Two high-profile solar manufacturers face major milestones in their bid to reposition for the future, Q-Cells and Suntech Power Holdings.
Q-Cells, the troubled German solar cell manufacturer that filed for bankruptcy in April, has reached a deal to be acquired by Hanwha Group of South Korea.
But that bid is likely to be challenged by a counter offer from Isofoton SA, a power-plant operator from Spain, along with an unnamed US investor.
Hanwha's agreement calls for it to pay $50 million to $63 million in cash and take over $273 million in Q-Cells debt. Under the deal, Hanwha would keep Q-Cells' subsidiary in Malaysia and its research and development facility in Thalheim, Germany, says a statement on the Q-Cells Web site.
“Isofoton is still confident that there’s a chance to buy Q-Cells as the creditors haven’t yet agreed to the Hanwha bid,” Carl Graf von Hohenthal, a spokesman for Isofoton working for Brunswick Group GmbH in Berlin, told Bloomberg.
Isofoton is especially interested in Q-Cells’ research capabilities and its “European dimension,” reports Bloomberg. While the amount of its rival bid was not made public, Hohenthal told Bloomberg that Isofoton plans to invest about $375 million in the operation in a bid to boost its production capacity to 1,500 megawatts (MW) within two years.
Q-Cells, once valued at about $150 per share, is among the solar technology companies that has been hard hit by both the low-cost model of rival Chinese solar companies as well as changes to solar subsidies in Europe. Many are transitioning to new business models in order to shore up margins. First Solar, for example, has found new financial footing with its switch to solar project management.
Suntech Switches Leaders Amid Investigation
As Q-Cells shareholders weigh their buyout options, Chinese solar panel maker Suntech faces at least three class action suits amid the revelation that it may have been defrauded.
In late July, Suntech admitted it has been unable to verify the existence of up to $689 million in German bonds that it was supposed to receive as collateral for its investment in Global Solar Fund.
"Based on recent review and inquiries, Suntech suspects that the collateral related to the security interest may not have existed and the company may have been a victim of fraud," says Suntech.
The assets of that organization were frozen in mid-August, and an independent manager was appointed to run it. The fund owns and operates approximately 142 megawatts (MW) of solar planets in Italy; about half the plants accounting for that capacity are receiving payments through Italy's feed-in-tariff (FiT) program.
At least three class action suits have been filed in response to Suntech's revelation of its bad investment. While the company has shrugged them off as routine, the timing of all this is pretty awful, since Suntech faces a debt payment of about $541 million early next year.
The company's total short-term debt as of the end of fiscal year 2011 is $1.6 billion and its long-term debt is $149 million, according to its annual report.
“We think the company will never be able to repay its debt, and we have consistently called the company a poor steward of investor capital,” Jesse Pichel, an analyst with Jefferies Group Inc., told Bloomberg. “We have recommended that investors sell the stock for over a year and never had a Buy.”
Seeking to restore investor confidence, the company's chief financial officer David King stepped into the CEO role in early August to address Suntech's operational issues. The founder, Dr. Zhengrong Shi, was moved into the role of Executive Chairman and Chief Strategy Officer. King joined the company in May 2011.
On a brighter note, Suntech announced a major milestone in early August: it has now produced and delivered more than 1 gigawatt (GW) of solar panels to the Americas. The company also this week introduced a 300-megawatt (MW) panel certified for the region.
"This new 300W module is what our customers have been asking for. The improved design will lower balance of system costs and generate a better levelized cost of electricity," says John Lefebvre, president of Suntech America. "Success in the PV module industry is all about manufacturing efficiency and incremental innovation, and this new product again demonstrates Suntech's ability to enhance our products year after year while continuing to reduce costs. Every penny of improvement makes solar power more attractive to investors, developers and utilities."
The panels are manufactured in the US and are not subject to the tariffs being levied on Chinese-made solar technology, says Suntech.