Pondering the what-ifs of a deal for Suntech

Updated: 2013-04-18 12:00

By Michael Barris in New York (China Daily)

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If investor Warren Buffett's MidAmerican Energy Holdings Co were to buy bankrupt Chinese solar-panel maker Suntech Power Holdings Co, it would "open doors to potential investment opportunities in China's utility and energy sectors", an analyst said.

Wedbush Securities' Min Xu told China Daily on Saturday that a rumored bid by MidAmerican for Suntech - based on an anonymously sourced report last week by a news service owned by the Hong Kong Economic Times - could, if true, turn the local government in Wuxi, where Suntech is based, into a "close ally" of Buffett's.

Such a relationship "could be valuable for future investment in the region", Min said.

Buffett is no stranger to deals for US solar companies. Reflecting the Nebraska billionaire's confidence in the future of panels, which convert sunlight into electricity, MidAmerican in January agreed to acquire two SunPower Corp solar photovoltaic power plant projects in California for between $2 billion and $2.5 billion. MidAmerican also owns the 550-megawatt Topaz Solar Farms built by First Solar in California and holds a 49 percent stake in a 290-mW plant in Arizona.

A Buffett rescue of Suntech could restore some luster to what was once the world's biggest maker of panels. But Min cautioned that "the huge liability" tied to 20-year warranties on Suntech's solar modules "could be a deal breaker". Buffett could also look into "a dozen other Chinese solar companies for a better deal", the analyst said.

"The debt owner and the Wuxi government will have to offer something very attractive to seal the deal," Min said. "The Buffett name is probably worth more than the whole company.

Speculation that Buffett was looking to buy the ailing company last week pushed up Suntech's New York-traded shares by more than 30 percent.

A spokeswoman for Iowa-based MidAmerican said the company doesn't comment on speculation. A spokesman for Suntech couldn't be reached.

Suntech is a casualty of debt, which totaled $2.2 billion at the end of March 2012, as well as oversupply and declining prices in the solar-panel market.

It filed for protection from creditors under Chinese bankruptcy law after defaulting on a $541 million bond payment in March. The bankruptcy court in Wuxi has appointed a team of local government officials to manage the process. Suntech employs about 10,000 people at its main factory in Wuxi.

A Buffett deal is seen easing Suntech's debt woes faster than a rumored plan to sell solar power generation assets in Italy. Reports on Wednesday said selling the assets may generate hundreds of millions of dollars, but some industry insiders doubt if it could strike a satisfactory bargain, due to its urgent demand for cash.

"We will consider all options to maximize the value for our stakeholders," Suntech's spokesman said on Wednesday when asked whether the company would sell its 88.15 percent stake in Global Solar Fund Sicar, a Luxembourg-based fund specializing in the development of solar power projects, mainly in Italy.

In 2013, worldwide solar panel output is expected to climb to 60 gigawatts - well above forecast demand in the 40-gW range. In 2012, worldwide module demand was 35 gW.