The world’s largest manufacturer of solar panels has said that its main subsidiary company, which operates in China, has gone bankrupt. This decline in the fortunes of Suntech Power Holdings is a definite indication of how the global solar power energy is experiencing turmoil these days.
Wuxi in China is where Suntech’s largest subsidiary is located. Many Western solar companies had declared insolvency this year, like Germany based Q-Cell and U.S. Based Solyndra. Suntech’s Wuxi subsidiary is the first Chinese company to do the same.
This declaration on the part of Suntech is significant because China is the world’s largest producer of solar panels. To give the solar panel production industry some much-needed incentives, the Chinese Government had put in place subsidies, cheap loans and many other preferential treatments. However, this lead to such rapid expansion of the business in China that the country’s solar panel industry has now failed and faces problems due to overcapacity.
On Wednesday, it was announced that eight banks had filed a petition for insolvency and restructuring of the company in Wuxi. The petition was filed in Jiangsu province, and is creating news because it marks a change in the condition of solar companies in China. They had, till now, kept going because of cheap credit and support received indirectly from the State.
It is also interesting to note that the insolvency declaration of the Wuxi subsidiary of Suntech will put China’s current bankruptcy laws to the test. The old laws were overhauled and replaced in the year 2007, but no case had arisen since where the application of such laws was required. The scenario is made complex as it is the only the Wuxi subsidiary of Suntech that has announced insolvency. Further, the parent company is still solvent.
Chinese law mandates that in case of insolvency of a company, the courts will have to them six moths for formulating a plan for restructuring the company. This six-month period may be extended by three months, once, and the plan has to be presented before creditors.
The authorities of the city of Wuxi had earlier helped Suntech, and are now even more involved in the affairs of the company. The new President of the company, appointed earlier this week, is Zhou Weiping, who has gained experience by working for the Chinese Government earlier in his career.
About continuing production even though there have been setbacks, David King, who is Suntech’s Chief Executive said, “While we evaluate restructuring initiatives and strategic alternatives, we are committed to continuing to provide high-quality solar products to our global customer base.” Suntech was one of the first American companies to usher in the manufacturing of solar panels, and dominates the market there.