Doug Young
After a week of unusual quiet on the stormy solar panel front, the sector is splashing back into the headlines with word that struggling LDK Solar (NYSE: LDK) is moving one step closer to a state-led takeover of the debt laden company. Meantime, China is also taking its own broader moves against recent protectionist actions in the West by lodging an official complaint at the World Trade Organization against what it is calling unfair treatment of its companies in Europe.
Let’s take a look at the LDK news first, as it’s the most dramatic and immediate compared with the WTO action that looks largely symbolic and unlike to have much impact over the short- to medium-term. LDK has announced the promotion of its president to the additional role of CEO, while the company’s founder and previous CEO Peng Xiaofeng will retain his title of company chairman. (company announcement)
Meantime, the company also announced the naming of 5 new directors to its board. The list includes a financial expert who will be tasked with helping to create a restructuring plan for the troubled company, and several members from the state-affiliated consortium that gave LDK a $140 million lifeline last month. (previous post)
Peng’s move from the CEO’s office to the chairmanship looks strikingly similar to what happened in August at Suntech (NYSE: STP), China’s other major solar panel maker that is facing a major cash crunch. That move saw Suntech founder Shi Zhengrong hand over his CEO position to CFO David King, while Shi retained the chairman’s position. (previous post)
I commented at the time that the move looked mostly cosmetic and that Shi would continue to control Suntech from his chairman’s post. But based on this strikingly similar move at LDK, it appears that these 2 shifts are perhaps face-saving intermediate steps before both Shi and Peng are completely removed from their companies by the state-run entities that are now providing emergency rescue packages.
Chinese media previously reported that Shi is desperately trying to stay on at Suntech, even as government rescuers seek his removal as part of any rescue package. (previous post) Look for both Shi and now Peng to both ultimately be removed from their companies before any rescues are finalized, though Shi may perhaps put up a fight before his departure.
Meantime, let’s look quickly at the second news bit, which has China formally lodging a complaint with the WTO accusing Greece and Italy of unfairly supporting their domestic sollar panel makers. (English article) China’s claim is based on policies in those 2 countries that offered special incentives for power plants developers who equipped their plants with domestically-manufactured solar panels.
That policy does indeed seem to discriminate against solar panels from other countries, so perhaps this complaint has a chance of success. But I do find it quite ironic that China is accusing others of unfair support for their solar industries, since it offers far more generous support for its own sector in the form of policies like low-interest loans and export tax rebates. But if other countries are going to accuse China of unfairly supporting its solar panel makers, they should also be ready to show they don’t engage in similar practices.
Bottom line: LDK’s replacement of its CEO is the first step toward removal of its founder from the company as part of a rescue by the state.
Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters, writing about publicly listed Chinese companies. He currently lives in Shanghai where he teaches financial journalism at a leading local university. He also writes daily on his blog, Young’s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also the author of an upcoming book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China
