Derek Newberry

Solar IPOs and Sustainable Enterprise in China

In a recent interview with New Ventures staff, the China Environment Fund’s Steven Guo explains what two recent exits mean for green business growth.

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cef logo“Solar IPOs shine,” raved a CNN headline earlier this year, a declaration that comes as little surprise to Steven Guo, director of research and analysis at the China Environment Fund. After all, two of the CEF’s first three exits have been from companies in this high-growth industry, a sector with $4.7 billion in funds raised for initial public offerings this year alone. Since their IPOs, the performance of LDK Solar and Sunergy has been mixed; LDK’s stock has leapt from 27 dollars per share to 43 as of August whereas Sunergy’s price was 27 percent lower three months after it began trading publicly. Much of the reason for this difference can be attributed to circumstance – LDK is an upstream company which has been favorably affected by increasing silicone prices – but in any case, the returns associated with each exit have been crucial to the continued growth of the Fund.

Steven focuses on the dynamism and background of the entrepreneurs behind LDK and Sunergy as keys to their success. For example, one of the major backers of Sunergy, Zhao Jianhua, co-founded the company after finishing a stint as a researcher at Southern Wales University, where he and his team set the world record for solar PV conversion at 24.7 percent. Additionally, the founder and chairman of LDK is an experienced young entrepreneur who previously owned a special wares enterprise in Hong Kong. As his company began generating revenues of several hundred million RMB, the entrepreneur decided to bring his business experience into the rapidly growing solar sector. Another characteristic of these companies that was central to CEF’s decision to invest was that they each had established some track record of success. Three years after its inception, Sunergy was forecasting profits of $180 million in 2006 and $450 million for 2007, figures that when combined with the company’s highly efficient solar cell technology served to pique the interest of the CEF team. The Fund initially approached LDK at a very early stage, when the enterprise had not yet finished constructing its main production facility, but the decision to invest in the second round was made after LDK secured dependable contracts with clients and began manufacturing operations.

The returns on these two investments have been considerable for CEF; Sunergy’s IPO raised $94 million, and LDK’s raised over $470 million. Yet as Steven explains, the broader returns for the sustainable enterprise sector in China will be far greater. A primary obstacle to investment in green sector startups has always been the lack of success stories. These two IPOs contribute significantly to building LP confidence in enterprises in a variety of industries including organic agriculture, clean tech, and recycling. Steven notes that these two CEF investees are hardly the first green enterprises in China to go public; for example, in the last year several sustainable waste management businesses as well as water treatment and other clean technology companies became listed on the stock market. However, the IPOs of Sunergy and LDK will draw more attention and investment to companies in other green sectors that have the potential to generate the same triple-bottom-line benefits as the solar industry currently does. The future is certainly looking brighter for China’s sustainable SMEs.

The Rising Ventures Series features articles, announcements and profiles of investors and entrepreneurs related to the theme of innovative small and medium businesses (SMEs) in emerging markets that deliver social and/or environmental benefits. These businesses have been identified through the New Ventures ( project. To view other Features in the Series, visit