Chinese Developer Evergrande Real Estate Invests in Solar Energy

By Esther Fung

SHANGHAI--Chinese property developer Evergrande Real Estate Group Ltd (3333.HK) said it plans to invest a total of HK$1.2 billion ($154 million) in a U.S. solar company and another Hong Kong-listed firm, in yet another move to diversify from the sluggish housing market.

The Guangzhou-based developer plans to invest US$30 million, or a 3.95% stake, in San Francisco-based SPI Solar, a photovoltaic solar developer, Evergrande said in a stock exchange announcement late Tuesday.

Evergrande also plans to buy 30.81 billion shares at HK$0.03135 each in another Hong Kong-listed firm Guocang Group Ltd. (0559.HK). This purchase would total around HK$966 million ($125 million) and represent about 73.59% of the entire issued share capital of Guocang, a loss-making liquor and wine manufacturer. Meanwhile, the statement added that SPI Solar would also be buying 7.5 million shares, or a 17.83% stake, in Guocang. Guocang said it is also looking to diversify into the solar energy business.

Evergrande said the acquisitions would provide an opportunity for it to invest in and co-invest with SPI to develop business in the new energy sector. It also plans to utilize Guocang to gain access to the capital market.

Evergrande, well-known in China for owning a successful soccer team, said in August it would spend 10 billion yuan in China's oil, grain and dairy markets. Last year, it started a new business line distributing bottled water.

On September 30, Evergrande said in a statement on its website that it was investing 90 billion yuan ($14.7 billion) in a solar power plant in Zhangjiakou in north China's Hebei province with an expected capacity of 9.2 million kilowatts.

In recent months, analysts have raised concerns about Evergrande's debt levels, noting that it is one of the most highly leveraged property developer. Citi Research said that Evergrande's leverage levels, or debt to equity ratio, could be as high as 248%.

Write to Esther Fung at [e-mail]

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