China leading solar panel maker declares bankruptcy

The world's biggest solar panel maker Suntech Power declared bankruptcy earlier Wednesday. Bankruptcy reorganization will be carried out for Suntech, based in Wuxi in eastern China, as the company is unable to repay its maturing debt. Both the local government and the company are working on how to save the one-time Chinese giant. Analysts in Shanghai say both sides have to think through their own best interests before reaching an agreement.

Suntech announced Wednesday that Zhou Weiping has been appointed the company's executive director. Zhou was formerly a senior official of the Wuxi Guolian Development Group, a state-owned company in Jiangsu Province. Ibe analyst says it looks like the local government is starting to intervene in Suntech's bankruptcy.

Lian Rui, senior analyst of Solarbuzz, said, "If the Wuxi Guolian development group steps in, they will be putting money into Suntech. It's most likely that Wuxi Guolian will be helping Suntech reorganize."

But Lian says it may be too early to conclude that the local government will save Suntech. The company, which is listed on the New York Stock Exchange, will shut down its one and only plant in the United States next month. That will ease a debt burden estimated as high as 3.5 billion US dollars. Suntech also has plans to close a factory in the city of Wuxi, but but the Wuxi government has yet to agree to that.

Lian Rui also said, "I think the Wuxi government will be thinking about its own issues, including local GDP, taxes, employment questions, and bank loans. But as a listed company in the US, Suntech has to consider its overseas investors."

Suntech said on Monday that it has defaulted on a 540 million US dollar loan that was due last week, and that it also cannot afford to repay a 150 million US dollar bank loan. Another analyst notes that even if the government bails out Suntech by paying off its loans and protecting it from bankruptcy, money will not solve all the company's problems. Government policies towards the industry also need to change.

Prof. Zhang Huiming, Fudan University, said, "The reason we have developed so quickly is that European countries like Germany and Spain, and also the US, used to have policies encouraging the use of solar products. Those policies have stopped now. Here we only have policies encouraging production, instead of consumption."

Suntech's share price today is only 0.59 US dollars. At its highest three years ago it was 90 dollars a share. The company has received a warning from US authorities that it could be delisted within six months. Analysts say one key objective of both the company and the Wuxi government is how to maintain Suntech's US listing.