Energy Business

China Picks a Solar Company to Rescue

Alternative Energy sources
Source: thinkstock
With Suntech Power Holdings Co. Ltd. (NYSE: STP) now in Chinese bankruptcy court, the shakeout in the Chinese solar industry is officially underway. What’s shakin’ today is a $51 million 15-year loan to solar module and wafer maker ReneSola Ltd. (NYSE: SOL). The China Development Bank (CDB), a state-controlled bank that provides financing for strategic economic programs, is making the loan.

Now the $51 million is less than 10% of the amount that Suntech needed to avoid bankruptcy, but there is little question that the CDB could have come up with the money if it had wanted to. The bank funded the Three Gorges dam project, so a few hundred million is not a huge problem.

There are probably a couple of reasons — besides the cost — that Suntech was cut loose and ReneSola was not. First, Suntech’s founder and former CEO was determined to keep the government out of Suntech’s business. He lost that round when the company’s board replaced him.

Second, and perhaps more important, Suntech is a showcase for non-Chinese investors. The image that the central government wants to project is that it takes a hands-off approach to publicly traded businesses. What better way to emphasize that than to let one of the country’s most highly touted companies go down? If the government will not intervene to save Suntech, then it will not put its thumb on the scales for any other firm. Except, now, ReneSola, and who knows which other firms in the future.

ReneSola’s shares are up more than 3% today, at $1.66 in a 52-week range of $1.08 to $2.65.

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