Big Chinese Companies gobble up financially strained Western solar technology firms

Chinese Scenario

Big Chinese state owned companies are gobbling up financially strained Western solar firms as a massive overcapacity in global solar panel supply (caused by their brethren) drives them to bankruptcy. Note thin film startups like Ascent Solar, Heliovolt have already seen Asian companies taking a controlling equity stake. Now Chinese state owned companies which do not have a big solar presence are buying up these companies to gain access to solar technology which they lack. Recently Hanergy bought Solibro which has one of the best thin film CIGs technology and a 100 MW capacity from bankrupt Q-Cells. Note the company has been developing this technology for almost a decade and Hanergy has made a killing by buying it for a dirt cheap price (my assumption).

Another big Chinese conglomerate Aiko Solar Energy has bought bankrupt Holland solar company Scheuten Solar after it too was forced into bankruptcy. There are also a number of big State Owned (SOE) Chinese conglomerates that are entering the Solar Panel Industry. These state owned Chinese giants have huge financial muscle and they can internally use the solar panels made by these acquired entities. With the profits and focus of the solar industry shifting to solar system installation, the big players have a huge advantage in terms of size. Only companies with a solid and large balance sheet can make a decent play in the utility scale solar system game as it requires raising large amounts of debt. This is beyond the capabilities of the western solar startups though they have great technology.

The big Chinese groups continue to build huge capacities in the already oversupplied solar industry as they have the backing of the Chinese banks. Hanergy is getting a $5 billion credit line from CDB and is aiming for a 3 GW capacity by the end of the year. Note CDB has given multi-billion credit lines to most big Chinese solar panel companies even as these companies struggle to maintain a market valuation of a couple of hundred million dollars.

LDK Buying Sunways/ Chinese Government Support

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 n$3 billion in debt compared to its market cap of around $600 million. It faces massive losses in the coming quarters and cannot 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.

Global Scenario

Most of the German solar manufacturing industry is finished and it is unlikely that except a couple of them like SM Solar or Wacker will live to see 2013.Q-Cells too should go bankrupt or get consolidated . Note despite European companies shifting factories to Asia, they just can’t compete. Some of the smaller module makers with 20 MW plants have seen huge losses with the equipment not selling for 10 cents on the dollar.

Note the solar glut is not isolated, Chinese mal-invesment has led to a similar overcapacity and crash in the global wind turbine and LED industries as well.

LED Overcapacity

The LED chip industry flourished in China as the government provided capital subsidy to small companies to buy MOCVD tools which help in making these chips. With oversupply, prices have crashed to below costs leading to bankruptcies. China is now seeing the 3^rd Green Industry Bubble Bursting with LED chip manufacturers in China going bankrupt in drovers. With massive oversupply and crashing prices, LED chip makers especially the smaller ones are seeing huge losses and shutting down operations. The government like the solar and wind industries now wants the small LED chip makers to go out while retaining the big ones. Foshan, Silan and others face survival questions while the bigger ones like Sanaan and Elec-Tech keeping adding capacity. Note it is only government support that is leading to this crazy situation that companies are adding equipment even as 50% of the industry equipment lies idle. The industrial overcapacity in China is being acutely felt in the Green Manufacturing Industry as well, where the government policies have been the most supportive.