Shipments from China to the European Union are tumbling down in fear of potential deposits required at the port of entry. According to sources, Trina Solar Limited (NYSE: TSL) has shipped as much as 165MW of modules in July, including around 125MW to the EU, but due to reduced demand in Germany, the figure had dropped to around 60MW in August with only 20MW going to the EU. In the month of September that number so far looks like 30MW, but shipments came to a halt shortly after the news announcing investigation, and have not recovered due to threat of potential customs fees.
In yesterday’s conference call, LDK Solar Co., Ltd (ADR)(NYSE: LDK) announced that the average selling prices for its wafers in Q2 were only at $0.25 due to sub-standard products included in the sale. In the same period, companies like GCL –Poly and ReneSola Ltd. (ADR)(NYSE: SOL) sold their wafers at $0.26 and $0.31, respectively. Last week we were told that LDK’s modules appeared in Europe shortly after the EU investigation announcement. The company was using modules to pay off some payables, and in quick turnaround vendors were pushing off this inventory on European markets. LDK has been trying to monetize on every opportunity to pursuit greater liquidity. In Q2, it appears $65M of LDK’s revenue was generated from sales of real estate and land rights. The company actually had taken $31M impairment as a result of those sales to adjust property values under the sale.
LDK is working hard against the time to produce its miracle product in order to attract buyers, hesitant to deal with the company due to its financial woes. LDK announced success in formulating a third generation of its M wafer series. This generation is apparently able to achieve 17.4 to 18% conversion, placing it in line with the efficiency of Virtus II from ReneSola, currently the top line polycrystalline wafer. LDK delivered this new wafer concept with only $4M R&D spent in the period. ReneSola spent over $11M in Q2 and a total of $25M this year on R&D, more than a double the expenses incurred by LDK. Despite those efforts LDK’s brand name has been under a lot of pressure due to flagging finances, and sales will not be recovering in the next half of 2012.
The company was able to add $80M to its cash accounts by releasing some of the pledge deposits and borrowing an additional $143M in the short term. The overall debt, including various bonds, grew to $3.5B, only second to GCL-Poly’s $5B. The company amortization in the quarter was at $65M, $10M shy of covering the $75M interest payment. LDK has the highest interest rates of all major solar companies, with exception of SunPower.
Contributions: Dr. Jason Tsai
