(Yicai Global) June 8 -- Shanghai Electric Group, the world's biggest thermal power equipment maker, is taking a controlling stake in a leading solar material producer as it looks to add to its clean energy assets, unfazed by government plans to slash photovoltaic feed-in subsidies.

The firm penned a deal with GCL-Poly Energy Holdings on June 6 to buy a 51-percent stake in its wholly-owned Jiangsu Zhongneng Polysilicon Technology Development, the buyer said in a statement the same day. It will cover half of the balance by issuing shares and the remainder by stumping up cash.

Hong Kong-based GCL-Poly values its 100-percent stake in Zhongneng at around CNY25 billion (USD3.9 billion), but the pair will negotiate and bring in a third-party appraiser to determine the final value, the statement added. Zhongneng, once the world's biggest polysilicon maker and still China's largest, is a brute force in the photovoltaic sector and has the capacity to produce 10,000 tons of the material each year.

But the move comes at a trialing time for China's solar sector. Three government agencies announced on June 1 that the nation would cut solar feed-in subsidies by 10 percent to between CNY0.5 (USD0.08) and CNY0.7, and reject any plans for new subsidized solar plants as the country looks to slash electricity prices by one tenth.

Sector leaders were quick to contest the change, which saw solar stocks sink across the board and some hit the 10-percent limit down.  11 executives sent an open letter to state-owned news agency Xinhua this week, requesting the National Development and Reform Commission, the National Energy Administration and the Ministry of Finance reassess their decision and delay the cuts.

The NEA met with the executives yesterday, offering unwavering government support for the sector but advising that the subsidies aim to address solar energy wastage and growing pressure on the government to provide subsidies, which are harming the sector's development, officials from the agency said.

Despite lowering subsidies, China is planning to expand clean energy production. It aims to be generating more than a quarter of energy from green sources within the next two or so years, according to the national five-year plan through 2020. The country, which generates more power from renewable sources than any other, produced 35 billion kilowatt-hours of energy from solar in the first quarter, up 64 percent on the year.

GCL-Poly and Shanghai Electric suspended share trading on June 6 and resumed yesterday, with GCL-Poly [HKG:3800] opening up nearly 17 percent at HKD0.9 (USD0.11). Shanghai Electric [HKG:2727;SHA:601727] opened 3.64 percent down at HKD2.91 in Hong Kong but has not yet resumed trading in Shanghai.

Editor: James Boynton