China’s Suntech Pulls out of their U.S. Solar Plant
China-based Suntech Power Holdings Co Ltd said it would close its only solar panel-making plant in the United States to cut costs, two years after opening the facility that never reached full production. Shares of the company, struggling to cover a convertible bond due this Friday, fell 9 percent to $1.05, their lowest in more than two months.
Suntech opened the plant in Goodyear, Arizona in September 2010, saying that making panels in the United States would reduce time, costs and greenhouse gas emissions related to sourcing panels from overseas. The plant, however, has been weighed down by U.S. import tariffs on solar cells and aluminum frames as well as a global panel oversupply.
Suntech is required to pay duties of 35.97 percent on solar cells imported from China and used in the plant, the company said on Tuesday. The plant, originally expected to scale up to 120 megawatts (MW) per year, was scaled down to 15 MW in November.
The closure, slated for April 3, will affect 43 employees, the company said. Suntech had 17,693 employees as of December 2011, the latest period for which job data is available. U.S.-based First Solar Inc (FSLR.O) and SunPower Corp (SPWR.O) too have cut production, and many solar companies are running their plants at lower capacity.
“These are the growing pains of a maturing industry,” Chief Executive David King said.
Raymond James analyst Pavel Molchanov said the closure was of negligible importance for Suntech’s financials. Suntech has not released quarterly results since the second quarter of 2012, and had reported losses for the four quarters before that.
Rapid capacity expansion in China and a drop in demand in top market Europe sent prices into a tailspin over the past two years, making profits elusive for solar product makers.
Suntech, one of the many Chinese solar companies taking on debt to add capacity, said on Monday it reached an agreement with some of its bond holders, getting a two-month reprieve on repayment due this Friday. The company, with a market capitalization of about $195 million, had debt of $2.2 billion at the end of March 2012.
“I doubt that Suntech has enough cash on hand to immediately pay the 40 percent of bondholders who have not signed the forbearance agreement,” Molchanov said.
“At the same time, I doubt that those bondholders want to push the company into bankruptcy on March 15.” The government of the Chinese city of Wuxi, where Suntech is based, is in talks with the company and may prefer a bailout rather than risk wider repercussions from allowing it to fail.
“This is still a company that is nowhere near being able to pay its debt…,” said Patrick Chovanec, chief strategist at investment firm Silvercrest Asset Management.