Yingli Expects Debt Pressure to Ease as Solar Shipments Increase

Yingli Green Energy Holding Co. (YGE), the world’s largest maker of solar panels, expects its debt burden to ease as higher shipments edge the company closer to turning a profit after three consecutive annual losses.

Yingli Energy (China) Co. is forecast to return to profit in the second quarter, while the listed company may do so in the third, Chief Financial Officer Wang Yiyu said in an interview in Baoding, China, yesterday.

“After turning to profit, the debt-to-asset ratio will decrease and we’ll be able to raise financing from the capital market to further reduce our debt ratio,” Wang said.

China’s clean-energy industry faces record debt payments this quarter, heightening risks after panel maker Shanghai Chaori Solar Energy Science & Technology Co. (002506) became the country’s first onshore bond issuer to default. Yingli, whose American depositary receipts have dropped 11 percent since Jan. 1, had $1.11 billion in short-term debt at the end of 2013, according to data compiled by Bloomberg.

China International Capital Corp., an investment bank, last month flagged Yingli Energy (China) Co. as one of 12 companies with outstanding onshore bonds in “great need” of more scrutiny.

Yingli Energy must pay interest on May 3 on bonds due 2015 and 2017, according to data compiled by Bloomberg.

“We paid interest in 2012 and 2013, the most difficult periods,” Wang said. “As gross margin rebounds and cash flow increases, we have no reason to default on payments.”

Gross Margin

The company raised its forecast for gross margin in the first quarter to at least 15.5 percent from 14 percent because of higher average selling prices, it said on April 11.

Trina Solar Ltd. (TSL), JinkoSolar Holding Co. (JKS) and JA Solar Holdings Co. (JASO) reported quarterly profits in 2013. Yingli has been slower to return to profit because it’s focusing more on market share in China, which is one of the regions with the lowest average selling price of panels, said Wang Xiaoting, a Hong Kong-based analyst from Bloomberg New Energy Finance.

“Yingli is deploying a more diversified business model along the whole value chain, like downstream business, that involves more intense capital investment,” she said.

China accounted for 34 percent of Yingli’s shipments last year, Yingli’s Wang said.

To cut debt, the company has sought partners to develop solar farms. Yingli and private equity manager Shanghai Sailing Capital Management Co. last week agreed to form a fund with an initial size of 1 billion yuan ($160 million) to invest primarily in the manufacturer’s projects in China.

The company plans to develop 400 megawatts to 600 megawatts of solar farms, mainly in China this year, the CFO said. Thirty megawatts to 50 megawatts of projects will be built in East Europe, South America, Mexico and Africa.

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net Iain Wilson, Indranil Ghosh

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