Since the second half of 2011, many solar firms have been suffering losses and possible bankruptcies. US-based Solyndra, Spectrawatt and Evergreen Solar all declared bankruptcy. Many China-based small- and medium-size solar firms have also been facing temporary or permanent suspensions of production. There have been rumors that a large-size China-based solar firm with international listings is facing a cash shortage. Europe-based solar firms such as Norway-based REC, Germany-based SolarWorld, Solon, Conergy and Q-Cells have been reducing losses and cash outflows by closing plants and decreasing capacity.
The Europe debt crisis has been causing financial institutes to turn conservative in providing funds for solar firms. Many solar firms have been obtaining large loans to expand capacity causing their debt-to-asset ratio to be quite high. Now the firms not only have to face operational difficulties, but also need to pay off the debts. The pressure to pay off the debts has been forcing many solar firms to clear out inventories and sell materials and equipment to raise cash.
According to Digitimes Research, during the low demand in 2011, the debt-to-asset ratio of many solar firms continued to increase while cash and cash equivalents continued to decrease, which will likely be a problem for the firms' short-term ability to repay loans. As inventory turnover and accounts receivable days increase, the operational efficiencies of these firms continue to decrease.
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