Bookmark and Share

Large Solar player going bust in China sent shockwaves across the industry

4 Comment

Tianwei New Energy in a state of bankruptcy

It is not news , that a large number of solar industry companies are caught in a death spiral and are unlikely to return to economic viability anytime soon if ever. A large number of these organizations are running their operations through doles from the state and local governments. The Chinese authorities not only provide subsidized land and utilities but also massive loans which are rolled over. Some of the biggest solar companies such as Suntech and LDK have already gone bust, with their factories being taken over by other Chinese entities such as Shungfeng. This has led to continued overcapacity in the solar panel sector in China with low margins for most players.

Read more about the Chinese Solar Industry here.

Major companies such as Tianwei New Energy and Yingli Green Energy, which had taken massive loans for expensive capacity expansions or building of polysilicon capacities are facing huge solvency issues. Tianwei New Energy which is s a subsidiary of a state owned company is now in the bankruptcy state. Tianwei’s parent had built polysilicon plants which proved to be non-viable as poly prices crashed. Only the biggest players such as GCL and Daqo are still running profitably. Polysilicon plants are expensive to build and require experience. There are only a few companies that have managed to develop poly plants, without getting into major financial problems. LDK Solar spent almost $2 billion dollar in building a giant poly plant, which never ran to capacity and its costs remained much higher than the industry.

The Tianwei fall was a setback because it was a subsidiary of a state owned company (SOE). Most investors assume that a SOE is implicitly backed by the government and will not fail. LDK, Suntech and Chaori were not state owned companies, so their going down did not cause shockwaves to the industry. However, Tianwei is a state owned firm which has set the cat amongst the pigeons. Chinese state owned companies own large solar manufacturing capacities and this could be a problem if they are allowed to fail. Customers would be leery of buying solar panels from China, as these products need a 25 year warranty. If the solar panel supplier goes bankrupt then enforcing the warranty also becomes an issue.

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in

4 Responses so far | Have Your Say!

  1. angad

    is it really happen in china ..bcoz we just know China fr build up and chase fr new tech. Chinese have violation in economy its totally promising

  2. Radhakrishnan Mundoli

    This was expected. But this is also a set back for the solar industry since many modules supplied by these companies when face quality issues, where is one going to look for replacements.
    Also, one needs to worry about increase in solar module costs with so much capacity disappearing

  3. Sneha Shah

    Agree with you Sir

  4. Arun Gulati

    Hi Sneha ! Do we also have similar stories of solar companies India?