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SFCE Media Scan for May 21, 2015
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Yingli shares recover as it reassures investors about debt
May 20, 2015 | Financial Times
By Lucy Hornby
Yingli Green Energy Holding moved to reassure investors that it was taking steps to pay back its debt after shares in the company plunged on its warning that it might not be able to stay in business. -
Yingli In Danger Of Default
May 20, 2015 | Alt Energy Mag
By Doug Young
Bottom line: Yingli is in increasing danger of defaulting on its heavy debt load, which could result in a rapid and disorderly bankruptcy if its hometown government fails to provide support. -
Another Chinese Solar Giant On the Verge of Collapse
May 21, 2015 | The Motley Fool
By Travis Hoium
The mantle of largest solar panel manufacture is a curse these days. Not long ago, Suntech Power was the largest solar manufacturer in the world, but it became insolvent a year and a half ago after a series of financial missteps. -
The 24-minute, $24b wipeout that halved Chinese billionaire's fortune
May 21, 2015 | Sydney Morning Herald
That's the question many were wondering when the founder, chairman and principle owner of Hanergy Thin Film Power Group failed to show up at his company's annual meeting Wednesday -- the same day the company's stock price tanked 47 per cent, wiping out $US19 billion ($24 billion) in market value in 24 minutes.
Industry News
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Yingli shares recover as it reassures investors about debt
May 20, 2015 | Financial Times
By Lucy Hornby
Yingli Green Energy Holding moved to reassure investors that it was taking steps to pay back its debt after shares in the company plunged on its warning that it might not be able to stay in business.
The world’s second-largest solar panel manufacturer said on Wednesday that it had repaid Rmb1.2bn on notes due earlier in May and was taking steps to meet other obligations on schedule.MoreIN ENERGYQ&A What is going on at Hanergy?EDF chief backs Areva nuclear takeoverShell secures Arctic drilling plan approvalAreva cuts 6,000 jobs ahead of rescue planSign up now
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“We believe that we will meet our repayment obligations based on the substantial progress we have achieved to date to secure funds to repay these notes on schedule,” said Liansheng Miao, Yingli chairman, in a statement.
Yingli’s woes preceded Wednesday’s sharp drop and stock suspension of Hanergy Thin Film Power, the high-flying Hong Kong-listed thin film equipment provider that has racked up a number of unconventional deals with its parent Hanergy Holding Group. Analysts said the two are unrelated.
On Friday, Yingli said in an SEC filing to the New York Stock Exchange: “Our substantial indebtedness and net loss may adversely affect our business, financial condition and results of operations, as well as our ability to meet our payment obligations.”
Shares in Yingli, which fell almost 45 per cent this week, recovered by 20 per cent in early morning trading on Wednesday.
The solar manufacturer made an ill-fated investment into polysilicon manufacturing technology several years ago, and has struggled with heavy interest costs on its debt ever since, said Charles Yonts, analyst at CLSA in Hong Kong.
“Their manufacturing cost is just a couple pennies higher than average first tier in China, but they have razor thin margins so that matters,” Mr Yonts added.
The Chinese solar industry has suffered from rapid expansion fuelled by generous state subsidies and is now operating about 15 per cent below capacity.
Two years ago, former top panel maker Suntech went bankrupt, resulting in the first case of an international bond default by a Chinese company that had listed overseas.
Suntech has been consolidated along with other struggling solar firms in its home province, Jiangsu, by Shunfeng, now an integrated solar manufacturer.
Like Suntech, Yingli is a home town favourite. The streets of the polluted industrial city Baoding just 150km southwest of Beijing, are lined with Yingli’s solarpanel street lights, while the corporate campus features a panel-clad hotel and an exhibition hall displaying Yingli’s wares. The company also splashed out on high-profile sponsorships, including the 2010 World Cup in South Africa.
http://www.ft.com/intl/cms/s/0/2bbc35e0-fefe-11e4-94c8-00144feabdc0.html#axzz3am5NHMyN
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May 20, 2015 | Alt Energy Mag
By Doug Young
Bottom line: Yingli is in increasing danger of defaulting on its heavy debt load, which could result in a rapid and disorderly bankruptcy if its hometown government fails to provide support.
