Bottom line: Canadian Solar’s raised revenue guidance hints at rising prices and could signal upside for the company’s profits, while YIngli’s latest signals may show it’s trying to sell itself to a healthier rival.
Canadian Solar surges, YIngli struggles
The strongest and weakest players from China’s lively solar panel sector are in the headlines today, with superstar Canadian Solar (Nasdaq: CSIQ) and the struggling YIngli (NYSE: YGE) both releasing their latest quarterly results. But whereas Canadian Solar has just announced its financials for this year’s first quarter, including a raised revenue outlook for 2016, Yingli is just now releasing its results for the fourth quarter of 2015.
Most companies typically release their quarterly results within 60 days of the quarter’s end, or 90 days at the very latest. But YIngli’s ongoing struggles have led managers to say several times the company could become insolvent, as it sits on a massive pile of maturing debt that it can’t repay. The latest of that debt comes due today, and Yingli is saying it’s unlikely to make the repayment on time. Read Full Post…
Bottom line: Yingli is likely to get sold or announce a major government-led restructuring, which could include bankruptcy, before a new round of 1.4 billion yuan in bonds comes due next month.
Yingli shrivels under crushing debt load
In what looks like a case of deja vu, fast-shrinking solar panel maker Yingli (NYSE: YGE) is in the headlines again as it looks set to default on 1.4 billion yuan ($220 million) worth of bonds set to come due next month. The default would be Yingli’s second within a year, after it failed to pay off part of another big bond that matured last October.
Yingli is still working to repay the remaining debt from that earlier bond, which amounts to another 1 billion yuan. That means that Yingli now needs to find some $375 million in funds to repay all of its maturing debt by the time the new round of 1.4 billion yuan in medium-term notes come due on May 12. That looks all but impossible for a company that’s bleeding money, which resulted in a $500 million net loss during its latest reporting quarter. Read Full Post…
Bottom line: Trina’s new loan and BYD’s uncertain outlook for EV sales this year reflect continued reliance of new energy technology companies on state support, which could pressure them as government incentives get retired.
Trina, BYD fueled by state support
Two new energy stories are in the headlines today, reflecting the progress but also the continued reliance on government support that this up-and-coming group of companies faces. That particular reality isn’t new, though some who were hoping the industries would become commercially independent more quickly may be disappointed. But more important, this reality could challenge many of the companies in the next 2-3 years in the face of disappearing support from governments that believe they have already given enough incentives to this slowly-developing group.
The first development has solar panel maker Trina (NYSE: TSL) announcing $143 million in financing for a new plant in Thailand, with all of the money coming from local lenders that almost certainly have government ties. The second has electric car maker BYD (HKEx: 1211; Shenzhen: 002594) reporting annual results that showed a surge in its EV business last year thanks to government incentives, setting the stage for a possible rapid slowdown this year as those incentives get set to retire. Read Full Post…
Bottom line: The bankruptcy of Tianwei signals Beijing will allow a new round of failures for weaker solar panel makers, with YIngli and ReneSola the most likely to come under pressure.
Future looks bleak for Tianwei
News that solar panel material maker Baoding Tianwei is on the brink of collapse has sent shudders through the entire sector, as everyone guesses who might be next to fall in a looming new clean-up of China’s bloated industry. Tianwei has been in trouble for a while now, after the company became the first state-run firm to ever default on a domestic bond interest payment back in April.
That development certainly didn’t bode well for Tianwei, but it remained unclear if the local government or Beijing would ultimately step in to bail out the company and save its investors. Now we finally have the answer to that question, following media reports that Tianwei and 3 of its business units are formally filing for bankruptcy. (English article; Chinese article) Read Full Post…
Bottom line: Complaints of problems from a major solar plant builder reflect the difficulty of new construction in China, and could wreak havoc on the sales and finances of panel makers and their construction partners.
Solar entrepreneur Shi complains of bureaucracy
Two solar energy news items are showing both the attraction and also the frustration that developers are feeling as they try to build new clean-energy power plants to help China wean itself from its dependence on fossil fuels. On the attraction side of the story, the industry has just won a major new backer in the form of insurance giant Ping An (HKEx: 2318; Shanghai: 601318), which is teaming up with panel maker Trina Solar (NYSE: TSL) in a new plant-building initiative.
