By Swetha Gopinath
Dec 7 Chinese solar panel maker Suntech Power
Holdings Co Ltd, already under pressure from the
collapse in the price of its products, said an internal probe
concluded the company was defrauded by a partner in a solar
As a result, Suntech will reduce its 2010 net income by
between $60 million and $80 million, it said in a statement.
The news was the latest blow to Suntech, which is grappling
with a global glut of solar panels that has sent prices into a
tailspin. The company also said revenue fell 18 percent from the
second to third quarters because subsidies were cut in Europe, a
top solar market. Shipments of photovoltaic solar panels are
expected to be lower than planned.
Suntech is also weighing alternatives to cover a $541
million convertible bond due in 2013.
The Chinese solar panel industry received a vote of
confidence too, on Friday, when Suntech rival JinkoSolar Holding
Co Ltd said its Swiss unit will get up to $1 billion
over five years from the China Development Bank Corp
to fund projects outside China. JinkoSolar's stock was up 12
percent following the announcement, which also lifted the shares
of rivals Trina Solar Ltd, Yingli Green Energy Holding
Co Ltd and JA Solar Holdings Co Ltd.
Suntech shares were up 2.2 percent at 88 cents in afternoon
trading. The stock has fallen about 35 percent since July 30
when Suntech said it might have been the victim of a fraud. Many
solar stocks have lost more than half of their value this year
due to weak demand and an oversupply of solar panels.
The No. 1 solar panel maker also said on Friday that its
results for 2011 and the first quarter of 2012 should not be
relied on, although the impact was expected to be "immaterial."
The scandal involves Luxembourg-based investment fund GSF
Sicar, a solar power plant developer 80 percent owned by Suntech
and 10 percent by Zhengrong Shi, who founded Suntech in 2001.
The allegation relates to a minority shareholder, GSF
Capital PTE, which owns the remaining 10 percent of the fund.
Suntech, which plans to file restated consolidated results
in early 2013, said it concluded that a security interest it
received from GSF Capital to finance Italian solar projects did
not exist. It said in August that the 560 million euro ($727
million) security was in the form of German bonds.
One analyst said there was a risk the restatement could
stretch Suntech's already fragile balance sheet.
"$60 million to $80 million is a small number for Suntech,"
said Maxim Group analyst Aaron Chew. "The implication for
Suntech not having collateral for that $700 million loan is that
the loan should go on to Suntech's balance sheet. The issue is
what their level of debt is now going to be and if that is going
to trigger any covenant defaults."
The company said that, as a result of the alleged fraud, it
was now required to record a guarantee obligation higher than
the prior obligation of $3 million.
GSF Capital officials were could not be immediately
A prosecutor in the southern Italian city of Brindisi has
brought charges against certain officers of GSF subsidiaries
alleging they failed to comply with the necessary permitting
process and building regulations for solar plants in Italy.
Suntech said on Friday it was advised the GSF officers were
vigorously contesting the charges and believed the plants at
issue were in compliance with Italian law.
Suntech cut its full-year shipment forecast to a range of
1.7 gigawatts (GW) to 1.8 GW from 1.8 GW to 2.0 GW and estimated
shipments declined by about 10 percent in the third quarter
ended Sept. 30 compared with the preceding quarter.
The company said third-quarter revenue was estimated at $387
million. Analysts on average were expecting $478.45 million,
according to Thomson Reuters I/B/E/S.
However, the company said its gross margin turned positive
in the third quarter to about 5 percent, partly because it
reversed an $18 million provision it took in relation to U.S.
countervailing and anti-dumping duties.
The United States gave final approval last month to duties
on solar equipment imports from China, but rejected a finding
that would have made the duties retroactive by 90 days.