New Suntech Rises From Ashes, Eyes UK

Suntech faces final sunset

Opportunities for me to write about former solar pioneer Suntech (OTC: STPFQ) are growing fewer with each passing day, as its life as an independent company nears an end with the imminent finalization of its bankruptcy liquidation. That said, a company announcement saying that a new Suntech has emerged after the yearlong bankruptcy storm seems like a good opportunity to write about this company one last time before it and its stock permanently disappear. The announcement features a photo of Suntech’s youthful looking new CEO, Eric Luo, and says the company is preparing a new push into Europe, starting with Britain. (company announcement)

Before we go any further, I should point out this new announcement is coming from Wuxi Suntech, owner of the main production assets of the original Suntech Power Holdings, which was formally forced into bankruptcy about a year ago after defaulting on more than $500 million in debt. Wuxi Suntech was auctioned off as part of the bankruptcy liquidation process, and was purchased by Hong Kong-listed Shunfeng Photovolatic (HKEx: 1165) last year.

In its latest announcement, Wuxi Suntech says its sale to Shunfeng will close imminently, which means the parent Suntech’s bankruptcy liquidation plan is also close to finalization and will likely be approved by its creditors. I would expect all of that to happen sometime this month, at which time the original Suntech will formally be disbanded and become a chapter in future history books on solar energy.

To this day, stock buyers don’t seem to have a strong idea of how much their holdings in the original Suntech are worth, as reflected by the stock’s wild swings even as the final liquidation approaches. In the latest session alone, the stock rose 30 percent, recouping some of the losses from a 40 percent slide over the previous month. I expect we’ll see one or two more major swings before the final plan is approved, at which time investors will finally lose this popular betting vehicle.

The latest announcement says that Wuxi Suntech will remain as an independent entity after its sale to Shunfeng is complete, which means the brand will stay intact. The statement also implies that Suntech may become the flagship brand of the new Shunfeng, which isn’t a huge surprise due to Suntech’s status as one of the industry’s most recognized names. Luo says the new Suntech will also make some strategic acquisitions, and that it expects to ship a record 2.5 gigawatts worth of panels for this year, 20 percent higher than its previous peak in 2011.

While Suntech’s shares have swung wildly over the last year, Shunfeng’s have been on a more positive trend, rising from their previous level of about HK$1 as recently as last June to around HK$7 at present. I’ve previously said that Shunfeng could be a company to watch going forward, and do expect it should benefit strongly from Suntech’s strong brand, as well as its technology and sales networks. I wouldn’t be surprised if Shunfeng ultimately takes the Suntech name as its primary brand, though it will probably want to wait at least a year until the bankruptcy is well in the past.

I should close out this post with a final memorial to Suntech, whose biggest fault was probably hubris. Founder and former chief executive Shi Zhengrong will be remembered as a visionary for his early entry to the market, becoming the first solar panel maker to list in New York in 2005. But too much praise for his firm and his own self confidence led Shi to take unnecessary risks that ultimately led to Suntech’s downfall, ending a brief but turbulent life for this colorful but ill-fated sector pioneer.

Bottom line: Shunfeng could position Suntech as its leading brand after finalizing its purchase of the company’s main assets, and could use Suntech as a platform for future acquisitions.

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