Guest Blog: Tragic Fall of a Solar Icon - Sharp sells itself piece by piece
By Sneha Shah.
The vicious downturn of the global solar industry has seen innumerable bankruptcies and thousands of job losses.
Companies which used to rule the roost in the solar industry like Q-Cells, Evergreen Solar, and Energy Conversion Devices no longer exist today. The most promising ones like Solyndra, and Abound Solar have also bitten the dust, being sold for pitiable sums to Asian conglomerates.
However a solar story that nobody is talking about much is the fall of the Japanese giant Sharp. The company used to be the biggest solar company in 2010 but has now become a shadow of its former self.
How did Sharp reach its current tragic state?
Sharp, which is Japan’s largest solar panel manufacturer, is facing a real fear of failure as its stock price has crashed to a 37 year low - as its cash flow position become precarious. The company has been locked out of the debt capital markets as a result of its massive losses and falling market share, and its CDS price indicates a high probability of bankruptcy.
Japanese electronic conglomerates like Sony, Sharp, and Panasonic have continuously lost marketshare to South Korean and American companies like Samsung and Apple. They have been plodding along with wafer thin margins for a long time, but the last couple of years have been brutal. A strong Yen and increasing competition has seen them record huge losses.
In fact Sharp is facing a major equity draw-down because of the huge loss it is making. The company has been losing money in its major bread and butter business lines like flat panel displays and solar panels.
Sharp being forced to sell itself piece by piece
Sharp has to sell most of its useful assets as part of the deal reached with its creditors. The banks contributed 360 billion yen in loans in return for which Sharp has to raise 38 billion yen from selling the plants, 25 billion yen from Recurrent Energy, 3 billion yen from its Tokyo office building and 1.6 billion yen from its Toshiba stakezv.
The company had negotiated with Foxconn (an OEM supplier) for a stake sale but the deal fell through over valuation and control. Now the company is selling three of its four foreign flat panel plants for 55 billion yen. With the majority of its flat panel manufacturing capacity gone, it remains to be seen if Sharp will remain in the display sector or not. And Sharp has bailed out of solar energy after a number of failed strategic shifts, namely trying to shift manufacturing to low cost locations in Asia, as well as through a JV with Italian energy giant Enel.
Sharp - along with STM and Enel - built a 160 MW factory in Italy in an unused STM fab to manufacture thin film amorphous silicon modules using Sharp technology. Along with this JV between these 3 companies (3Sun), Sharp also entered the Independent Power Producer (IPP) business with a 50:50 JV with Enel Green Power - to build power plants using a-Si modules in the EMEA region.
But Nothing worked, and Sharp has now retreated almost completely from solar energy, almost completely selling 3 of its 4 factories in Japan and closing its marketing operations in USA and Europe which account for nearly 80% of the global solar PV market. The company is also looking for a buyer for US solar energy developer Recurrent (which it bought for US$305 million in 2010). Recurrent installs, owns and operates solar-power systems and sells the generated electricity to utilities, municipalities and businesses.
And the company has also abandoned its 4 year old JV with semiconductor equipment maker Tokyo Electron do develop thin film equipment.
The sale of its crown jewels is huge setback for Sharp as it used to be the No.1 player in the global solar PV market selling both thin film and crystalline solar panels. While Sharp has not declared bankruptcy as such, selling its crown jewels marks the end of one of the biggest Japanese icons.
About: this article is written by Sneha Shah, editor of Greenworldinvestor.com, a blog about Global Green Industry and Renewable Energy Industry.
Posted 04/12/2012 by David Hopwood
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