Financial Pressures Mount for Solar Companies at Cycle Low, Industry Seeks Increased Financial Support

As the rush to install photovoltaic systems enters its final countdown, the growth in demand is starting to show signs of weakness, leading to a decline in prices across the industry chain. Over the past week, prices in various segments of the photovoltaic industry have fallen sharply, with polysilicon futures hitting a record low since their listing, closing at 37,615 yuan/ton. This reflects market uncertainty regarding demand, prompting concerns among investors about the financial pressures facing related companies.

In February of this year, the National Development and Reform Commission and the National Energy Administration jointly issued a notice titled “Notice on Deepening the Market-oriented Reform of New Energy Grid Connection Prices to Promote High-Quality Development of New Energy” (Document No. 136 [2025]). This key policy introduced two important deadlines: the “430” deadline requires commercial and industrial distributed projects to complete filing and grid connection by April 30 to secure existing subsidies or fixed-price policies. In a bid to lock in revenues before the policy takes effect, photovoltaic developers and investors are hastening project connections, leading to a surge in demand for distributed photovoltaic projects, which has sparked the current rush for installations.

The 136 Document aims to reconstruct the industry ecosystem through market-driven mechanisms, encouraging a shift towards market-based electricity trading, which will positively impact the long-term development of photovoltaics. However, in its early stages, this initiative introduces uncertainties in revenue and strengthens grid connection constraints, accelerating the reshuffling of the industry and reshaping the competitive landscape.

A report by First Financial published on April 18 noted that after the installation rush, both supply and demand dynamics within the photovoltaic industry are subject to numerous variables, including the sustainability of self-discipline, domestic and international policy directions, and the interplay between upstream and downstream sectors. As the industry reaches a significant turning point, many photovoltaic companies remain in a loss phase due to supply-demand mismatches, with financial statements indicating shrinking cash flow and rising debt ratios.

Currently, banks and other financial institutions are becoming more cautious in lending to photovoltaic companies. With demand entering a vacuum post-installation rush, these companies may face increased financial pressure and will require greater tolerance from banks and financial institutions to navigate through these challenges.

In 2024, the photovoltaic industry chain experienced a significant drop in prices, leading to an expansion of losses across the main industry chain. Companies like TCL Zhonghuan (002129.SZ) and LONGi Green Energy (601012.SH) are expected to incur losses exceeding 8 billion yuan for the year, while Tongwei Co., Ltd. (600438.SH) anticipates a loss of 7.5 billion yuan. Other firms, including Aiko Solar (600732.SH) and JA Solar (002459.SZ), are also expected to report losses exceeding 5 billion yuan.

The capacity reduction cycle is not only eroding the profits of photovoltaic companies but also increasing financial pressure. As of now, the number of annual reports disclosed by the photovoltaic sector is relatively low. However, a report analyzing 75 listed photovoltaic companies as of September 30 reveals a total debt of 1.57 trillion yuan, an increase of 19.4 billion yuan compared to the previous quarter. The median asset-liability ratio stands at 60%, with companies in the main industry chain showing a ratio of 64%, which is a rise of 4.6 percentage points year-on-year. Some leading companies have seen their asset-liability ratios climb above 70%.

Moreover, 36 listed companies have asset-liability ratios exceeding 60%. For instance, GCL-Poly Energy Holdings has an asset-liability ratio of 87.56%, while Shuangliang Eco-Energy also exceeds 80%. Other leading manufacturers in the main industry chain, such as Aiko Solar, Trina Solar, JA Solar, JinkoSolar, Tongwei Co., Ltd., Canadian Solar, SunPower, and Sungrow Power Supply Co., have liabilities exceeding 65%.

Amid rising debt ratios, the cash reserves of photovoltaic companies have been declining. As of the end of the third quarter last year, the total cash held by the 75 photovoltaic companies was 343.84 billion yuan, a decrease of approximately 23 billion yuan compared to the previous year. Specifically, Tongwei Co., Ltd. saw a cash reduction exceeding 11 billion yuan, while LONGi Green Energy reduced its cash by around 5 billion yuan. Other companies, including Flat Glass Group, Aiko Solar, and Oriental Sunrise, also experienced varying degrees of cash decline.

