logo_canadian-solar_de.jpgLike motherhood, every government claims solar energy is a good thing. But not all are as willing as China's to underwrite the sizable capital costs associated with expanding facilities and funding projects, which is essential if solar energy is to make more than token contribution to the energy mix in the future.

EngagingChina is thus cheered to see that Suzhou municipal government has agreed to provide funds for Nasdaq-listed Canadian Solar to develop local solar projects. Up to 7.5m yuan are being offered on a matched basis to supplement the subsidies on offer from China's central government. The company already has a photovoltaic research centre in Suzhou.

In a separate announcement, three Chinese state banks have agreed to provide Canadian Solar with up to 15bn yuan in credit facilities to finance domestic and overseas projects. The credit crunch and the reduction of solar subsidies in key European markets like Spain and Germany have poured cold water over the expansion plans of many solar energy companies and sent their share prices into a nose dive.

The crisis has hurt hardest China's small army of solar-grade silicon wafer manufacturers, which are turned into solar panels. High excess inventories have caused wafer shipments and prices to fall, forcing many smaller manufacturers to close the gates.

China's decision last month to launch a generous subsidy scheme for solar power systems thus came as a rare bit of good news in an industry that has been under a cloud for the past year. It caused the share prices of Canadian Solar and its rivals to bounce off the floor, but they dropped back again this month as analysts decided that the near-term impact of the scheme was likely to be modest.

Despite its name, Canadian Solar has all its production facilities in China, making standard solar modules for residential and commercial use. It sells into various markets, including Germany, Spain, Canada, Korea and China.

The Company competes with established players like BP Solar, Sharp Solar and SolarWorld and Chinese companies such as Suntech Power Holdings, Yingli Green Energy Holding, Solarfun Power Holdings and Trina Solar.

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