BEIJING (AP) — China's troubled solar panel maker Suntech Power Holdings Ltd. said it was in line to receive a $150 million investment from a company controlled by its hometown government as it restructures following a debt default.
The cash infusion could help to revive Suntech following financial trouble that saw it tumble from its status as a dominant solar panel manufacturer amid price-cutting wars triggered by a global production glut. Suntech's main Chinese subsidiary, Wuxi Suntech Power Co., was forced into bankruptcy court in March after missing a $541 million payment to bondholders.
Suntech has received an investment letter of intent from Wuxi Guolian Development (Group) Co., the company said in a statement Wednesday. Suntech's CEO said that it was not a firm commitment but "an important step in restructuring of the company."
The Chinese Cabinet announced in December it would encourage mergers and acquisitions among China's solar panel producers to reduce overcapacity and return the industry to profitability.
The Communist government sees solar power as a strategic emerging industry that it wants to develop. Beijing encouraged the industry's expansion over the past decade with grants and low-cost loans. That prompted hundreds of small producers to spring up, flooding the market and depressing prices.
Guolian will inject its solar and other businesses into Suntech, the company said. Guolian said it has net assets of $2.6 billion, including investments in solar, power generation, textiles, waste disposal and environmental protection.
There will be "substantial dilution" for existing shareholders but the move should rebuild Suntech's operating assets and global brand, said CEO Zhou Weiping.
"Even though the investment letter of intent is indicative only and is not a firm commitment, this is an important step in the restructuring of the company with key stakeholders," Zhou said in the statement. He gave no other details.
Guolian bid for Wuxi Suntech but lost out to another company, Jiangsu Shunfeng Photovoltaic Technology Co. That deal awaits court approval.
Suntech's financial trouble was a dramatic reversal for a company that was a leading force in China's fast-growing renewable energy industry.
Its founder, Shi Zhengrong, was lauded by the Chinese press but has seen much of his multibillion-dollar fortune evaporate.
Chinese solar panel makers, which export most of their production, have been hurt by higher import duties imposed by the United States and Europe over complaints Beijing improperly subsidizes the industry.
China retaliated last July by raising import tariffs on U.S.- and Korean-made polysilicon used to manufacture them and launching a trade investigation of European wine that could lead to higher duties.
Suntech also has faced trouble in Italy over investments there. Italian courts have ordered the seizure of 37 solar projects that received investment from Global Solar Fund SCA, of which Suntech owns 88 percent. Suntech lawyers believe that Global Solar used bonds that never existed as collateral in a partnership deal with the Chinese solar-power company.