After sending out a steady series of distress signals over the last few weeks, solar panel maker Yingli Green Energy (NYSE: YGE) has sent out its strongest trouble sign yet as it struggles under a huge debt load. The most recent signal comes in a new filing with the US securities regulator, in which Yingli says its big debt could threaten its ability to survive, potentially making it the latest casualty in a clean-up of China’s bloated solar panel sector. Such an outcome would see Yingli follow in the footsteps of former high-flyers Suntech andLDK, and would raise the question of whether others may soon follow down a similar path.
First Suntech and LDK, and now Yingli have all struggled to service billions of dollars in bonds and bank loans they used to build plants for solar panel manufacturing at the height of an industry boom 7 years ago. Suntech’s inability to pay off a maturing bond was the trigger that finally forced it into bankruptcy 2 years ago, though it was already in deep financial trouble by then. Now the same thing could soon happen to Yingli, whose prospects are being clouded by recent weakness in the global solar panel market.
In its new filing with the US securities regulator, Yingli says it has nearly 15 billion yuan in debt ($2.4 billion), more than two-thirds of which is short term borrowings. (company announcement; English article) It said it is having difficulty servicing that debt, which could affect its competitiveness, its ability to get new financing and ultimately its ability to stay in business.
The announcement sparked a sell-off for Yingli shares, which tumbled 12.3 percent to $1.49 in the latest regular trading session in New York. The shares were down another 25 percent at $1.11 in after-hours trade, putting them in position to reach an all-time low if the declines hold in the next regular trading session. Shares of many other solar panel makers also dropped by smaller amounts, with Canadian Solar (Nasdaq: CSIQ) andReneSola (NYSE: SOL) both down by more than 4 percent.
Yingli has yet to announce its first-quarter results, but reported net losses of nearly $90 and $210 million for last year’s fourth quarter and the full-year 2014, respectively. Its new announcement was its loudest signal yet that it may be the next to fail, following a recent string of similar signs.
YIngli was recently forced to sell some of its idle land in its hometown of Baoding to meet a debt payment due earlier this month, barely managing to avoid a default. (previous post) Another solar manufacturer named Tianwei, which also happens to be based in Yingli’s hometown of Baoding, last month made headlines when it became the first company to default on a domestic Chinese bond. (previous post)
It’s unclear if these 2 companies are related beyond the fact that both are based in the industrial northern city of Baoding. But what does seem clear is that the city of Baoding isn’t in any rush to bail out these local companies, which certainly isn’t a good sign for either. In the earlier Suntech bankruptcy, the company’s hometown of Wuxi was much more proactive in the bankruptcy process, even though Suntech’s management team was ultimately forced out.
In this latest case it’s probably still too early to say if Yingli will ultimately be forced into a similar bankruptcy, though the likelihood certainly looks high. The earlier bankruptcies 2 years ago were relatively orderly, thanks to strong support from local governments.
But now many of those governments are coming under economic distress as they struggle with their own big debt amid a slowing Chinese economy. Accordingly, first Tianwei and now Yingli probably can’t expect too much assistance from the local Baoding government, meaning a rapid fall and disorderly bankruptcy could come if and when the company fails to service its next upcoming debt obligation.
Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.
http://www.altenergystocks.com/archives/2015/05/yingli_in_danger_of_default.html
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Another Chinese Solar Giant On the Verge of Collapse
May 21, 2015 | The Motley Fool
By Travis Hoium
The mantle of largest solar panel manufacture is a curse these days. Not long ago, Suntech Power was the largest solar manufacturer in the world, but it became insolvent a year and a half ago after a series of financial missteps. The title was then handed to Yingli Green Energy , which was more than happy to tout its size as a competitive advantage.
But the debt that Yingli Green Energy used to build the world's largest solar manufacturing company appears to be more than it can pay back, and a recent filing with the SEC brought up the fact that there was risk of it being a "going concern", a terrible sign for any company.
Just how did we get here? Well, don't say we didn't warn you that this was coming.
Built on a house of cards
Yingli Green Energy's latest filing shows just how bad it's gotten for the company. $2.4 billion in debt is offset by just $387 million in cash, and the company lost $205.9 million, or $1.21 per share, last year.Spending lavishly on events like the World Cup didn't help expenses, but a $163.7 million interest expense is what really sunk the company.
One of the problems Yingli Green Energy had is that it was one of many companies built with funding from Chinese state-run banks. Along with Suntech Power and LDK Solar, which both went insolvent, the company got billions in funding and used that money to build large factories with off-the-shelf equipment, which led to scale the solar industry had never seen.
