(Reuters) - China-based Suntech Power Holdings Co Ltd STP.N said it had concluded that it had been defrauded by a partner in a solar development fund, which would require it to reduce its net income for 2010 by between $60 million and $80 million.
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 had concluded that a security interest it had received from GSF Capital to finance Italian solar projects did not exist. It said in August the 560 million euro ($727 million) security was in the form of German bonds.
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 not immediately contactable.
Suntech shares were up 2.9 percent at 89 cents in late morning trading on the New York Stock Exchange after rival JinkoSolar Holding Co Ltd (JKS.N) said its Swiss unit will get $1 billion over five-years from China Development Bank CHDB.UL to develop solar projects outside of China.
The stock has fallen about 35 percent since July 30 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.
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 that shipments had declined by about 10 percent in the third quarter ended September 30 compared with the preceding quarter.
The company said third-quarter revenue was estimated at $387 million. Analysts on average had been expecting $478.45 million, according to Thomson Reuters I/B/E/S.
However, the company however said its gross margin had turned positive in the third quarter to about 5 percent, partly because it had reversed an $18 million provision it took in relation to U.S. countervailing and anti-dumping duties.
The United States last month gave final approval to duties on solar equipment imports from China, but rejected a finding that would have made the duties retroactive by 90 days.
A prosecutor in the southern Italian city of Brindisi has brought charges against certain officers of GSF subsidiaries alleging they had failed to comply with the necessary permitting process and building regulations for solar plants in Italy.
Suntech said on Friday it had been advised that the GSF officers were vigorously contesting the charges and believed that the plants at issue were in compliance with Italian law. ($1 = 0.7700 euros)
Reporting by Swetha Gopinath in Bangalore; Editing by Joyjeet Das and Rodney Joyce and Ted Kerr