The dire warning on the effects of climate change delivered by former World Bank chief economist Sir Nicholas Stern in late October was not bad news for everyone.
For the backers of a raft of Chinese solar energy companies eyeing public offerings in the next 6-18 months, the dark cloud came with a significant silver lining.
Although participants are keeping characteristically quiet, there may be a dozen companies across the solar power value chain – panel makers, silicon cell producers and so on – that have their sights clearly set on offshore exchanges.
Canadian Solar is leading the charge after filing its intention to list with the US Securities Exchange Commission in October. Solar cell maker Yingli Solar had also completed its paperwork and was preparing to file as CHINA ECONOMIC REVIEW went to press, according to a source close to the firm; it plans to raise about US$400 million in a US listing.
Meanwhile, equipment maker LDK Solar Hi-tech confirmed plans to raise about US$300 million next year. Trina Solar Energy and Linyang Solarfun both have targets of US$100-150 million. Nanjing PV-Tech has also completed pre-IPO fundraising with an eye firmly on NASDAQ.
Initial offerings from another dozen smaller firms are also in the pipeline. They are all backed by a who's who of global investment banks hoping to cash in on the success of China's one established renewable energy superstar, Suntech Energy Holdings, which raised almost US$400 million in a New York Stock Exchange listing in 2005.
"If they can list they will make their backers money," said one domestic dealmaker, who sat out the fundraising round amid concerns over deal quality. "The question is which ones will list."
Another banker echoed these concerns, also sitting out the "unreal" frenzy of deal making over concerns that not all would be able to squeeze through the IPO pipe.
In principal, there is no limit to how many companies can exit, and exchanges around the world are cueing to attract the best ones. Most watchers believe that NASDAQ is in the driving seat, providing the opportunity to grow visibility alongside capitalization in the lucrative US market.
"The US has the deepest capital pool in the world in terms of capital markets," said Lawrence Tan, NASDAQ's chief representative in China. "I have no doubt that we can support and facilitate the growth and listing of these companies."
In the long run, their fortunes will be based on the underlying fundamentals of sustainable growth, scalability, and profitability, he said.
For investors, there are large potential rewards for backing the right horse, but, in this high-risk business, those that reach the finish line are likely to be outnumbered by those that stumble on the track.
What's more, with barriers to entry still reasonably low, cashed-up first movers will be in a prime position to secure market share and leave little room for those who are late following.
This is the reason investors are rushing to market, in some cases scrimping on due diligence to secure deals. Time may not be on their side to iron out underlying flaws
"Many of the companies believe that if they do not go out soon they will not survive," said the domestic dealmaker.
Ultimately, though, success could be out of their hands. Solar energy is still prohibitively expensive. Until improved technology can bring unit costs down significantly, the industry will be reliant on government subsidies.
The flipside of this is the price of oil. According to a recent report by Citigroup analyst David Smith, solar stocks are hypersensitive to energy costs, showing an 80% correlation to forward energy prices.
Both these factors are closely tied to a third factor: public opinion.
To cross the Pacific and see their New York dreams come true, China's flotilla of solar energy companies will need to convince equity market investors to take a gamble on a nascent technology tied intricately to the price of crude and the whim of government.
Sir Nicholas Stern's warning may have just put a friendly breeze at their backs.