Chinese solar farm operator seeks to resolve bond defaults as end of subsidies casts shadow over industry
- The Hong Kong-listed company has defaulted on loans totalling US$142 million
- Fitch Ratings says that Chinese solar firms are under significant pressure from delayed subsidy payments and falling value of solar farms
China Singyes Solar Technologies Holdings, once the mainland’s leading solar developer, is seeking to resolve bond repayments worth 967 million yuan (US$142 million) it had defaulted on in October.
The Hong Kong-listed company, focusing on operating solar farms and building solar curtain walls, had defaulted on 202 million yuan of offshore loans and 765 million yuan of onshores loans at the end of October, it said in a stock exchange filing on Thursday.
Singyes Solar said it has been in close discussions with the onshore lenders, suppliers and local governments to resolve the situation.
“Given the group’s financial difficulties and the loan defaults, it is uncertain whether the group has sufficient working capital to maintain its business operations,” the company said.
The company said onshore lenders did not demand immediate repayment of the loans and were open to extending payment schedules.
It had slashed round the clock operating hours at two of its factories to as little as eight hours, it said.
The financing difficulty faced by Singyes Solar, based in the southern city of Zhuhai, points to a clouded outlook amid policy shifts for China’s solar industry, which leads the world in solar energy capacity and output.
After a decade of rapid expansion into solar energy driven by heavy government subsidies, China announced in May that it would gradually phase out subsidies to rein in overcapacity. According to Taiwanese research institute EnergyTrend, solar demand in China was likely to fall 40 per cent in the wake of the decision and also affect global demand.
Rishab Shrestha, solar analyst at energy consultancy Wood Mackenzie, said that the effect of the ongoing subsidy delays was being felt by the developers.
“The financiers have become even more cautious about financing projects given the regulatory uncertainty,” he said.
Singyes Solar said it had 2.43 billion yuan worth of onshore loans in total, and was actively looking to sell its photovoltaic power stations in the southern province of Guangdong and elsewhere.
The company also decided to terminate a plan to issue HK$230 million (US$29.3 million) of convertible bonds at an annual interest rate of 12 per cent announced in October.
A report published on Tuesday by credit rating agency Fitch Ratings said that Chinese solar farm operators were under significant pressure from a combination of factors including delayed subsidy payment and falling value of solar farms.
“There is a risk that the recent default of Singyes Solar could be followed by further failures in 2019,” the report said.
Jun Zhu, an equity analyst with Guotai Junan Securities, wrote in a report published in November that the brokerage expects “the borrowing cost of Singyes to increase substantially and … long-term partners and suppliers may become more reluctant when dealing with Singyes”.
Shares of industry leaders such as Henan Yicheng New Energy have declined by a quarter since June, while Longi Green Energy Technology has lost 13 per cent.
Trading of Singyes Solar’s shares has been suspended since October 15.