Suntech gets $32m emergency loan from local gov't

Updated: 2012-09-29 09:19

By Du Juan (China Daily)

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Suntech gets $32m emergency loan from local gov't

A Suntech Power booth at an international solar power equipment exhibition in Beijing. The company is suffering from financial difficulties as China's photovoltaic industry faces huge challenges, particularly anti-dumping investigations in the US and EU. [Photo/China Daily] 

China's Suntech Power Holdings Co Ltd, the world's largest solar panel maker by capacity, has been granted an emergency funding package worth 200 million yuan ($31.7 million) from the government of Wuxi city in East China's Jiangsu province.

The company has the largest photovoltaic solar panel production base in China, and the local government there has already carried out a series of measures, including granting subsidies and loans, to help solar companies in the area.

Zhu Kejiang, the mayor of the city, went to Suntech with a finance offer from a consortium of several banks, including Bank of China, on Thursday, aimed at helping it weather its financial difficulties.

According to reports from China Business News on Friday, the company still has about 1 billion-yuan worth of debt to pay back by the end of the year. In the first quarter of this year, its debts totaled $1.79 billion.

The consortium has helped by granting short-time loans, which will ease its ongoing costs.

The move comes as China's photovoltaic industry has seen huge challenges this year, as the US and EU - China's two main export markets - both launched anti-dumping probes into the country's solar exports.

Suntech has already reduced its production plan for the fourth quarter. A week ago, the company announced 1,500 job cuts.

According to Suntech officials, its exports in the third quarter reached 450 megawatts (mW), and it has another 450 mW of overseas orders due in the fourth quarter. Its annual production will be about 1.9 to 2 gigawatts.

However, its financial situation is worrying investors.

The company was notified by the New York Stock Exchange last week that it did not meet the NYSE's price criteria for continued listing because, as of September 10 2012, the average closing price of its American Depositary Shares, or ADS, was less than $1 per ADS over a consecutive 30-trading-day period.

Industrial insiders said the new local financial measures in place will help the company to some extent in the short term, but a final solution still lies on an expansion of the country's domestic solar market.

"The local government's policies to help the solar industry have shown their confidence on the future of the industry," said Wei Qidong, the former secretary-general of the Photovoltaic Industry Alliance in Jiangsu province.

He said the Jiangsu government will start giving subsidies of 0.3 yuan a kilowatt-hour this year on the basis of the national subsidies of 1 yuan a kilowatt-hour for on-grid solar power.

"It is important for the country to further open up its domestic market, and Jiangsu is setting a good example," he said.

"The province will increase its solar panel demand to 400 mW this year by adding solar roofs and new solar power plants."

The province will reach a demand of 1 gW by the end of 2015, he said.

Earlier this week, Chinese media reported that China Development Bank is planning to provide further credit support to 12 domestic solar companies to ensure their survival.

The 12 companies include six large-scale solar players including Suntech, Yingli Green Energy Holdings Co Ltd and Trina Solar Ltd and six other technical enterprises listed in A-share market.