Debt-ridden Chinese solar power company Suntech Power Holdings has agreed to sell its main Chinese assets to Shunfeng Photovoltaic International in exchange for the latter company agreeing to pay 30% of Suntechs $1.75 billion debt owed to Chinese creditors. Suntechs total debt stands at $2.3 billion, with $500 million in covertible bonds owed to U.S. creditors.
The deal means Suntechs solar equipment factories can continue to operate, albeit under new management as Shunfeng takes over Suntechs subsidiary, Wuxi Suntech Power Co.
Suntechs Chinese creditors voted in favour of the deal, which enables them to recover 30% of their claims on the company monies that will be paid by Shunfeng. The company has also pledged to invest an additional $492 million in Wuxi Suntech over the next 24 months. These funds will be used to upgrade Suntechs manufacturing facilities.
Keeping the lights on
Shunfengs injection of capital keeps Wuxi Suntechs three Chinese factories open for business. Since Suntechs financial troubles in 2012, one of the factories was closed while another, 1.6 GW per-year capacity factory, has remained idle since August last year. The third factory with a production capacity of 2.4 GW had been running at just 60% capacity since November last year. Shunfengs largest shareholder, Cheng Kin Ming, has funded the deal.
Although Beijing has generally frowned upon such agreements recently as the Chinese government seeks to discourage industrial overcapacity, a court in Wuxi approved Shunfengs approach, even agreeing to bear the responsibility of any claims or losses incurred by Wuxi Suntech when the company was pushed into Chinese bankruptcy that exceed Shunfengs agreed investment.
The central government has previously sought to close any inefficient manufacturing capacity, but has often been met with obdurate local resistance from various communities that rely on such factories and plants for employment.