Scale is great because it helped drive solar panel costs dramatically lower than we saw a decade ago, but when you're buying the same equipment as your neighbor it's inevitable that you'll all make the same product. That's essentially what's happened in China, and costs fell -- but so did overall margins, and that's led to the financial mess we see today.
This is what happens when we all make the same thing
The problem with China's strategy in solar is that it builds a series of commodity manufacturers. Even companies that are doing well today, like Canadian Solar (NASDAQ:CSIQ ) , Trina Solar (NYSE: TSL ) , and JinkoSolar (NYSE: JKS ) , are making essentially the same solar panels. They just had better balance sheets than their failed rivals, and were smart getting into the project development business as well.The core problem is that everyone making solar panels in China was making a commodity. It was a race to the bottom. That's no way to build a long-term, profitable business.
Why I'm buying differentiation and innovation
This is why I've long stuck with technology leaders like SunPower , which has a quantifiable advantage over commodity solar products. Sunpower doesn't put up the best growth numbers in the industry, but it does post strong margins because it can sell what it makes for a profit.The lesson here for investors is that you want to find companies that are different than competitors and can use that to generate more sales or higher margins long-term. Using leverage to build the exact same product as everyone else is a recipe for disaster.
Good luck to the new top solar manufacturer in the world making a commodity product: Trina Solar.
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The 24-minute, $24b wipeout that halved Chinese billionaire's fortune
May 21, 2015 | Sydney Morning Herald
Where's Li Hejun?
That's the question many were wondering when the founder, chairman and principle owner of Hanergy Thin Film Power Group failed to show up at his company's annual meeting Wednesday -- the same day the company's stock price tanked 47 per cent, wiping out $US19 billion ($24 billion) in market value in 24 minutes.
The entrepreneur, who began the day as China's second-richest man worth more than $US30 billion, was almost $US14 billion poorer by 11am, according to a Forbes magazine estimate.
Li Hejun's absence at the shareholder meeting was all the more noteworthy because over the past year he has tirelessly championed his vision of a new era of mobile energy: thin, flexible solar cells. They would soon, he promised, be plastered on just about everything: cars, backpacks, phones, tents, satellites, flashlights, buildings, lamps, drones and clothing.
Under his stewardship, the company's stock had surged more than sixfold in the past year, making it the world's most valuable solar company worth more than HK$300 billion ($49.2 billion). That's larger than tech-giant Sony and seven times the size of First Solar, the biggest US solar manufacturer.
Then on Wednesday, trading was suspended after the shares spectacularly plunged amid speculation of market manipulation and questions about the viability of the company's core technology - while the entrepreneur himself spent the morning at the opening of a clean energy exhibition in Beijing, according to a company spokesman.
Chinese workers manufacture solar panels at the plant of Zhejiang Changxing Hanergy Solar PV in HuzhouPhoto: Imagechina
"All directors of listed companies take part in setting the dates of their shareholder meetings, and they should attend," said David Webb, shareholder activist and founder of Webb-site.com. "If a chairman of a mainland company did not show up in Hong Kong for the AGM, then it raises questions."
A request for an interview with Li following the plunge was sent to the public relations department of Hanergy Thin Film's parent, Beijing-based Hanergy Holding Group. Representatives responded that the request will be considered.Unproven technology
In an interview earlier this year, the solar entrepreneur claimed he was no gambler.
"The biggest difference between gambling and the spirit of adventure is that if you know you can stand up to the worst scenario, that's the heart of an entrepreneur," Li said in March on the sidelines of the Chinese People's Political Consultative Congress, an annual meeting of advisers to the government in Beijing.
"Gamblers are unsure of the result and aren't able to face the worst outcome," Li said.
As outcomes go, this is a pretty bad one for one of China's richest men on paper. But analysts have been questioning whether his company's stratospheric stock price surge was justified.
"The bulk of Hanergy's technology portfolio remains unproven," said Jenny Chase, lead solar industry analyst at Bloomberg New Energy Finance.
In a six-page examination of the Hong Kong manufacturer's operations, the London-based researcher said it's been unable to find a detailed list of solar-power projects that would help explain why the company's shares surged in the past year.
