Yingli Falls on Saying ‘Substantial Doubt’ It Will Continue

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Yingli Green Energy Holding Co., the second-largest panel maker, fell the most in more than seven weeks after saying there’s “substantial doubt” about its ability to remain in business.

Yingli declined 12 percent to $1.49 at the close in New York, the most since March 25.

“Our substantial indebtedness and net loss may adversely affect our business, financial condition and results of operations, as well as our ability to meet our payment obligations,” the Baoding, China-based manufacturer said in a filing Friday.

Yingli had short-term borrowings of about $1.6 billion at the end of last year and long-term debt of $460 million, according to the filing. It hasn’t reported a profit since the second quarter of 2011.

“The firm’s reputation is for very low cost at its manufacturing base well away from the major cities, and for compromising on margin to sell volume,” said Jenny Chase, lead solar analyst for Bloomberg New Energy Finance. That “makes it popular with project developers, but has obvious consequences for the balance sheet.”

Yingli was the biggest panel maker in 2013 and slipped in 2014 after Trina Solar Ltd. shipped 3.66 gigawatts of panels, compared with Yingli’s 3.36 gigawatts.

Cost Controls

“Solar cell and panel manufacturing has become more concentrated as prices have fallen,” Yin Lei, a Shenzhen-based analyst at China Merchants Securities Co., said by phone. “Companies with more liabilities and weaker cost controls will be eliminated,” while top manufactures with lowest costs will benefit from the growth in demand, he said.

Solar panel prices have declined almost 13 percent in the past year, according to Bloomberg data.

The fight for survival in China’s solar and wind industries, where overcapacity has weighed on earnings, is escalating after President Xi Jinping said last year that the nation should boost clean-energy supply amid worsening smog.

China’s government has sought to eliminate outdated capacity by encouraging solar companies to consolidate through mergers and acquisitions or restructuring.

Baoding Tianwei Group Co.’s default last month on an onshore bond, the first by a state-owned company in China, exposes the toll that a glut of solar manufacturing has inflicted on some of the smallest and financially weakest producers.

The company, which is also based in the northern city of Baoding, failed to pay 85.5 million yuan ($13.8 million) of bond interest in April.

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