April 16, 2013 / 6:16 AM / 6 years ago

China's cash-strapped Suntech considers Italian assets sale

HONG KONG, April 16 (Reuters) - Suntech Power Holdings Co Ltd could offload its solar power generation assets in Italy, a company spokesman said on Tuesday, as the struggling Chinese solar panel maker scrambles to trim debts of more than $2 billion.

The former green tech poster child, with a New York Stock Exchange listing and a market value of $16 billion at its peak, last month defaulted on $541 million of its dollar-denominated bonds and said its biggest subsidiary was bankrupt.

A source with direct knowledge of Suntech’s search for a cash infusion said last week it might consider selling its 88.15 percent stake in Global Solar Fund Sicar (GSF Sicar), a Luxembourg-based fund specialising in the development of solar power projects mainly in Italy.

“We intend to operate GSF for the time being and will consider all options to maximize the value for our stakeholders,” a Suntech spokesman said in emailed reply to Reuters.

Asked how it planned to use the proceeds of a sale and whether it had received any interest in the assets, he said Suntech would update investors “in the coming months”.

It is the first time Suntech has publicly acknowledged it could sell the GSF Sicar stake since its announcement last month that its biggest subsidiary, Wuxi Suntech, was bankrupt and would undergo a government-led restructuring.

By some estimates, the fund carries an enterprise value of up to $800 million, including more than $600 million in loans from China Development Bank, analysts say.

Suntech, one of the world’s largest solar panel manufacturers by capacity, is seeking to sell some assets and bring in a strategic investor to repay debt and revitalise the company, the source with knowledge of the matter told Reuters last week.

Even if Suntech disposes of the stake in GSF Sicar, proceeds would not nearly be enough to repay creditors, analysts say.

Creditors would still have to accept a debt restructuring in which they might undertake a loss, convert some debt into equity stakes in Suntech or extend the maturities of parts of their debts.

Shares is Suntech, which peaked at $90 on the New York Stock Exchange in 2008, fell to 58 cents on Monday.


Analysts say the recent settlement of a dispute between Suntech and its former partner in the fund, GSF Capital, may have paved the way for a sale, which in theory could generate hundreds of millions of dollars in cash.

Suntech said in November that it had contributed 156 million euros to the fund. Suntech’s founder and former chairman Shi Zhengrong, who holds the remaining 11.85 percent, had contributed 19 million euros.

But any potential buyer would seek to drive a hard bargain given that Suntech is under pressure to sell.

Suntech was struggling with a net debt-to-equity of around 200 percent and total debts of about $2.2 billion at the end of March 2002.

That included loans from the International Finance Corp (IFC), the private sector arm of the World Bank, and Chinese lenders including Industrial and Commercial Bank of China , Agricultural Bank of China and Bank of China .

“I put a big question mark on whether Suntech can sell off its stake in GSF soon,” said Glenn Gu, a China-based analyst for business information provider IHS. “It will not be a surprise if the stake in GSF is sold at a big discount at the end of the day.”

Suntech said last month it had settled a dispute with GSF Capital Pte Ltd, which sold its 10 percent stake in GSF Sicar to Suntech and a company owned by Shi as part of the settlement.

GSF Sicar owns 142-megawatt solar projects in Italy, 141 MW of which are now connected to the grid — including 118-MW capacity that has obtained Italy’s feed-in tariffs, the Suntech spokesman said.

Feed-in tariffs are government-subsidised power prices as incentives for clean energy development. The euro zone debt crisis has led to the world’s biggest solar power producers such as Germany and Italy slashing subsidies for renewable power, triggering a plunge in solar panel prices in the last two years.

There are no signs of recovery in demand for solar panels this year, according to top executives at several Chinese solar panel makers interviewed by Reuters this week. Chinese solar panel makers are also bracing for a decision to be made by the European Union in June on whether to slap anti-dumping duties on their products.

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