Shares in Chinese solar-wafer maker LDK Solar Co Ltd (LDK.N) jumped almost 15 percent after it secured a 60 billion yuan ($8.95 billion) credit agreement with China Development Bank.
The agreement, the largest in a series of loans dished out by the bank to Chinese solar manufacturers such as Suntech Power Holdings Co Ltd (STP.N) and Trina Solar Ltd (TSL.N) this year, will help LDK deal with over $1 billion in short-term debt coming due next year, until now a big overhang on the stock.
Investors had worried that the company might need to take measures such as selling a plant or issuing more stock to meet those obligations, analysts said.
LDK shares were up $1.31 or 14.8 percent to $10.16 in late New York Stock Exchange trading.
Even with its stock trading north of $10, some analysts think LDK still has room to grow.
“Consensus estimates are way too low for LDK,” said Ahmar Zaman, an analyst at Piper Jaffray who initiated coverage of the stock with an “overweight” rating last week.
Zaman thinks the company’s expansion plans and continuing pricing strength for solar wafers will help LDK brighten its financial picture.
Others disagree. The rise in LDK’s share price is overdone, said Gordon Johnson, head of alternative energy research at Axiom Capital Management.
He said LDK’s costs in manufacturing wafers are higher than competitors’, and a shortage in solar modules could become a glut, affecting prices for components such as solar cells.
On Monday, HSBC cut the Asian solar sector to “underweight,” citing subsidy cuts in Europe, which it said would push down prices and margins.
LDK chief executive Xiaofeng Peng said in a statement that the five-year credit agreement would help the company strengthen its position in photovoltaics. “We will have an enhanced ability to pursue our long-term growth strategy,” Peng said.
LDK Solar is the latest Chinese solar company to receive loans from the development bank, an arm of the Chinese government that bankrolls infrastructure projects.
Heavy support from Beijing for clean energy has angered some in the United States, where government backing is much smaller scale.
Earlier this month, the United Steelworkers union filed a petition with the U.S. Trade Representative’s office seeking action against what it called illegal Chinese practices that threatened U.S. jobs in the clean energy area.
Rivals such as Suntech Power, Trina, Yingli Green Energy Holding Co Ltd (YGE.N), and JA Solar Holdings Co Ltd (JASO.O) have all struck loan deals with the lender this year.
LDK’s 60 billion yuan credit agreement is the biggest. The others have run from 30 billion yuan for JA Solar and Trina Solar to up to 50 billion yuan for Suntech Power.
(US$1=6.703 Yuan)
