Unit of China’s Suntech in strategic investment talks

PUBLISHED : Tuesday, 06 August, 2013, 5:24pm
UPDATED : Tuesday, 06 August, 2013, 5:25pm

The main unit of troubled Chinese solar panel maker Suntech Power Holdings is in talks with five companies for strategic investments as part of efforts to restructure its US$1.75 billion debt, a source familiar with the matter said on Tuesday.

The unit, Wuxi Suntech, has been seeking strategic investments and is in negotiations with three privately-owned companies and two state-owned enterprises, the source told Reuters on condition of anonymity.

Wuxi Suntech has also verified all debt claims filed by its creditors, including domestic banks and suppliers, and confirmed that its liabilities reached 10.7 billion yuan (HK$13.55 billion), he said, confirming a report in the state newspaper Economic Daily on the latest of Wuxi Suntech’s restructuring and talks with potential strategic investors.

“The investors approaching Suntech include a domestic industry peer – a major domestic solar panel producer,” the source said, but declined to give details.

A Suntech Power spokesman in Wuxi said the company had no comment on the restructuring and the debts.

The newspaper on Monday quoted Huang Qin, vice mayor of Wuxi, where Suntech is headquartered, as saying that the restructuring was going smoothly and the local government backs Wuxi Suntech and wants to preserve the “Suntech” brand. The government has ruled out a liquidation of the unit.

The source said that creditors of Wuxi Suntech were expected to take a “haircut” – or suffer losses – while the strategic investor, when chosen, was expected to inject capital into the company. He did not elaborate.

Wuxi Suntech filed for bankruptcy protection in China in March, five days after its New York-listed parent company defaulted on a US$541 million dollar convertible bond.

A March 21 Suntech Power statement said “the primary goal” of the court-appointed administrators of the company “is to restructure Wuxi Suntech’s debt obligations while continuing production and operations”.

The restructuring of Suntech’s domestic debt is being closely watched by overseas creditors, whom analysts say are expected to recover a fraction of their capital at best.

Suntech Power and others in the solar industry have been grappling with a global glut of solar panels that has sent prices into a tailspin and hammered their once high-flying stocks over the past two years.

At the end of March last year, Suntech Power had total debt of US$2.2 billion, including the convertible bond, loans from China Development Bank, and a US$50 million convertible loan from the International Finance Corporation, the private sector arm of the World Bank. The listed company has yet to publish its last year annual report and disclose its overall debt situation.

Suntech Power is currently operating at 30-40 per cent its designed annual capacity of 2.4 gigawatts (GW), but expected demand to pick up gradually as China has settled a solar panel trade dispute with the European Union and has announced plans to boost domestic demand for solar modules, the source said.

One EU source said it has been agreed that Chinese firms could sell into Europe at a minimum price of 56 euro cents per watt, with a total ceiling of 7GW a year, around half of the EU’s last year demand of about 15GW.

Suntech is expected to receive an annual government quota on solar panel exports to the EU and the quota will likely be tradeable, the source said.