Any pretense of Suntech (NYSE: STP) being an independent entity is over.
China's Suntech, faced with a debt crisis and with the fate of thousands of employees' jobs hanging in the balance, "is poised to be taken over partly or entirely by the municipal government's holding company in its hometown, Wuxi, China," according to reports in the New York Times after a confirmation from a Wuxi official on Wednesday.
Wuxi, with billions of assets across a variety of industries, had been the rumored acquirer for a number of months.
This news comes on the heels of several losing quarters and a boardroom bloodbath involving the removal of Suntech's wealthy founder as chairman, and the shuttering of its 50-megawatt Goodyear, Arizona solar panel factory.
Suntech was the world's largest manufacturer of solar modules in 2011. But it now has cash issues and bond obligations of more than $500 million coming due. In July 2012, Suntech's business partner, Global Solar Fund (GSF), faked $680 million in collateral for a loan backed by Suntech.
Late last year, LDK (NYSE: LDK), also troubled and also based in China, and one of the world's largest producers of solar wafers and high-purity polysilicon, sold a 20 percent stake to Heng Rui Xin (HRX) Energy, a Chinese state-run entity, for approximately $23 million.
Any U.S.- or EU-based firm with financials similar to Suntech or LDK would long since be bankrupt, as in the case of Q-Cells or ECD.
If China rescues a strategically important industrial firm and employer, is that an unfair trade practice? Do these actions prove the validity of the SolarWorld-CASM Chinese solar panel tariff? Or is it a sovereign state's right to influence industrial policy, in a move akin to a bank bailout or an automotive bailout?
If a foreign nation subsidizes solar, doesn't that mean the foreign nation is paying for a part of that solar panel? Is China subsidizing solar power in America or looking to monopolize the global PV market and eventually raise prices?
A few days ago, we asked if the Chinese government would see Suntech as too big to fail and step in to save the once-lauded firm -- or whether the Chinese government is willing to let the overcapacity Chinese solar manufacturing base consolidate and reach some balance with demand.
For now, Suntech is too big to fail.
GTM Research Solar Analyst Shyam Mehta suggests, "The government bailouts of Suntech and LDK have demonstrated that the global PV manufacturing landscape is simply not a level playing field."
Mehta asks, "Will other currently struggling Chinese firms also eventually be bailed out by their provincial or local governments, or will a relatively small set of firms be rescued? The reason this matters is that without any rationalization of manufacturing capacity in China, there is no near-term end in sight to the overcapacity malaise that has plagued the industry for almost two years now."