Strong Government Support to Chinese Solar Companies
No big Chinese solar company has failed till now despite most of them losing almost all of their value and trading mostly as penny stocks. This is in sharp contrast to the failure of hundreds of Western solar companies. The reason is that the Chinese local governments are not allowing the bankrupt solar panel producers to go belly up. They keep giving loans and grants to the companies despite their condition which is a point of no return.
LDK is the most famous Chinese solar bailout case as it is the most indebted solar company in the world. LDK has been making massive losses over the last one and half years and has no hope in hell, of servicing its more than $3 billion in debt. The company has already got sweetheart loans and grants from Chinese state owned banks and the Xinyu Government. But it is like pouring money down a drain given the massively oversupplied solar industry. LDK is selling itself piecemeal to stay alive as it sold 19.9% stake for a pittance. Recently the top management and board of directors were also radically changed as the local government is quietly taking over the company. However it is extremely doubtful whether LDK can ever be turned around successfully. The reason is that the cost structure is quite high and it has a colossal amount of debt.
German Solar Energy Company Sunways has sold a 33% stake to LDK solar for around 2 million euros. Note most small German solar companies are almost insolvent and have no hopes of turnaround. Around 5000 German solar companies have closed according to BSW. Some big German companies like Solon and Solar Millennium have already announced bankruptcy. Note Chinese companies too would have shut down but the state owned Chinese banks are keeping them alive with loans at ridiculous interest rates. LDK which is buying Sunways is almost insolvent as well with its convertibles trading at less than 50c on the dollar in Singapore. It has more than $3 billion in debt compared to its market cap of around $600 million. It faces massive losses in the coming qtrs and can’t serve the interest payments much less expand. The strong support of the Chinese government for its green companies is keeping them alive. Chinese solar panels have become super cheap due to companies selling at below cost and massive scale. Note all the cheap solar panel brands in the world are Chinese with the exception of First Solar and some Asians.
LDK has managed to spend 22 million Euros despite burning hundred of millions of dollars in cash because it has got the Chinese government trillions backing it. So while Western companies burn and crash, the big crony Chinese companies can expand and acquire.
CNPV bought by Dongying City
Now another Tier 2 solar panel producer CNPV has sold a majority stake to the local government for $10 million. The company which was listed in the French stock market has been facing perilous times as well despite strong growth in the preceding 3-4 years. CNPV like hundreds of other Tier 2 and Tier 3 solar panel makers are surviving on the largesse of the local Chinese government. These authorities keep supporting these companies as over 400,000 jobs are dependent on China’s solar industry.
Troubled Chinese PV equipment manufacturer, CNPV Solar Power, is holding a shareholder meeting today to vote on selling a majority stake to a local city for US$10 million.PV-Tech understands the plan to sell 50.38% of CNPV Dongying, CNPV Solar Power’s sole asset, to an unidentified company controlled by the local government of Dongying, has been endorsed by the board.
The Xinyu, Jiangxi-based company said Oct. 22 it would sell a 19.9 percent stake to a renewable-energy investor partly owned by the local government. Heng Rui Xin Energy Co. will acquire new LDK stock at 86 U.S. cents each. LDK’s American depositary receipts, each worth an ordinary share, had fallen from $51 in August 2008 to as low as 71 cents before the deal was announced. Chief Operating Officer Tong Xingxue takes over immediately as CEO from Peng Xiaofeng, who stays as chairman, LDK said today in a statement. The other new board members include independent directors Wang Ceng, who has served as a financial consultant for Xinyu city government, and Wu Shian, a member of the Standing Committee of the People’s Congress of Jiangxi.