World’s Second Largest Solar Maker Goes Bust
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
China’s Suntech Power, once the world’s largest solar panel producer, has been forced by its creditors to file for bankruptcy, reported Xinhua on Wednesday, after accumulating more than $2 billion in debt and defaulting on $541 million in bonds that were due on March 15.
China’s Suntech Power, once the world’s largest solar panel producer, has been forced by its creditors to file for bankruptcy, reported Xinhua on Wednesday, after accumulating more than $2 billion in debt and defaulting on $541 million in bonds that were due on March 15.
The Wuxi-based company, who has been listed on the New York Stock Exchange since 2005, announced that it would not be resisting a bankruptcy petition filed by eight Chinese banks for its main subsidiary, while the company would also embark on strategic reorganisation in the future.
According to Bloomberg, investors stand to lose as much as $1.28 billion from the bankruptcy proceedings, bringing to mind similar collapses around the world including Q-Cells SE in Germany and Solyndra in the U.S..
“What the Suntech case shows us is that the Chinese companies are not too big to fail,” said Jenny Chase, head of solar analysis at Bloomberg New Energy Finance, to the Financial Times. “We are entering a period of great difficulty for Chinese solar manufacturers.”
[quote]“It’s truly the end of an era,” she added.[/quote]Backed by government loans, Suntech more than quadrupled its panel-production capacity to 2400 megawatts a year from 2007 to 2011. But after dominating the market for four years, it was surpassed by Yingli Green, another Chinese company, as the largest photovoltaic (PV) company in the world in 2012, according to PV-Tech.org, after a global oversupply led to a massive drop in prices and a general slowdown in the entire global industry.
[quote]”The whole PV industry is downsizing. It is regrettable that the company went bankrupt, but it is a common market phenomenon,” said an official with China’s National Development and Reform Commission to Xinhua.[/quote]Some analysts also theorised that Suntech could no longer compete internationally, after China’s State Council announced last December that it would stop funding unprofitable domestic solar-panel makers and instead encourage mergers among healthy companies.
“Suntech, as a private firm, went too fast in its expansion,” said Liu Wenping, a partner in Shanghai-based solar investment consulting firm Sapphire Capital, to AFP.
“This event is significant, showing that the Chinese banks are no longer unconditionally willing to lend money to the loss making industry, even if it’s for a tier-one company like Suntech,” added Thiemo Lang, a portfolio manager at RobecoSAM in Zurich, to Reuters.
[quote]”The default is also a clear warning sign to other Chinese solar companies to repair their steadily worsening balance sheets, reducing spending,” Lang noted.[/quote]Related: China To More Than Double Solar-Power Capacity In 2013
Related: Asia Poised To Overtake Europe As Global Solar Power Leader By 2016
Related: Even Israel’s High-Tech Sector Struggles to Make Solar Power Cost Effective
Bankruptcy specialist Han Chuanhua, a partner at the Zhongzi Law Office in Beijing, told FT that the co-ordinated action of the eight banks suggested that the government had given its blessing to the proceedings.
“Without government support, even if creditors file a petition, the court wouldn’t accept it,” he explained.
