raising the target stock price to 27,000 won _ nearly a 23 percent increase.

“The price Hanwha Chemical paid for the M&A deal was appropriate, and its growth strategy is clear,” said Ahn. The Chinese firm reported Tuesday that its operating profit increased 42.4 percent from the first quarter to $39.7 million.

Ahn also commented that Hanwha, which has now taken a lead in the fast-growing Chinese solar industry, is likely to achieve its goals to boost solar batteries production from the current 30 MW to 330 MW by 2012 and 2GW by 2020, ultimately generating 2 trillion won from the business.