Doug Young
The solar sector’s slow recovery is receiving some new setbacks
in the form of lawsuits by 2 bankrupt US companies against Yingli
(NYSE: YGE),
Trina (NYSE: TSL)
and Suntech (NYSE: STP),
the last of which is also in bankruptcy reorganization. Adding to
the mess, Suntech has just disclosed that more of its European
assets have been seized by the Italian courts, throwing yet
another new complication into its ongoing reorganization.
This
growing tide of litigation is somewhat expected, as investors try
to recover whatever money they can following the sector’s
spectacular crash over the last two years. But such actions will
only slow the sector’s broader recovery, and in some cases could
remain as troublesome liabilities for companies for years to come.
Let’s start off this solar litigation roundup with a look at a
series of lawsuits filed against Trina, Suntech and Yingli by 2 US
companies, Solyndra and Energy
Conversion Devices. (English article) Both Solyndra and Energy
Conversion went bust during the sector’s 2-year-old downturn, and
these new lawsuits are attempts by their creditors to recover
whatever money they can. Both Trina and Yingli issued statements
saying they believe the claims are groundless, and that the suits
represent attempts by Solyndra and Energy Conversion Devices to to
blame others for their own failures. (Yingli statement; Trina statement)
It’s impossible for me to give an informed view about the merit
of the lawsuits since I’m unfamiliar with the technology involved.
But I can say with certainty that these lawsuits will add unwanted
legal costs and pose the threat of penalties over the next few
years for Yingli, Trina and Suntech. That’s the last thing these
companies need as they try to return to profitability after 2
years of big losses.
This isn’t the first time that Solyndra has caused headaches for
the Chinese manufacturers. Industry watchers will recall that the
US company’s original bankruptcy was the first event in a chain
that ultimately ended with Washington slapping anti-dumping
tariffs on Chinese-made solar panels earlier this year. So perhaps
it’s appropriate that the ghost of Solyndra is coming back just
one more time to cause headaches for these firms.
From these new lawsuits, let’s look quickly at the latest news
from Suntech, which says courts in Italy have seized another 10
solar power plants owned by Global Solar Fund
(GSF), a solar power plant builder controller by Suntech. Suntech
reported last month that the Italian courts had seized 37 of GSF’s
solar plants (previous post), and now the number has grown
to 47. (company announcement) These new seizures
mean GSF has now lost control of 27 percent of its assets, which
prosecutors suspect of violating various environmental and
authorization rules.
GSF was once one of the biggest buyers of Suntech’s panels, and
has an enterprise value of about $800 million. Suntech creditors
were hoping to sell GSF’s assets as part of Suntech’s
reorganization, in a bid to get back some of their money. But the
seizure of so many GSF assets, combined with the potential threat
of additional seizures, means that GSF may be a difficult asset to
liquidate anytime soon.
I’d previously guessed that a sale of all of GSF’s assets could
have generated around $200 million in cash, far less than the
company’s enterprise value, since many of its plants were built at
the height of the solar boom when panels were still quite
expensive. But these latest seizures mean that Suntech’s creditors
won’t be able to recover any money from the sale of GSF assets
anytime soon. That means negotiations for Suntech’s reorganization
may have to be re-opened, further delaying its emergence from
bankruptcy.
Bottom line: New US lawsuits against Chinese
solar panel makers and the Italian court’s seizure of more Suntech
assets reflect growing solar litigation likely to delay the
sector’s recovery.
http://www.altenergystocks.com/archives/2013/10/the_ghost_of_solyndra_haunts_chinese_solar_st ocks_1.html
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