Suntech Power, the solar giant founded by Australian Shi Zhengrong, is teetering on the edge of bankruptcy because excessive growth in the industry triggered a global supply glut, according to the head of the company's Australian research arm.
Suntech may be declared as soon as Monday to be in default on $US541 million ($520 million) in convertible bonds initially due last Friday. The company had secured agreement from 63 per cent of bondholders to delay payment for two months, but others have indicated they may sue the firm.
A trustee administering the bonds sent Suntech a notice of default at the end of last week, Bloomberg reported, a move that would allow bondholders to take the company to court in the US. A default, if declared, would be the first by a mainland Chinese company.
Suntech was founded by Dr Shi, who trained and worked at Sydney's University of NSW and took Australian citizenship before returning to China in 2001. The company, the first producer of solar panels to list on the New York stock exchange, soared in value to be worth $US16 billion at the end of 2007, making Dr Shi a multi-billionaire and earning him the sobriquet of the 'Sun King'. The shares have fallen more than 99 per cent from their highs.
Suntech has faced a slew of financial problems over the past year including possible fraud losses totalling more than $700 million. Senior management has been in turmoil, with Dr Shi stripped of his role as chief executive in August and then his chairmanship this month though he maintains the biggest share of Suntech at about 30 per cent. Dr Shi, who turns 50 on Monday, may see the entire value of his stock wiped out if the company is declared bankrupt.
Renate Egan, managing director for Suntech's Australian research and development unit, said Suntech - along with many of its rivals - exceeded ambitious growth targets.
"Suntech doubled every year for six or seven years and couldn't produce enough for the market," Dr Egan said. Employees went from 200 to 20,000 over that time.
Then the financial crisis struck in 2008-09, sapping credit for many of the buyers of solar PV just as supply had started to explode.
"Now supply far exceeds demand and everybody's competing on cost.
"It's an industry in its teenage years," Dr Egan said. "People expect a very static market for the next two years. It needs a few small [policy] changes and it will grow dramatically again."