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Suntech freezes assets of troubled partner

By Xie Yu in Shanghai (China Daily)

2012-08-17 10:47

Suntech Power Holdings Co Ltd, China's largest solar energy firm, has replaced its founding Chief Executive Shi Zhengrong, after winning a court order freezing the worldwide assets of its partner in a solar development fund.

Shi, who founded the company in 2001, has been replaced by David King, the company's chief financial officer.

Shi will also step down as chairman to become the executive chairman as well as chief strategy officer.

Shi is considered the most prominent of the country's solar entrepreneurs, building Suntech into the world's largest panel maker in terms of manufacturing capacity.

"We believe that this new management structure will position Suntech to excel in this environment," Shi said.

He had been serving as chairman and CEO of the company since he founded it.

"The solar industry is at a critical juncture and is facing both significant challenges and exciting opportunities.

"At this time, I believe it's important to devote more of my time to guiding the strategic direction of the company, building relationships with key partners, and driving the ongoing development of Suntech's leading solar technology," Shi added.

The company's disclosure at the end of July of allegation that it may have been defrauded by a partner, GSF Capital, raised new industry fears it may struggle to cover 560 million euro ($685 million) in German government bonds due in early 2013, sparking market worries over its finances, at a time of considerable pressures on the industry in China and worldwide.

Suntech, which has been seeking to sell its 80 percent stake in GSF to raise money to cover debt payments, announced an investigation into the alleged fraud, alleging that the bonds, which it should have received as security for an investment in Global Solar Fund, had never have been posted as collateral.

Suntech's shares have dropped by 17 percent since July 30, when it reported the alleged fraud, Reuters said.

"It is hard to tell if Shi's leaving his post has anything to do with this, but for sure the company is in trouble," said Wang Anshi, secretary-general of Shanghai Solar Energy Society.

According to reports, the company has already said it is working with existing lenders to secure new financing, and is believed to be considering a debt issuance.

It said on Wednesday that it had now won court orders freezing the worldwide assets of GSF Capital, and GSF owner Javier Romero, and a court-appointed manager would oversee the frozen assets.

Shi insisted the solar plants owned and operated by the fund's operating companies remained "in good order".

"Over the coming weeks we intend to work closely with the manager to review all of the assets, and confirm that the operations are in line with our initial expectations," he added

An earlier media report said the worst result might be that Suntech has to cover the 560 million euros by itself, which would be a severe hit to the company.

The 21st Century Business Herald said government officials were now trying to convince one or two listed companies in Suntech's home Jiangsu province to buy its shares to support it.

But Zhang Jianmin, a senior manager in the CEO's office, refused to confirm this in a message to China Daily on Thursday.

Maxim Group, an investment bank in the United States, said in a recent report that China's solar industry is close to the edge of bankruptcy.

The debt of 10 of the country's largest solar energy companies totaled $17.5 billion, the report said. It pointed out that LDK Solar, another solar giant in Jiangxi province, and Suntech were the most likely to go bankrupt.

A supply glut and falling prices are cutting profits at China's solar companies.

For many, profit margins have narrowed to 20 percent or lower, down from the 139 percent they previously enjoyed, added Wang Quan'an, secretary-general of Shanghai Solar Energy Society.

More than 90 percent of Chinese-made solar products used to be exported, but that number may drop to 75 percent this year, due to the global economic slowdown, he said.

What's more, the US has announced it will impose duties on panels made in China, and Europe may launch a similar anti-dumping investigation, adding to the troubles of Chinese solar manufacturers.

Many Chinese companies are now trying to grow their domestic market share.

Last year, China overtook Japan as Asia's biggest solar market, and demand is likely to continue. Some 3,000 megawatts of solar facilities will be installed in China this year, up from about 800 mW in 2010, Bloomberg New Energy Finance reported.

xieyu@chinadaily.com.cn

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