China Green Energy Firms Have Record Debt Due as Yingli Defaults
By Paul Homewood
More evidence from Bloomberg of the financial consequences of the worldwide glut of solar panels:
China’s clean-energy firms face record bond maturities this year, just as investor confidence was shaken by the default of a company that had been the world’s top solar-panel manufacturer.
Renewable companies must repay 28.8 billion yuan ($4.4 billion) of bonds over the rest of the year, more than any other previous annual repayments, according to Bloomberg-compiled data. A venture of Yingli Green Energy Holding Co., the top producer of panels until 2014, missed payments on 1.76 billion yuan of its notes. That brings the number of companies that defaulted on bonds to four, involving $1.8 billion, data compiled by Bloomberg show.
Overcapacity still plagues the industry after years of aggressive expansion that left the sector with 105 billion yuan of outstanding bonds. While President Xi Jinping has vowed to reduce pollution that’s a byproduct of a 30-year economic boom, the number of solar and wind-power generating plants in the nation lagged behind production of equipment.
“Companies in the upstream sector are still suffering from excess supply,” said Li Ning, general manager of the fixed income department at Western Securities Co. in Beijing. “Downstream companies, such as electricity providers, in the renewable energy industry have better credit profiles because of government support.”
Yingli’s venture Baoding Tianwei Yingli New Energy Resources Co. failed to make payments on Thursday for two separate five-year bonds, according to statements posted on the website of ChinaBond. One of the two notes was originally in default in October and holders had sought repayment by May 12.
In his only public comment on the matter, founder and Chairman Miao Liansheng maintained that Yingli is working to negotiate a debt resolution and plans to sell assets. The 60-year-old former soldier had an estimated wealth of 14 billion yuan in 2007, according to a ranking by Hurun Report Inc. Solar module production began in 2003 with 3 megawatts of capacity, which grew in the next three years to 100 megawatts. Over the next 10 years, production rose 40-fold to 4,000 megawatts. Listings followed in New York and Berlin in 2007.
“Our major creditors have been helpful,” Miao said on a conference call on Wednesday. “We strongly believe that we will achieve a successful transition.”
Solar-cell maker Shanghai Chaori Solar Energy Science & Technology Co., was the first company to default on onshore notes March, 2014. Suntech Power Holdings Co. and LDK Solar Co. missed obligations on offshore bonds.
There are signs investors are getting wary. Clean energy companies only managed to sell 7.9 billion yuan of bonds this year, 14 percent less than the same period last year
Just as we have seen with the steel industry, when there is overcapacity, solar panels get dumped at uneconomic prices. Once this excess capacity is shut down, or higher demand mops it up, the price of solar will rise.