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Bankrupt Solar-LDK, Suntech, SunEdison

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I am not sure if I ever saw a company lose $47 per share in one year. It may be even more surprising to see it last beyond this year. 

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SUNEQ filed the motion to sell one project to a JV, 104MW Sunflower; They also list Comanche as exclusive to negotiate by the JV. This project was on the list for TERP initially. Comanche is the only project that has exclusive right purchase not expired, versus other projects. What is interesting here, SUNEQ has never disclosed that TERP took a possession of 200MW of a wind farm in Texas. They have shown this property on the slide. I have calculated $240M less in cash for TERP.

TERP was going to sell its UK assets, enabling buy of assets from SUNEQ, before bankruptcy. In my view, TERP does not have capital to buy the Comanche. If their revolver is under any duress beyond the end of May due to not filing its FS, in my opinion, liquidity is compromised.  

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There is an update on the approval,

It appears yieldcos will get the guarantee that SUNEQ will perform services they are paying for. The loan will go forward as the examiner will be appointed by debtors. The concern for SUNEQ examiner may decide it is chapter 7 and 11. 

http://www.bloomberg.com/news/articles/2016-05-20/sunedison-reaches-agreement-with-creditors-on-bankruptcy-loan

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SunEdison's lawyer confirms there will be no recovery for equity holders in today's filing. Judge approves the sale of Sunflower project 104MW. Unsecured equity holders request to form the committee asking for Yieldcos to be included in sorting bankruptcy. The request as well as the claim is not logical.

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Yieldocs are protesting the sale and ask for the notification with at least 7 days. Big concern they already paid money for some projects.

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18 hours ago, thejaq said:

India's Adani eyeing bid for SunEdison solar assets: CEO

http://www.reuters.com/article/us-india-sunedison-inc-adani-idUSKCN0YW1OV

During India's big solar bet they chose to partner with foreign companies. US companies seemed to be preferred over Chinese and SunEdison announced a lot of investment plans. Others likely need to take over a lot of those plans now.

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The shareholder action losses in court, in my opinion, SUNEQ, is a chapter 7, I had this view for some time, I am not sure why "street" still quotes SUNEQ as a developer, and I see others say as they have any presence. It is over, the company is broken, assets are being sold.

http://seekingalpha.com/news/3203008-sunedison-shareholders-lose-fight-say-bankruptcy-case

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Based on all activities around SUNEQ We are in the chapter 7 setting.

I wonder if any of the developers will put bids for SUNEQ projects. Is anyone curious who will be building projects for NRG? NRG mostly bought from FSLR, so FSLR may not be betting on it. FSLR is also building Astoria for Recurrent, 80% revenue collected. Interesting times.

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1 hour ago, solarpete said:

Agreed.  Anyone care to speculate on whether they'll actually cease operations, which should ease the oversupply problem?

Well let's just say that Travis made an odd choice of CN solar company to bitch about financial stress with. It seems quite political with YGE. Close to central gov. No 1 (Suntech) already had an epic BK. If no 2 and the central leadership favorite goes BK too it is a lot of faces and credits lost. They seem to have been given irrational life lines after multiple defaults already.

I'm wondering if they can keep up with the aggressive cost reductions now though as they have nothing to spend on progress. As soon as ASPs falls below their cash production cost they must suspend production if they have any self preservation instinct (which is doubtful) and that should ease the glut a bit.

Suntech and Yingli couldn't handle their over-leverage as they reached for the sun. Trina, JA and Canadian avoided over-leveraging the manufacturing business and that has allowed them to reap the spoils of the fallen ones. Only Jinko has gotten away with breakneck leverage of mfgt biz, because they were best at it and that's basically the only way you can get away with it in this industry. Nobody in the industry has delivered so much from so little as Jinko, not even Firstsolar. Nobody is still close to Firstsolar in total delivery, but started with much shareholder capital than Jinko. Canadian and Trina have delivered decently since inception after those two great and good ones. JA has been poor since inception but good the last 3 years.

My strategic choice is JKS, FSLR, TSL, CSIQ and with some doubt JA. TSL is out and CSIQ looks comparatively expensive in this uncertain situation and JA is (was) still cheap so CSIQ was dropped and JA chosen on discount. I might drop JA too if it continues to rise and then there are only two, but that's the two historically greatest performers in the industry among the US listed companies.

