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Investors turn focus to profits, not capacity

2011-04-01 10:15:12Source:Global TimesAuthor:

With China continuing to lead the world in new energy investments, two US financial companies are seeking underwriting and acquisition deals in China.

Representatives from US investment bank Morgan Stanley and US banking giant JP Morgan pitched their advice on US partnership opportunities and how to go about getting listed on US stock markets to Chinese companies Thursday in Beijing.

Ray Spitzley, a managing director with Morgan Stanley in New York, told a forum, "Everyone recognizes that having strategic relationships and partners from China is going to be a key part of being able to be a low-cost producer, which will be the key to viability in the US."

As the US federal policy on renewable energy has come to a near standstill, Spitzley said many CEOs they speak with in the US "recognize they can no longer just rely on government support."

In contrast, China has announced a rigorous new energy plan for the next 10 years, and CITIC Securities Co analyst Liu Hong expects the government to invest $686.8 billion in the new energy sector, which will further spur total investment – public and private – of $1.4 trillion, the Economic Information Daily, a Chinese language newspaper in Beijing, reported.

China continued to rank as the world's largest clean energy powerhouse last year, with a record $54.4 billion in investments, or a 39 percent increase from 2009, followed by Germany and the US, recent research by the Pew Charitable Trusts showed. The US had held the top spot until 2008.

Globally, clean energy investments grew by 30 percent from the previous year to $243 billion in 2010, Pew, the Philadelphia-based non-profit organization, said.

Meanwhile, Wang Wenqi, an executive with JP Morgan Hong Kong, said now is the best time for investors to enter the sector because of low valuations, but expressed some reservations over policy uncertainties and diminishing profit margins.

In order to become a darling of US investors, companies mulling a US IPO should have specific plans to increase profitability, instead of touting huge capacity goals. They also need to have a range of diversified technologies and notbe fixed in a single location.