Technology aside, for months analysts and investors have raised questions about the company's revenue source: more than 60 per cent of Hanergy Thin Film's sales come from Beijing-based parent Hanergy Holding Group, a solar panel and hydroelectric company. And Hong Kong's Securities and Futures Commission has been probing market manipulation in Hanergy's shares for several weeks, according to a Reuters report. A spokesman for the regulator declined to comment.
"It's an adjustment that the market has been waiting for to happen, as Hanergy's earnings and business performance didn't support such a high stock price or valuation," said Gong Siwen, an analyst in China for Northeast Securities.
An even more fundamental investor concern, though, is whether the company's technology actually works and how big the market for it would be.Ambitious plans
Li had big plans. In the English translation of a book published last year, Li predicted the world is about to enter a third industrial revolution that will be based in China. Clean energy, he wrote, will account for half of the world's energy consumption by 2035.
"China has been a laggard in the past two industrial revolutions," he wrote in "China's New Energy Revolution," which was released in October at the Frankfurt Book Fair. "In the new round of energy revolution, the world will choose China and China will choose photovoltaics."
Seeking to tap that revolution, Hanergy Thin Film has said it will begin commercially producing by October cars that will be totally powered by the sun. The vehicles would be able to drive 80 kilometres to 100 kilometres on a four-hour charge from six square metres of thin film. Yet the industry is full of examples of companies that have developed the kind of thin-film solar cells Hanergy is banking on, yet have ended up in bankruptcy.
In an interview in March, Li called the company's investments cautious and said the earlier run-up in the stock was validation of the solar-maker's focus on a new era of mobile energy.
No one would argue that the technology lacks promise. Because its thin-film cells can be flexible, they've found their way into applications such as the solar panels for satellites developed by NASA, backpacks and windows. Solar calculators were some of the first devices to use them. Mass production, however, has proven costly. One early flop: Solyndra went bankrupt in 2011 after getting $US528 million from the US government.
Hanergy said in April it would build a factory to make the world's most efficient solar cells, using gallium arsenide that capture more energy from the sun. But experts cautioned that technology is years away from gaining mass appeal for the only solar market that really counts today: rooftop and utility-scale installations, an established $US24 billion market.Piecemeal technology
That left the company's fortunes entirely dependent on an as yet unproven technology which it has acquired piecemeal through acquisitions. Hanergy entered thin film through a buying spree. The first purchase was Solibro, a subsidiary of Germany's Q-Cells SE. That was followed by MiaSole, a California-based manufacturer, Global Solar Energy based in Arizona, and Alta Devices.
It was the Alta purchase, completed in August 2014, that gave Hanergy a toehold in gallium arsenide. Hanergy vowed to use Alta's products in a broad range of consumer products such as mobile phones and in automobiles.
"The advantage is going to be where things have to be flexible and light," said Isik Kizilyalli, a former Alta senior scientist. "I think that's where the value of what Alta will end up being until they can bring the price down," said Kizilyalli, who is the founder and chief technology officer at Avogy, an energy-efficiency electronics company.Catering trucks
In April, Hanergy's Li unveiled partnerships to develop catering trucks and recreational vehicles that would draw on the solar-maker's panels for energy.
The catering vehicles would generate 6 kilowatt-hours of electricity in normal sunlight for electronics such as light and refrigeration. The touring vehicle would use six 75-watt panels from MiaSole to generate 2 kilowatt-hours a day of electricity in normal light.
BNEF's Chase wrote in a March report that she was "skeptical that any thin-film technology unproven in bulk production will revolutionise the solar industry.
''While technological black swans can never be ruled out, the history of thin film has largely been one of losses and disappointments,'' she wrote.
History may be proving her right.
Li's meteoric rise and brutal fall has drawn comparisons by analysts with fellow renewable energy billionaire, the Sydney-educated Shi Zhengrong. Shi was founder of Suntech Power Holdings, whose fortunes unraveled when its main unit tipped into insolvency.
http://www.smh.com.au/business/the-24minute-24b-wipeout-that-halved-chinese-billionaires-fortune-201505
Additional Coverage:
The Star Online (English): http://www.thestar.com.my/Business/Business-News/2015/05/21/Hanergy-Li-said-he-is-no-gambler/?style=biz
IT Times (German): http://www.it-times.de/news/spektakular-19-mrd-dollar-innerhalb-von-minuten-bei-hanergy-thin-film-solar-weg-111414/
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