Rise and fall of the world’s biggest solar company

In 2011, Suntech Power Holdings was the world’s biggest solar panel producer, shipping more than 2 gigawatts of panels. As Wayne Ma of the Wall Street Journal reported today:

Suntech is now in Chinese bankruptcy court, and [founder Zhengrong] Shi isn't allowed to leave China without court approval, as is customary with non-Chinese executives involved in bankruptcy proceedings

The article is a must-read for anyone who follows the solar industry.

One reason is the dramatic turnaround of the personal fortunes of Shi, a Chinese-born Australian citizen. With his holdings in Suntech, Shi was on the Forbes list of billionaires (with a net worth of $2+ billion) in 2006 and 2008. The WSJ says his holdings were worth $4 billion in 2007 but “around $31 million” today. The pictures also show a man dramatically aged in the past five years.

The failure of Suntech has been assumed to be due to falling solar prices, but this is a pressure that all Chinese producers are facing. It was highly leverage, borrowing heavily to grow capacity and volume after the financial markets collapsed in 2008.

However, there were also unique problems of self-dealing and fraud. The WSJ focused on the investments of Suntech and Shi in Global Solar Fund, which financed European sales of Suntech panels. The story is complicated, but apparently the GSF manager posted fraudulent security for a €554 million Chinese government loan. When GSF got in trouble, the fraud was discovered, and Suntech (an NYSE-listed firm) was forced to report the GSF liabilities on its books and found itself unable to refinance more than $500 million in corporate bonds.

A second questionable deal was that Shi founded a polysilicon producer, Asia Silicon, and provided the unproven startup with both financing and more than $1 billion in purchase contracts. Suntech's failure to disclose its dealings and Shi’s conflict of interest are the subject of a class action shareholder lawsuit filed in San Francisco last year — a lawsuit that’s curiously been ignored by the US media.

After a 2005 IPO and a peak price of near $90, Suntech shares closed Friday at $.61 after trading under $5 for the past 18 months. For Shi, his dreams of creating an enduring industrial empire have been destroyed, as has his personal fortune.