Two high-profile solar companies in China were battered this week by nervous investors as debt concerns and a probe into market manipulation overshadowed their prospects in a booming solar market.
Yingli Green Energy Holding Co., the second-largest panel maker, tumbled 37 percent Tuesday after the company warned Friday that its debt may be too burdensome. Yingli recovered some of the loss Wednesday.
There was no rebound for Hanergy Thin Film Solar Group Ltd., the most valuable solar company, which lost $18.6 billion in market value after reports that it may be the target of an investigation by Hong Kong’s Securities and Futures Commission.
All that as solar is booming, set for its best year ever, according to Patrick Jobin, an analyst at Credit Suisse Group AG in New York, who said investors shouldn’t shun the industry because of mistakes by individual companies.
“Solar is at an inflection point and we’re seeing robust demand indicators,” Jobin said in an interview. The challenges are “company-specific” and “not reflective of the broader industry.”
Investor concerns come as the NYSE Bloomberg Global Solar Energy Index of 132 companies surged 67 percent this year through Tuesday, outpacing the 3.4 percent gain for the S&P 500. The gains reflect a forecast that panel production will grow by almost a third this year, according to data compiled by Bloomberg.
Manufacturers are expected to produce as much as 55 gigawatts of panels this year, enough to power 11 million U.S. homes and 31 percent more than last year, according to Bloomberg New Energy Finance.
Baoding, China-based Yingli’s “self-inflicted wounds of overleverage,” will make it difficult for the company to build new factories overseas, Jobin said. Yingli’s competitors, including Trina Solar Ltd., the world’s largest solar panel manufacturer, and third-largest Canadian Solar Inc., carry about half as much debt, according to data compiled by Bloomberg.
“In this situation, they’ll never have cash to add capacity, so they’re kind of going to fall behind overall,” said Mahesh Sanganeria, an analyst at RBC Capital Markets in San Francisco. “If they didn’t have the debt, they’d be in good shape.”
Meanwhile, regulators in Hong Kong have been probing potential market manipulation in Hanergy’s shares for several weeks, Reuters reported Wednesday citing an unidentified person.
That sent the company’s shares down HK$3.46 to HK$3.91 before their suspension at 10:40 a.m. local time, wiping HK$144.3 billion off its market value. Ernest Kong, a spokesman for Hong Kong’s Securities and Futures Commission, declined to comment.
Before Wednesday’s decline, the stock had surged more than sixfold in the past year despite questions from analysts and investors about the company’s revenue sources. About 61 percent of Hanergy Thin Film’s sales come from its Beijing-based parent Hanergy Holding Group, the listed company said in March.
Hanergy Thin Film initially didn’t give a reason for the suspension. In a later statement, the company said trading was suspended pending “an announcement containing inside information.”