Suntech, Owing Millions, Is Near Takeover by Chinese Holding Company

Suntech Power, one of the world’s leading solar panel manufacturers, is in financial trouble and is expected to be taken over, at least partly, by the  holding company of the government of Wuxi, China. Struggling to pay $541 million to bondholders, Suntech’s cash reserves have taken a major hit.  Suntech shares went down 5.2% on the day and have gone down 63.2% in the last 12 months, closing at $1.09 on Tuesday.  Bondholders are especially unhappy as Suntech claimed that it had reached a deal with the majority of its bondholders for a two-month reprieve.  However, bondholders are questioning the validity of the statement as many claim they were not even approached by the company.

The investment in renewable energy production by the Chinese government is especially note-worthy as China is experiencing severe air pollution and extreme dependency on energy provided by politically unstable countries.  The struggles of companies like Suntech have also sparked action by the United States and the European Union.  The U.S. has placed tariffs of 40% on solar cells and panels from China.  Meanwhile the European Union is considering similar action and will reach a verdict this summer.

The Chinese economy can take a serious hit by the collapse of solar panel manufacturers like Suntech because of the loans provided by Chinese state-owned banks.  The government has invested a lot in renewable energy to help solve not only economic problems, but health and environmental problems as well.  If the new arrangement for Suntech Power does not work out, China is set to face serious consequences.

Written by: Constantine Kostikas



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