Chinese solar firms sign deals with Saudis to expand globally

(Bloomberg) — China’s two largest solar panel makers will build $3 billion in power plants in Saudi Arabia, underscoring their efforts to globalize their production bases as margins in the domestic market come under pressure.

Shares of Jinko Solar Co. and TCL Zhonghuan Renewable Energy Technology Co. rose 5% on the Shanghai Stock Exchange after the announcement, which also helped other hard-hit industries including Tongwei Co. and LONGi Green Energy Technology Co.

China’s solar makers are drowning in a supply glut that has forced many to sell below cost and take huge losses. The excess capacity, which is expected to last for months, has prompted the government to issue regulations to curb domestic expansion and unnecessary investment.

The Saudi projects are a major step forward for China’s clean energy industry, which is also grappling with escalating trade tensions with the U.S. and its allies.

Jinko Solar has agreed to form a joint venture worth about $985 million with the Public Investment Fund, Saudi Arabia’s national wealth fund, according to a Shanghai Stock Exchange filing. The project will have an annual capacity of 10 gigawatts of photovoltaic cells and modules. Vision Industries, a private renewable energy company, will also be a shareholder in the joint venture.

TCL Zhonghuan said it will partner with PIF and Vision Industries to build the $2.08 billion plant. The project, which will have an annual production capacity of 20 gigawatts, will be the largest overseas wafer factory, according to a separate stock exchange filing in Shenzhen.

The agreements were reached after a meeting between Chinese Deputy Prime Minister He Lifeng and PIF Governor Yasir Al Rumayyan last week. During the meeting, He said the two countries should expand cooperation in emerging sectors such as renewable energy and high technology, according to Xinhua news agency.

Separately, solar equipment giant Sungrow Power Supply Co. has signed a deal with Saudi investment firm Algihaz Holding for a battery storage project, also underscoring the oil-rich kingdom’s efforts to boost renewable energy production.

(Updates on share price movement in paragraph 2, context throughout.)