Soured deal another blow for Chinese solar company

However, state-owned lenders in China are likely to continue supporting it

We’re back after a short hiatus with a story from Monday by Diane Cardwell of the New York Times, noting the seemingly slow-fuse meltdown of China’s solar industry. Wracked by trade and tariff battles with the U.S., increasing wages fro its workers and simply too much product, China’s solar industry continues to move in the wrong direction, as we’ve posted herehere and here.

The burden of a heavy debt load and the news of alleged fraud at Suntech Power Holdings prompted to one Raymond James analyst to compare it to Solyndra, the failed California solar company, which has become a symbol of poor government investments in green technology that only appears to have benefited the top executives.

Cardwell reports: “Suntech Power Holdings, one of the world’s largest manufacturers of solar panels, was already struggling with heavy debt, a global glut of solar panels that has wiped out the industry’s profits and a new round of tariffs imposed by the United States.

“On Monday, Suntech, a Chinese company, disclosed a potential fraud committed by an affiliated company that might deepen its troubles.

“Suntech said that 560 million euros ($686.6 million) in German government bonds, pledged as collateral for loan guarantees provided by the company, might not exist. The bonds and loan guarantees were part of a complex investment in a European solar development company that used Suntech panels and was financed by a Chinese state-owned bank.

“The potential fraud, which the company blamed on a former sales agent for the company, Javier Romero, could stretch Suntech’s already-strained finances to the breaking point. The company already must repay about $540 million in debt next year, and if it had to make good on all of the loan guarantees, it would owe nearly $680 million more.

“Executives said that they were investigating and that they might delay reporting the company’s second-quarter earnings. […]

“The announcement sent Suntech’s shares tumbling by almost 15 percent to $1.34 in New York trading on Monday.

“In May, Suntech announced a first-quarter loss amid a sharp decline in panel shipments and the added costs from the first round of tariffs imposed by the United States Commerce Department. In two separate cases, the department determined that major Chinese manufacturers of solar cells benefited from unfair subsidies by the Chinese government and have been selling their products below cost.

“On Monday, Trina Solar, another major Chinese manufacturer, said its shipments for the second quarter would be about 20 percent lower than expected. And this month, the city of Xinyu said it would pay the debt of LDK Solar, a manufacturer based there that has also been reeling from losses.

“But Suntech’s situation may be worse than the other major manufacturers, analysts said, because of its high debt, which they put at about $2.3 billion.”

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