Solar demand revival draws panel makers out of debt shadow

Rising demand worldwide, and more support from Beijing, has solar companies finally back on the front foot and chasing capital for expansion.


Solar panel makers are tapping capital markets for the first time in more than two years, shoring up battered balance sheets and improving their ability to pay off billions of dollars of debt as demand for the green energy recovers.

JinkoSolar Holdings, JA Solar, Canadian Solar and U.S. companies including First Solar and Sunpower Corp have raised about $US3 billion in the past year, over according to industry estimates and Thomson Reuters data, mostly through private share placements, public share issues and convertible bonds.

Their efforts were boosted by China's decision in July to quadruple its solar power capacity to over 35 gigawatts (GW) by 2015 and Japan's need to replace the nuclear power it shut off after the 2011 Fukushima disaster.

These factors, as well as rising demand from the United States, has helped to at least double the share price of many solar firms from mid-2012 levels. Chinese firms dominate the global solar industry, which saw a slew of defaults triggered by overcapacity and dwindling demand.

Solar panel makers were largely absent from the capital markets between 2011 and mid-2013 when the industry was mired in a severe slump. Analysts expect global panel shipments to rise by at least a tenth this year to more than 40 GW.

"I would characterise it as a re-engagement with the capital markets after a period of absence," Robert Todd, director of renewable energy banking at HSBC in Hong Kong, told Reuters. "You are going to continue to see this trend."


China's top 10 solar makers - among the largest solar manufacturers in the world - had accumulated 100 billion yuan ($US16.5 billion) in debt as of June 2013, with an average debt-to-asset ratio exceeding 70 percent, official data showed.

Based on industry estimates, at least $US10 billion, or two- thirds of the total debt, matures over the next 12 months. For example, Trina Solar, one of China's biggest panel makers, had $US1.1 billion in total bank borrowings at end-September, including $US966 million in short-term debt, most of which matures within a year.

Chinese solar panel makers have been relying predominantly on short-term bank loans for financing. Thanks in part to the government push, Chinese lenders have rolled over panel makers' short-term facilities and will continue to do so this year, encouraged by the recovery in demand, industry executives and analysts say.

These banks, however, are still reluctant to extend any new credit, executives and bankers say, a sign that the solar sector's prospects remain cloudy.

Defaults on their offshore debts by LDK Solar and Suntech Power Holdings, once China's largest photovoltaic module maker, and the bankruptcy of Suntech's biggest China unit last March exacerbated investors' worries about the creditworthiness of the sector.

It also remains unclear whether the current demand by China and Japan, which some analysts expect will account for 40-45 percent of global installations this year, will remain strong over the medium to long term.

"Having gone through the industry turmoil in 2011-12, banks are still jittery," said Ziguang Zhou, analyst at Chinese investment bank Ping An Securities in Beijing. "It's still regarded as a high-risk sector."

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