China’s Yingli Green Energy, a large producer of solar power wafers, cells, and panels, warned investors last week that it risks going out of business as a result of its cost structure and debt load.
Yingli posted a net loss in 2014 of $209 million, adding to three straight years of significant losses, according to a report filed with the U.S. Securities & Exchange Commission. Although based in China, Yingli trades on the New York Stock Exchange. In addition, the company owes payments on $1.6 billion in debt.
Since the recession began in 2008, the solar industry has experienced periods of both boom and bust, but the main trend has been a sharp decrease in the prices of solar panels. Falling prices forced many firms, particularly in the West, to go bankrupt, leaving only low-cost producers, most of which are based in China.
“Yingli was willing to make panels at very low prices and aimed to be a high-volume producer,” explains Jenny Chase, head of solar at analysis firm Bloomberg New Energy Finance. That strategy meant low margins, and Yingli was not alone for a time in running its factories at a loss. But other Chinese firms, including Jinko Solar and Trina Solar, have regained profitability.
Yingli may have survived thus far because it has patient lenders, according to Chase. In the filing, Yingli says it will look to raise cash from its current shareholders, lower its costs, and work with banks to refinance its debt. The firm may also benefit from domestic demand: China is now leading the world in solar panel installations.