Chinese renewable energy giant LDK Solar reported its fourth-quarter earnings today, and by any measure the news was grim. Falling revenues, a $409 million operating loss, a negative 301% operating margin, and more than $2 billion in debt. As of this morning, LDK has a market cap of $137 million.
But wait, it gets worse. LDK, which on April 16 partially defaulted on $24 million in bonds, faces a $295 million payment to China Development Bank on June 3 unless it spins off a subsidiary that makes polysilicon, the chief ingredient of solar cells. Given that polysilicon prices fell 50% in 2012 and the Chinese solar panel industry is burdened by overcapacity, such a sale appears unlikely. (The company makes just about everything in the photovoltaic panel supply chain—from polysilicon to silicon wafers to solar cells. It also develops solar power plants.)
LDK, it seems, could be the next Chinese solar company to fail. After all, China’s banks last month forced the Chinese operations of Suntech into bankruptcy after the company defaulted on $541 million in convertible notes. Until 2012 Suntech ranked as the world’s biggest solar panel maker. (More here on the Suntech saga.)
China Development Bank was also a Suntech creditor.
Lai said LDK has also secured a 2 billion yuan ($321 million) line of credit. “We’re confident we’ll be able raise sufficient funds to meet our obligations,” said Lai.Famous last words? And, if there is a solar bubble popping in China, then what is next?