UPDATE 3-LDK Solar hunting for acquisitions -CFO

Mon Sep 27, 2010 5:50pm EDT

* LDK eyes acquisitions, partnerships -CFO

* Credit agreement will help with short-term debt

* Company may step up move into solar modules, cells (Revises first sentence, adds comments from CFO interview, adds closing share price, other details)

By Sarah McBride

LOS ANGELES, Sept 27 (Reuters) - Solar-wafer maker LDK Solar Co Ltd LDK.N is hunting for acquisitions and partnerships, aided by a 60 billion yuan ($8.95 billion) credit agreement with China Development Bank.

The company, whose shares rose 18 percent on Monday on news of the credit agreement, is scouring the globe "for opportunities to increase capacity, increase market share, or lower costs," Chief Financial Officer Jack Lai said in an interview.

The company is looking in Asia, Europe and the United States, but has not yet "seen a good fit," Lai said.

LDK Solar has a sizable war chest as a result of the credit agreement. Some analysts say it should pay down its debt before focusing on acquisitions.

The company will use part of that amount to deal with more than $1 billion in short-term debt that comes due next year. It will likely move those obligations into longer-term loans, Lai said.

Still, that gives LDK Solar plenty of cash for other purposes.

The company could build on existing downstream expansion plans, Lai said. It is increasing its solar module operations to 2.5 gigawatts, as previously announced, and its solar-cell operations to 1.24 gigawatts. Solar wafers and solar cells are components of solar modules.

The credit agreement is the largest in a series of loans dished out by the bank this year to Chinese solar manufacturers such as Suntech Power Holdings Co Ltd STP.N and Trina Solar Ltd (TSL.N).

Investors, who had previously worried about LDK's debt deadlines, sent its stock up to a 13-month high at $10.50 on the New York Stock Exchange on Monday. The stock ended at $10.45, up 18.1 percent on the day.

Some analysts think LDK still has room to grow.

"Consensus estimates are way too low for LDK," said Ahmar Zaman, an analyst at Piper Jaffray who initiated coverage of the stock with an "overweight" rating last week.

Zaman thinks the company's expansion plans and continuing pricing strength for solar wafers will help LDK brighten its financial picture.

Others disagree. The rise in LDK's share price is overdone, said Gordon Johnson, head of alternative energy research at Axiom Capital Management.

He said LDK's costs in manufacturing wafers are higher than those of competitors, and a shortage in solar modules could become a glut, affecting prices for components such as solar cells.

On Monday, HSBC cut the Asian solar sector to "underweight," citing subsidy cuts in Europe, which it said would push down prices and margins.

LDK Chief Executive Xiaofeng Peng said in a statement that the five-year credit agreement would help the company strengthen its position in photovoltaics. "We will have an enhanced ability to pursue our long-term growth strategy," Peng said.

Heavy support from Beijing for clean energy has angered some in the United States, where government backing is much smaller scale.

Earlier this month, the United Steelworkers union filed a petition with the U.S. Trade Representative's office seeking action against what it called illegal Chinese practices that threatened U.S. jobs in the clean energy area. [ID:nN09121928] ($1=6.703 Yuan) (Reporting by Sarah McBride in Los Angeles and Sakthi Prasad in Bangalore; Editing by Hans Peters, Gerald E. McCormick and Matthew Lewis)

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