Chinese Solar Companies Feel Impact of Suntech Bankruptcy
Chinese solar equities have experienced a sharp decline in recent weeks as Suntech Power’s recent bankruptcy has raised concerns that other Chinese manufacturers may be over-leveraged. Ticker Spy’s Chinese Solar Stocks Index (CHSOL) has fallen over 35% in the past month. Research Driven Investing examines investing opportunities in the Chinese Solar Industry and provides equity research on ReneSola Ltd. and Suntech Power Holdings Co., Ltd.
The China Daily recently reported that the China Banking Regulatory Commission (CBRC) has warned banks to “pay close attention to the credit risks in key industries affected by the economic downturn and hit by overcapacity woes.” In an attempt to protect themselves from risks associated with the solar industry Chen Yuan, chairman of China Development Bank, has stated his bank will begin to curb new loans to solar panel manufacturers.
“There clearly will be pressure on other Chinese stocks with heavily leveraged balance sheets and non-existent cash flows,” said Gamco’s Gabelli Green Fund, David Smith. “The outlook also is strained by Suntech continuing its production. Suntech probably will have to discount their panels more to sell them, putting downward pressure on market pricing.”
ReneSola uses in-house virgin polysilicon and a vertically integrated business model to provide customers with high-quality, cost-competitive products. The company recently announced it has signed a RMB320 million (approximately US$50.9 million) loan agreement with China Development Bank. Shares of ReneSola have fallen nearly 40 percent in the past month.
Suntech Power has delivered more than 25,000,000 photovoltaic panels to over a thousand customers in more than 80 countries. Shares of the company have fallen over 65 percent year-to-date. Suntech power is expected to release results for the fourth quarter and full year 2012 on Monday, April 1st.