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Suntech Power: Now a Takeover Target

A major reason for the fall in STP's price is the realization that it is carrying a heavy debt load and that about 500million of that load is in the form of convertible bonds bearing next to no interest that can be redeemed in Feb 2010. The stock price would have to show signs of getting back to the $48 range before anyone would be tempted to hold those convertibles past the Feb 2010 "put option" date. The company has also tapped something like $600m of a $1.1b line of credit.

Bottom line: in this financial environment the debt to equity ratio on its balance sheet is a serious drag on STP's stock price compared to its peers.

The Chinese government may protect STP from going bust as a long-term energy play but in the short term China's electric companies are having a hard time selling their existing capacity - making it that much less critical to develop alternative - and still expensive - electricity source alternatives.

Q-Cells of Germany, one of the two largest makers of solar panels in the world (after Sharp) yesterday reversed its rosy guidance of just 3 weeks ago and has joined the chorus of solar companies announcing maintenance shut-downs of existing capacity over the short-term.

Reemphasizing that excess capacity, Dr. Shi was recently quoted as saying that 2009 will see a glut of panels on the market.

That being the case, there seems little likelihood STP will be able to earn its way out of the financing crunch that is less than 14 months away.

As noted by others, the author of this article clearly has not done his or her homework.