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Chinese Firm Buys U.S. Solar Start-Up

The chief of MiaSolé, John Carrington, left, at the announcement of the company’s purchase by Hanergy Holding Group, for which Zhou Jiesan is an executive.Credit...Alexander F. Yuan/Associated Press

Just a few years ago, Silicon Valley investors were pouring money into solar technologies and talking about how they would bring the same kind of innovation to green energy that they had to the computer chip.

But few anticipated that prices for silicon, the main component of traditional solar panels, would plummet or that Chinese manufacturers, backed by enormous subsidies from their government, would increase solar production capacity by a factor of 17 in just four years.

The resulting plunge in solar panel prices wiped out the dream of a new Solar Valley. Despite making advances in the new technology, known as thin-film solar, the American companies just couldn’t compete.

The federal government’s imposition of steep tariffs last year on Chinese conventional panels helped, but the industry had waited so late to apply for the tariffs that balance sheets had already been crippled with accumulated losses and investors had lost interest.

Some thin-film companies went bankrupt, including Solyndra, which had received half a billion dollars in federal subsidies. Others, like Stion, licensed their technology or formed strategic partnerships with large corporations.

On Wednesday, the chief executive of MiaSolé, one of the most promising Silicon Valley solar start-ups, appeared in Beijing for the announcement that Hanergy Holding Group of China had completed the purchase of his company and its technology for a fraction of what investors had put in. Hanergy made its money building hydroelectric dams.

Hanergy’s purchase of the 100-employee MiaSolé, based in Santa Clara, Calif., follows its acquisition in September of the 400-employee thin-film solar unit of Q.Cells, an insolvent German solar company. The two deals have allowed Hanergy to acquire at low cost an array of patents developed for hundreds of millions of dollars of venture capital investments.

“Going head to head against the Asian low-cost, mass-volume crystalline silicon manufacturers is not a wise strategy if you’re trying to produce an ultracheap module in the United States or in high-cost markets,” said Neil Z. Auerbach, managing partner of Hudson Clean Energy Partners, a SoloPower investor. “But if you’re adopting advanced technology, you have a niche strategy in which those incumbents do not have a competitive edge because they don’t really have a product that suits.”

The industry’s broad competitive challenges have prompted American investors to shun the sector. Last year, venture capital financing in the solar sector plummeted nearly 50 percent to $992 million in 103 deals from $1.9 billion in 108 deals in 2011, according to Mercom Capital Group, a clean-tech research and communications company.

Chinese regulators, too, have begun trying to deal with the overcapacity, discouraging their banks from making more large loans to the solar panel sector.

Li Hejun, the chairman of Hanergy, said at the news conference in Beijing that the company’s hydroelectric dams produce several hundred million dollars a year in free cash flow, so it can finance its own investments in solar, which already include six thin-film solar factories, plus three more under construction.

“Everyone knows about the overcapacity in solar energy industry in China, but for us industrial insiders, this overcapacity is but a relative one,” he said. “For those who have technology, the situation is the opposite.”

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Li Hejun, chairman of Hanergy Holding Group.Credit...Alexander F. Yuan/Associated Press

The thin-film technology championed by the Silicon Valley start-ups uses more exotic materials than conventional solar panels, which are made from crystalline silicon.

Most thin-film modules are slightly less efficient at converting sunlight into electricity than conventional panels, but they are much lighter, which makes them easier to mount in locations that may not support the weight of conventional panels.

Supporters of thin-film technology contend that it has the potential for considerable further efficiency gains that may not be possible for conventional panels, which have been researched for decades. And some research has shown that thin-film can outperform conventional silicon-based panels at high temperatures, such as in deserts, where solar farms are often located.

The technology’s promise attracted the attention of the Obama administration, which provided clean-energy grants and loans to some of the companies, although not to MiaSolé.

Hanergy has pursued thin-film technology as a way to distinguish itself from the pack of large manufacturers like Suntech and Yingli that make crystalline silicon modules. But Hanergy had originally relied on a much less efficient material, amorphous silicon.

Shyam Mehta, a senior analyst at GTM Research, a renewable energy consulting firm, said that MiaSolé, which uses a blend of other materials, makes the highest-efficiency modules among its thin-film competitors. “It’s a better technology choice.”

Mr. Li said he planned to keep MiaSolé’s manufacturing and research operations and staff in California, sending only two Chinese executives to join them. Hanergy also plans a larger factory in China using MiaSolé’s technology.

John Carrington, the chief executive of MiaSolé, said in a telephone call that he believed there would still be demand for thin-film modules. “I don’t know if there is overcapacity for really good, efficient technology.”

Many of the thin-film companies are overhauling their strategies. First Solar, an industry leader, reorganized last year and considers itself a developer and seller of solar power plants, rather than a module maker. Eventually, the company plans to produce panels only for its own projects rather than selling them as well.

Other companies are pursuing niche applications for their products, like SoloPower, a start-up that has begun producing flexible thin-film panels in Oregon that are intended for commercial and industrial rooftops that cannot support the weight of glass-encased modules.

Hanergy reached an agreement to buy the Solibro subsidiary of Q.Cells in June, and signed its agreement to acquire MiaSolé in September. After obtaining various government approvals in China, Germany and the United States, Hanergy completed the Solibro deal at the end of September and the MiaSolé deal at the end of December, but delayed its news conference until this week in the hope that it would attract more attention, people involved in the deal said.

Hanergy reportedly agreed to pay just $30 million for MiaSolé, but Mr. Li said that this was only what Hanergy had repaid to the company’s creditors. Mr. Li did not indicate a price in his remarks in Chinese, but in the English translation, his translator said that the purchase price had been about one-tenth of the $1.2 billion that MiaSolé’s board initially sought for the company.

MiaSolé’s investors, mostly venture capital firms, including Kleiner Perkins Caufield & Byers and VantagePoint Capital Partners, had put more than $550 million into the company, but were unwilling to provide the additional large sums the company needed to continue developing its technology.

More than 90 potential purchasers looked at the company, but it attracted few bidders.

“Unfortunately we were not able to find somebody that was just going to be a partner,” said Stephan Dolezalek, a managing director at VantagePoint who was a member of MiaSolé’s board. “What we found in Hanergy was someone who was large in and of themselves but also had the Chinese government backing and so provided a combination of scale and government backing but was only willing to do so in a complete acquisition of the company.”

Diane Cardwell reported from New York and Keith Bradsher from Hong Kong. Patrick Zuo contributed research from Beijing.

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Chinese Firm Buys U.S. Solar Start-Up. Order Reprints | Today’s Paper | Subscribe

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