Trina Joins Solar Fund Raising Queue

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by Doug Young

Just a day after the solar panel sector was hit by a new negative trade ruling from the US, Trina Solar (NYSE: TSL) gave its investors another unwanted surprise with word that it is preparing to raise more than $200 million through a combination of new stock and bond offerings. Trina joins a growing list of solar panel makers that are looking to western capital markets as confidence returns to the sector following a prolonged downturn dating back to early 2011.

The fact that Trina and others are turning to western capital markets to obtain funding is probably a good sign overall, as it means these companies are healthy enough to raise their own money rather than relying on handouts from Beijing. But western investors are showing such money won’t come cheap, with Trina’s shares tumbling after it announced its plan.

In fact, shares of all the solar panel makers fell in the latest trading session on Wall Street, after a ruling from Washington laid the groundwork for new punitive tariffs on Chinese panels. (previous post) Shares of Trina, as well as Yingli Solar (NYSE: YGE), ReneSola (NYSE: SOL) and Canadian Solar (Nasdaq: CSIQ) were all down 4-6 percent in the trading session after the news.

But Trina shares fell another 4 percent in after hours trade after it announced its newest fund raising plan, meaning the company has lost nearly 10 percent of its value in the last 24 hours. Trina actually issued 2 separate announcements, starting with one detailing plans to issue $150 million in convertible bonds. (company announcement) That was followed by another announcement that it would issue 8.8 million new American Depositary Shares (ADSs). (company announcement)

Based on Trina’s latest closing price before the 2 announcements, the company could raise around $100 million from the share offering, bringing its total fund raising to around $250 million through the 2 different plans. There’s nothing else of major interest in the announcements, though Trina did say it could raise up to an additional $40 million if overallotments for the 2 plans are exercised.

Trina’s plan makes it the latest of China’s major solar panel makers to tap western capital markets for much-needed new funding. Last month Yingli raised a more modest $83 million through the issue of new shares. (previous post) But the company ultimately had to sell the shares for 20 percent less than its stock price before it announced the deal, reflecting the skepticism many western investors still feel towards solar panel makers. Canadian Solar has also raised $200 million through its own offerings of new stock and debt.

As I’ve said above, one could interpret these latest plans as a positive development because they signal a level of confidence that the companies feel about their near- to mid-term prospects. But growing protectionist sentiment in some of the world’s major markets makes these companies’ prospects look shaky at best.

The US ruling this week is just the latest in a growing series of protectionist moves against solar panel makers. China responded to earlier US tariffs with retaliatory moves against American makers of polysilicon, the main ingredient used in solar panel production. India has also taken its own recent protectionist moves, and Japan is taking similar though less obvious moves by refusing to finance projects that use non-Japanese solar cells.

Shares of the solar panel makers all staged a huge rally last year, as companies finally returned to profitability and signs emerged that the trade wars could be easing. But many shares have begun to retreat this year, and more downside is likely ahead if companies start to report they are feeling effects of all the protectionist moves happening in the market.

Bottom line: Trina’s new fund-raising plan is the latest sign of growing confidence in the recovering sector, but a fresh series of protectionist moves could put a damper on the turnaround.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He 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 author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.


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