Taiwan’s polysilicon producer Powertec (Powertec Energy Corp.) formally filed for bankruptcy on February 27. As one of its major shareholder, the government-run National Development Fund of Taiwan is expected to face a staggering loss of around NT$3 billion.
Established in 2010, Powertec’s key investors initially included Walsin Lihwa and Sino-American Silicon Products (SAS). Walsin is a power cable manufacturer, while SAS is a well-known silicon wafer supplier. Set out to make solar-grade silicon as its core business, Powertec originally focused on building up its in-house production capacity. Many participants of Taiwan’s solar industry have one time or another considered developing a domestic supply of this feedstock material because they have been entirely dependent on foreign imports. Prices of polysilicon can also fluctuate wildly, once reaching a high of US$120/kg. Hence, Powertec was expected to play an important role in the domestic supply chain.
The National Development Fund, which is under the control of Taiwan’s Executive Yuan, acquired a 13% stake in Powertec in 2014. With this deal, Taiwan’s government obtained a seat on the company’s board. However, the government bought into the company at the wrong time. Polysilicon suppliers based in Mainland China were aggressively expanding their production capacity, and the whole market was starting to go south. The construction of Powertec’s production plant was also completed in 2014, but the company did not put the facility immediately into operation. Due to the challenging business environment, Powertec did not want to incur the related depreciation cost. Nevertheless, this move failed to prevent a net loss for the year, and Powertec had not been able to to turn around its financial results from that point on.
Polysilicon suppliers have been struggling in the recent years because there has been no significant improvement in the market situation. Besides Powertec, numerous producers in Mainland China and other regions have also started to plan their exits.
In 2016, Powertec took out a syndicated loan of NT$3.2 billion to maintain its operations. Next year, the National Development Fund announced an injection of another NT$425 million to help the company set up new production lines. However, by that time, polysilicon prices had dropped to one-tenth of what they used to be six years ago. Even if Powertec could continue its operations, its profit outlook had become very dim. Additional fundraising efforts in 2018 were unsuccessful as the private financial sector already lost interest. In 2019, Powertec managed to develop the capability to produce semiconductor-grade polysilicon. Unfortunately, this achievement was still not enough to keep the company off the path of insolvency.
The declaration of bankruptcy indicates that Taiwan’s government is unwilling to keep providing financial backing, especially as polysilicon prices has lately fallen to a low of US$8/kg (or 6% of the previous peak price). Globally, the solar sector has been hit hard by the price plunge in the polysilicon market. Manufacturers of photovoltaic products that pursue vertical integration have all suffered financially in various degrees as a result of this trend. The fact that Powertec kept itself in business up to the early part of this year is rather remarkable.
Along with the National Development Fund, many private investors will be affected by the bankruptcy. Walsin, for instance, will have to recognize a loss of around NT$1.68 billion. Powertec appears to be a significant liability in Taiwan’s financial sector as well. Mega International Commercial Bank, which is the leading lender of the syndicated loan, is exposed to a risk worth NT$2 billion. The second and third largest underwriters of the loan are First Commercial Bank (NT$1.4 billion) and Taishin International Bank (NT$1.2 billion). The bankruptcy will also result in bad debts worth hundreds of millions for many domestic financial institutions including Hua Nan Commercial Bank, Bank of Taiwan, Chang Hua Commercial Bank, Taiwan Cooperative Bank, and Taiwan Business Bank.
The foreclosure process has begun for Powertec. The company’s main collateral—the production plant in Yunlin County—will be auctioned off and is now being appraised for its value. Even with the liquidation of assets, the outstanding loans will not be fully repaid. Hence, this event will likely affect the financial results of many domestic banks for this year since they all have to deal with bad debts accrued by Powertec.
Aside from polysilicon, Powertec also offered chemical products such as high-purity hydrogen for semiconductor manufacturing. Therefore, its fall could be seen as a setback in the advancement of Taiwan’s semiconductor material industry.
(News source: TechNews. Photo credit: Powertec Energy Corp.)