Suntech saga; more twists than Breaking Bad

I must admit that I am a very recent Breaking Bad tragic, after being given a CD set of the first series. The plot has so many incredulous, constant, twists and turns that you just cant help becoming hooked on this tragic tale.

The Suntech story seems to have many of the same elements. Good intentions. Smart people. Bad people. Twists and turns of fate. Desperate times calling for desperate, uncharacteristic actions. The Mafia even got a mention.

Ultimately, like Breaking Bad we don’t know how it will end up (don't tell me!) but another chapter has unfolded with the announcement that on November 6, Suntech Power Holdings announced it had filed an application for a provisional liquidation with the Grand Court of the Cayman Islands, where it was incorporated. The rationale behind this is a little complex but there is a story here which is apparently reasonably accurate.

At the same time as this liquidation is being announced, official confirmation that  Shunfeng PV will have its investment in Suntech confirmed is imminent and Wuxi Court will apparently formally announce that Wuxi Suntech Power is out of administration in the next two weeks. 

So what gives?

Quite simply, Suntech Power Holdings  and Wuxi Suntech Power are different entities. A company search shows Wuxi Suntech Power owns 100 per cent of Suntech Power Investment Singapore, while Suntech Power Investment Singapore owns 100 per cent of Suntech Power Australia and Suntech R&D Australia.

Importantly in this plot, Wuxi Suntech Power owns the Suntech Wuxi manufacturing facilities, Suntech brand rights, and all of the technology patents – and that’s what  Shunfeng PV will get through its investment. Importantly for Australians, Suntech R&D Australia and Suntech Power Australia are subsidiaries of Wuxi Suntech Power (not Suntech Power Holdings). I would assume that this means warranties are assured and protected for Australian consumers (anyone like to confirm that?).

According to insiders, this means that Suntech Power Australia and Suntech R&D Australia will continue operating as normal and will not be affected by the process that Suntech Power Holding will go through; although they will have new owners in Shunfeng PV. We had already speculated about the logical fit between Shunfeng PV and Suntech since they have a 1GW project pipeline with limited manufacturing capacity. Suntech on the other hand has capacity, technology, experienced staff and a global brand. Shunfeng PV are located within one hour of the Wuxi manufacturing facilities and were, in fact, founded by Suntech’s previous chairman.

According to a statement to the Hong Kong Stock Exchange on Friday night, Shunfeng PV reportedly paid nearly $US493 million for the assets and a Chinese state-owned conglomerate, the Wuxi Guolian Development Group, pledged to throw in $US150 million to finance “a comprehensive rehabilitation and restructuring of the financial and operational affairs”.

Shunfeng PV will get the potential for 3.6GW of capacity in the move which is substantial; however one of its two cell production facilities in Wuxi is disused and loaded with obsolete equipment according to press reports. A second – 1.6 GW – cell production line has been idle since mid 2012, which Shunfeng PV claim can be restored to 1.2 GW annual capacity. This situation is characteristic of the hyper-speed PV manufacturing sector where technologies rapidly evolve and equipment can have very short life cycles; I witnessed this problem first hand when I worked for another PV industry giant in my previous working life.

Same time next week for the next enthralling episode.

Nigel Morris is director of SolarBusinessServices.