Solarfun Power (SOLF) has shored up its polysilicon supply, but its balance sheet still scares the heck out of AmTech.
Yesterday, SOLF announced the company had agreed to a long-term polysilicon supply contract with GCL (Zhongneng) that will allow it to produce 1.2GW of solar modules over 8 years. SOLF also announced it is buying the remaining 48% equity interest in Yangguang Solar it did not previously own for $55 million.
AmTech was encouraged to see Solarfun assuage their poly concerns, but that doesn’t mean SOLF’s balance sheet is fixed:
Our main company specific concerns regarding SOLF surround its level of poly procurement for 2009, as well as the status of its balance sheet. We view the GCL contract as an incremental positive towards the former; however, we remain concerned about SOLF’s reliance on high interest rate short-term Chinese bank debt relative to the latter. We are awaiting clarity surrounding a potential capital event at some point in the next 6 months before we would consider becoming constructive on shares.
AmTech maintains NEUTRAL on Solarfun Power (SOLF).
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