But the frustrations that many plant builders are feeling were on prominent display in a separate report that cited another major developer complaining of the difficulties of new construction. Those kinds of complaints aren’t really new, and are being caused by provincial government interference and other local issues in the many remote locations where new plants are being built. Read Full Post…
Bottom line: China and the west will continue to find common interests in fighting corruption, while Beijing’s state support for certain industries will remain an area of contention for the foreseeable future.
Obama press Xi on Qualcomm case
Sino-US business ties are on display in 3 separate headlines today, reflecting the increasingly complex relationship between these 2 economic superpowers that sometimes agree but often clash on different issues. One of the few things they agree on is the need to fight corruption, which is the theme in one headline that has the US fining health care products maker Avon (NYSE: AVP) for bribery at its China operation.
But the areas of disagreement are a bit more numerous, including US disapproval of Beijing’s strong state support for industries it wants to develop. That disagreement was at the center of another headline that saw the US finalize anti-dumping tariffs against Chinese solar panels, capping a 3-year-old clash on the issue. Heavy western ownership of globally used technologies is another sore spot, which was in the headlines as the US pressured China on a probe it is conducting into the licensing practices of mobile technology giant Qualcomm (Nasdaq: QCOM). Read Full Post…
Bottom line: China is likely to fall well short of its plan for 35 gigawatts of solar power capacity by the end of next year due to profit-seeking speculation and lack of experience among plant builders and operators.
China struggles to meet solar power targets
I’ve been quite skeptical for a while about China’s ambitious plans to rapidly build up its solar power capacity, arguing that many of the plants being built are more designed to please central planners in Beijing than of real practical use. Now it seems at least one researcher at a major government institute agrees with that view, prompting him to slash his forecasts for new construction this year. That certainly doesn’t look good for big domestic names like Yingli (NYSE: YGE) and Trina (NYSE: TSL), which are hoping to keep their recent positive momentum going with big new demand from plant developers in their home market. Read Full Post…
Lofty targets contained in a new report show that China intends to push ahead with ambitious plans to build up its renewable energy sector. But perhaps the most interesting thing about this new report is word that Beijing finally intends to sharply reduce the inflated state-set fees now paid for solar and wind-produced power, in one of the sharpest indicators that it expects the industry to stop depending on government support and become commercially viable on its own. Such state support through a wide array of measures, which also include export credits and low-interest loans, have become a huge sticking point that has led to a series of trade wars between China and the west. Read Full Post…
In a quirk of timing, 2 completely unrelated rulings are boosting the outlook for Chinese new energy firms from the wind and solar sectors in their complex relationship with the US. The 2 cases are quite different, but each reflects the wariness Washington feels towards these Chinese firms due to their government ties. In the bigger of the 2 cases, a World Trade Organization panel has ruled that US anti-dumping tariffs against Chinese solar panel makers violate WTO rules. In the second case, a US judge’s ruling has given a boost to a Chinese firm that planned to build a wind farm in the state of Oregon, only to get vetoed by Washington over national security concerns. Read Full Post…
After watching their shares and prospects soar over the past year, solar stocks are suddenly hitting a cloudy patch as investors anxiously wait for most companies to return to the profit column following a 2 year sector downturn. That wait may have just gotten a lot longer, following a warning from Trina Solar (NYSE: TSL) that it will fall far short of its previous sales forecasts for the just-ended first quarter.
Trina blames the problem on short-term factors, as it and other Chinese panel makers work to finalize an agreement to avoid the European Union’s previous threat of anti-dumping tariffs. But hidden in the optimism from Trina and its Chinese peers is the fact that the new agreement is likely to have many of the same effects as the original punitive tariffs. That means most of these Chinese companies will suddenly face resurgent new competition from western rivals in Europe once a deal is reached. Read Full Post…
After a massive rally over the last year, shares of solar panel makers could be set for a few months of winter following a disappointing earnings announcement from superstar Canadian Solar (Nasdaq: CSIQ) and a debt default from second-tier player Chaori Solar (Shenzhen: 002506). Such a correction was almost inevitable after last year’s huge rally and shouldn’t be cause for concern among long-term buyers of shares in top players like Canadian Solar. But shareholders of second-tier firms like Chaori might think strongly about selling their stock, as these smaller companies could easily end up getting wiped out or sold for bargain prices in the sector’s ongoing consolidation as it emerges from a 2-year downturn.