Edited by explo

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The problem with the glut is about 20 to 35GW capacity quoted over 85GW. The capacity of 120GW, I saw last time, is represented by a survey of the equipment.  20GW of it is too old to compete. The other 40GW are probably not profitable or crossing the zero profit daily, so it is on the verge of production stoppage.  The number of 120GW of module capacity has about 60GW of production today, which is priced with profit, it is an up to date technology, offering warranties and other buyer benefits. I consider that 50%, or 30GW, belongs to 3 Chinese (JKS, CSIQ and JASO =8+7+6=21) plus one went private (8 to 9). Attached is the list of tier 1 companies recognized per Bloomberg, carrying 70GW of module capacity in Q4 2016. I speculate that list will be over 85GW today, and 25GW from that list will be selling at the cost.

https://www.slideshare.net/RyanSong9/20161130-q4-2016-company-ranking-tier-1-pv-module-makers

So, when you think about it, 60GW versus 85GW sounds pretty good, but.......

Part of the ordeal is the inventory which may be sold below ASP just to turn into cash? Most of the one-time names of developers will buy those inventories and bid services to build plants with them, especially outside of the US.  I think the reasonable number of inventory plus production could be as much as 40GW for 2017, which one would be attracted to buy, below of ASP of tier 1 ones. When you think about this, this puts the number back to around 100GW this year. I believe the glut is 15GW, and I believe that 5GW would be inventory, which would not come back and 10GW could be stopped within a year for 2018. Note Yingli is not even on the list nor is Longi, with 5GW I think or even 6GW of modules. I have added Longi to tier one list as they just were. 85GW of Tier 1 includes my estimates of increases for CN4 plus a bit for others.

Yingli stopping production will have zero impact on glut conditions, but would contribute to benefits if stopped among others stopping for 2018 and beyond. 

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Just a quick browse through YGE's CC showed that their in-house no-Si cost stands 0.27 $/W. Which is not too far of the leaders, but it's counting pennies now. Although production costs have come down, shipping and handling costs (part of OPEX) remains hard to pressure and adds a few cent on the production cost. Warranty cost follows ASP down and is non-cash so it's less important to decide to keep producing. Their guidance show no growth and they haven't expanded capacity since 2013.

What I'm more interested in is Trina's capacity expansion and shipment growth plans. Unfortunately it's not public anymore.

 

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I did an additional review of tier 1 and suspected 83GW from the 34 manufacturers is most likely the capacity representing current status. It appears that about only 12GW, including thin-film, do not refer to PERC in a transparent manner.  Of course, not all 71GW are PERC.  I would imagine roughly 30GW would be. Most, belonging to top 7 companies as the end result of 2017.

Perhaps more aggressive math, which may suggest that all BSF capacity has near zero margins, would put 53GW to be lower than 5% gross margin in Q1. while the 30GW is better than 5% and below 15%.

I think this would represent, with adjustment, more realistic condition.

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On ‎4‎/‎26‎/‎2018 at 3:52 PM, Mark said:

Wait, someone admired this company at some point?

On the contrary I think this site was early on warning about the risk that they would default on their medium term notes. And of course prior to that that their retained earnings were a big red avalanche in the making. Yingli did the same mistake as many others. They paid too much for the very capital heavy ingot casting/pulling and wafer slicing equipment at times when there were wafer shortage. In 2010 cell makers paid 1 $/w for a wafer and now it's close to 0.1 $/w. CSIQ were smart to avoid this to a large degree. Trina and JA were prudent to not get volume and integration rate greedy too early and also prudently depreciated their equipment heavily to account for expected future price drops (making their earnings more real and sustainable). Jinko were integration rate (gross margin) greedy like Yingli but they were smart to always pay minimum price but has been a bit aggressive on the depreciation rate. Maybe starting to hit them a bit now as they are still depreciating older, more expensive and inefficient equipment while CSIQ's, Trina's and JA's depreciation cost is more dominated by new, cheaper more efficient equipment.

We all know that STP, LDK and YGE reached for the sun and over paid to get the volume top spot. The difference is that Yingli is largely based close to Beijing area (while most others are Shanghai area dominated) and has a lot more political stake in it even though STP became the early Chinese solar poster boy for the rest of the world. STP was a unique bankruptcy and a lot of criticism that China would never let a company like that fail was probably silenced, but the criticism sure seems to hold in the YGE case.

If I'd make one bet on this sector it would still be Jinko of the US listed ones. In total they have had to earn their earnings the most through low capitalization and low subsidy reliance. FSLR is the next great one in making money, but their earnings is largely dominated by the US market and largely dominated by privileged access to subsidies in this home market of theirs (like most of the retained earnings created by CSIQ).

Edited by explo
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