Bankrupt Suntech taken over by Chinese government
Bad investment in German bonds causes top energy firm's downfall.
Suntech Power Holdings Company Ltd, one of the world’s largest makers of solar panels, is almost bankrupt and will be taken over by the municipal government of Wuxi, its hometown. Government sources said a deal had already been reached for the acquisition of Suntech.
Suntech has been driven to near collapse by an obligation to pay US$541 million to holders of convertible bonds at the end of this week. Its downfall began with a US$690 million investment in German bonds that might prove fraudulent. The company’s cash reserves are almost gone and Chinese state-owned banks have been reluctant to lend more money to Suntech.
Suntech, however, said it reached a deal with three-fifths of bondholders early this week to give it a two-month reprieve. Suntech’s convertible bonds have been trading this week for as little as US$0.30 on the dollar. The sudden collapse of Suntech is a milestone in the decline of China’s green energy industry over the last four years.
Easy state-bank loans to Chinese renewable energy makers fueled a glut in renewable energy products. State-owned banks have provided US$18 billion in loans on easy terms to Chinese solar panel manufacturers. This led to an increase of more than tenfold in production capacity from 2008 to 2012 and set off a 75% drop in panel prices during that period. As a result, Chinese companies lost as much as US$1 for every US$3 in sales last year.