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Heavy debts set China solar makers up for consolidation
(Reuters) - As solar panel prices continue to march lower, Chinese solar companies are struggling with heavy debt loads, triggering expectations many will be forced to seek a new infusion of funds through takeovers or mergers. Suntech Power Holdings (STP.N) could be liable for hundreds of millions in new payments after it disclosed a potential fraud by a partner, while peers such as LDK Solar (LDK.N), JA Solar Holdings Co (JASO.O), Trina Solar (TSL.N) and Yingli Green Energy Holding Co (YGE.N) are also feeling pressure.
With prices for solar panels barely covering the cost to build them, dozens of small Chinese solar companies are believed to have shut their doors, and equity investors have fled the sector, sending share prices of the U.S.-listed Chinese companies down more than 85 percent since early 2011. Most of the Chinese solar companies will be able to stay open only if government lenders continue to keep lines of credit open despite forecasts of several more quarters of red ink.
"Solar as an industry is going to continue to grow," said Brian Salerno, portfolio manager for Huntington EcoLogical Strategy ETF (HECO.K). "However, my belief is that for most of that time it's going to be profitless prosperity."
...snip...
Beijing has provided billions of dollars in credit lines and other supports to its solar industry through state-run banks, prompting the U.S. government to impose import duties earlier this year after some U.S. manufacturers filed a trade complaint. Though analysts and solar competitors outside of China have long viewed government bank credit lines as a major funding advantage for Chinese solar makers, that support has encouraged the industry there to overspend on new factories, leading to a glut of panels on the market.
http://www.reuters.com/article/2012/08/14/us-solar-debt-idUSBRE87D0MK20120814
With prices for solar panels barely covering the cost to build them, dozens of small Chinese solar companies are believed to have shut their doors, and equity investors have fled the sector, sending share prices of the U.S.-listed Chinese companies down more than 85 percent since early 2011. Most of the Chinese solar companies will be able to stay open only if government lenders continue to keep lines of credit open despite forecasts of several more quarters of red ink.
"Solar as an industry is going to continue to grow," said Brian Salerno, portfolio manager for Huntington EcoLogical Strategy ETF (HECO.K). "However, my belief is that for most of that time it's going to be profitless prosperity."
...snip...
Beijing has provided billions of dollars in credit lines and other supports to its solar industry through state-run banks, prompting the U.S. government to impose import duties earlier this year after some U.S. manufacturers filed a trade complaint. Though analysts and solar competitors outside of China have long viewed government bank credit lines as a major funding advantage for Chinese solar makers, that support has encouraged the industry there to overspend on new factories, leading to a glut of panels on the market.
http://www.reuters.com/article/2012/08/14/us-solar-debt-idUSBRE87D0MK20120814