The frequent adjustments to the conversion price of convertible bonds among photovoltaic stocks reflect the financial pressures faced by these companies. This year, several photovoltaic listed companies have proposed adjustments to their conversion prices for convertible bonds. For example, the LONGi Green Energy convertible bond recently announced a “downward correction” of its conversion price and a halt on conversion. Other bonds such as Tianhe 23 (underlying stock: Trina Solar) and Fu 22 (underlying stock: Foster) have also seen their conversion prices adjusted downward.

An analysis by Shenwan Hongyuan indicates that the downward adjustment of convertible bond conversion prices can typically be viewed as a shift from a bond-focused to a balanced equity approach. If the adjustments are fully realized, it may signal the issuer’s eagerness to promote conversion in anticipation of improved future operations. Currently, the outstanding convertible bonds in the photovoltaic sector amount to approximately 6 billion yuan, accounting for about 8.66% of the market, making it the second largest industry after banking.

In light of the challenges, companies are calling for increased support from bank credit. The photovoltaic industry is characterized by high asset intensity, a labor-intensive workforce, and strong cyclical fluctuations, with the main assets and personnel concentrated in the primary industry chain (silicon materials, wafers, cells, and modules). Since 2019, the domestic photovoltaic industry has rapidly developed, driven by policies and capital, leading to continuous capacity expansion across all segments. However, by the end of 2023, a phase of supply-demand imbalance has emerged, and the industry has begun entering a capacity reduction cycle, transitioning into a self-disciplined production reduction phase in the fourth quarter of last year.

As the debt ratios of photovoltaic companies rise, banks are expressing certain doubts regarding the industry’s laws and market logic, leading to more cautious lending and refinancing practices. “Financial institutions are generally adopting a prudent principle when it comes to lending to photovoltaic companies,” stated a representative from a photovoltaic listed company. “To alleviate the pressure on the industry’s capital chain and debt risks, we hope financial institutions can enhance their tolerance towards photovoltaic companies.”

In terms of financing channels, initial public offerings (IPOs), private placements, and convertible bond issuances are the main sources of direct funding for listed photovoltaic companies, while indirect financing predominantly comes from bank loans. Information disclosed by various banks shows that their main strategies concerning the photovoltaic industry include increasing credit issuance, participating in public REITs, underwriting and investing in green bonds, and engaging in debt-to-equity swaps. During the capacity reduction cycle, photovoltaic companies are generally reporting losses, with cash flows being consumed due to these losses. For companies relying more heavily on indirect financing, the cost of funds is higher.

For instance, LONGi Green Energy has raised a total of 40.471 billion yuan since its listing, with indirect financing making up 34.05%; Tongwei Co., Ltd., with a higher total financing amount of 107.992 billion yuan, has 51.42% from indirect financing. Recently, Tongwei Co., Ltd. announced new borrowing progress, reporting a loan balance of 96.457 billion yuan as of March 31, an increase of 12.26 billion yuan compared to the end of 2024, with new loans exceeding 20% of the company’s net assets at the end of 2024. Among these new borrowings, bank loans accounted for the highest amount at 6.981 billion yuan. This year, Tongwei Co., Ltd. issued 500 million yuan in short-term financing bonds to repay loans from financial institutions for the company and its subsidiaries, aimed at easing borrowing pressures.

Industry experts believe that the issuance of Document No. 136 marks the true arrival of the “post-subsidy era” for new energy, necessitating a reconstruction of profit models and investment logic for distributed photovoltaic projects. As the industry reaches a historic juncture, the photovoltaic sector has yet to move beyond intense competition, with pronounced supply-demand mismatches and significant operational pressures, particularly concerning financial strain. “Reflecting on the history of China’s photovoltaic industry, during the previous industrial cycle in 2011, many companies faced broken capital chains and were unable to fully repay substantial loans. Today, the photovoltaic industry has developed over many years, boasting the largest scale in manufacturing, assets, and personnel in history, with raw materials, technology, and capacity under control,” remarked an energy analyst. “The current downturn in the photovoltaic cycle is indeed more severe than market expectations, and market-based electricity trading may accelerate industry reshuffling. It would be unfortunate if high-quality photovoltaic assets were eliminated due to capital chain risks. At this stage, financial institutions need to enhance their understanding of photovoltaic industry policies and strengthen their comprehension of capital operations within photovoltaic companies, while appropriately considering the consistency and continuity of related policies.”