China-based Suntech Power Holdings announced the insolvency of its China subsidiary, Wuxi Suntech. Industry sources noted that Suntech executives will arrive in Taiwan next week to meet with strategic partners.
Taiwan-based solar firms noted that the insolvency news is not a surprise and in fact, the development is likely to benefit Taiwan-based firms. As early as the second half of 2012 when Suntech had financial problems, Taiwan-based solar cell partners began to diversify risks in hope to reduce possible damage, the sourcse said. In addition, the insolvency means Suntech currently has less funds to use and the production suspension will create a gap of capacity in the market, pushing downstream firms to transfer orders to Taiwan-based firms.
Suntech Power failed to make a US$541 million payment on its convertible notes on March 15, and by March 21, the court in Wuxi, China accepted the petition for the insolvency and restructuring of the subsidiary.
Before Suntech's financial problems surfaced, the firm's solar cell suppliers included Taiwan-based Motech, Neo Solar Power (NSP), Taiwan Solar Energy (TSEC), and Solartech. However, since the fourth quarter of 2012, due to Suntech's debt problems, some Taiwan-based firms have terminated cooperation. For firms that chose to continue cooperation became ODM firms by processing solar wafers into cells for Suntech. Solar cell makers that have signed long-term supply contracts with Suntech recognized bad debt losses in 2012 in hope to reduce damage.
Taiwan-based solar wafer firms stated that Wuxi Guolian, a holding company owned by the Wuxi municipal government, will take over Wuxi Suntech but due to regulations, the firm will have limited funds. In addition, the firm's large-size projects (in China and other countries) will be forced to halt. The legal process may take more than two years, said solar wafer makers.
Suntech began production reduction of solar cells in 2012. Market observers predict that during the restructuring period, Suntech's solar wafer and cell capacity will decrease sharply, causing market demand and supply to return to a balance. Taiwan-based solar firms are likely to benefit from order transfers.
According to media reports, by the end of February 2013, the total domestic and foreign currency loans to Suntech from nine China-based banks such as Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of China reached CNY7.1 billion (US$1.14 billion).
