Debt fears dog solar power suppliers
Renewable energy companies must repay US$3.5 billion this year, giving investors worries about another default in the sector
Renewable energy companies from the mainland and Hong Kong need to repay US$3.5 billion of debt this year, prompting global investors to fret that another issuer will follow Suntech Power into default.
Solar, wind, hydro and nuclear companies also have the equivalent of US$5.3 billion of notes due next year. The 2014 yuan bonds of LDK Solar, which failed to fully repay US$23.8 million of convertible notes last month, slid to a seven-month low of 34 yuan (HK$43) per 100 yuan face value this week, pushing the yield to 220 per cent.
The debt pile includes US$766.5 million of dollar-denominated convertible bonds in solar companies whose shares have slumped 88 per cent from their 2007 high, making the equity option unattractive for investors.
Suntech, once the world's biggest solar panel maker, defaulted on a US$541 million equity-linked bond in March, while LDK Solar must settle a US$240 million loan unless it spins off a subsidiary by June 3, filings show.
Bryan Collins, a fixed-income portfolio manager at Fidelity Worldwide Investment, said: "For the solar companies, it's a function of too much debt and poor market dynamics leading to an inability to refinance.
For the more experienced and conservative companies, they will refinance well in advance but, for convertible bonds especially, I think they issue on the hope some will be converted to equity
"For the more experienced and conservative companies, they will refinance well in advance but, for convertible bonds especially, I think they issue on the hope some will be converted to equity."