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Shares of merging solar cell companies soar

2017/10/17 12:18:28

Taipei, Oct. 17 (CNA) Shares of three major Taiwanese solar cell makers soared Tuesday morning a day after they announced the largest-ever merger in the country's solar energy sector, dealers said.

How far the upturn will go will depend on whether Taiwan's solar energy firms can navigate the fierce price competition they face from their Chinese counterparts and still squeeze out profits, they said.

As of 11:59 a.m., shares of Neo Solar Power Corp. (新日光), the lead company in the deal, had gained 10 percent, the maximum daily increase allowed on Taiwan's stock exchange, to NT$17.25 (US$0.57), with 75.39 million shares changing hands.

Both Gintech Energy Corp. (昱晶) and Solartech Energy Corp. (昇陽光電) had also gained 10 percent to NT$19.35 and NT$14.85, respectively, on trading volume of 6.78 million and 1.86 million shares.

The weighted index on the Taiwan Stock Exchange was down 0.23 percent at 10,749.33 as the broader market was dragged down by select market heavyweights, lagging behind the strong gains posted by the three solar cell stocks.

"The large trading volume right now shows investors were attracted by the merger deal, and they jumped in right after the stock market opened," MasterLink Securities analyst Tom Tang said.

Trading of the three stocks was suspended Monday before the merger announcement and resumed Tuesday.

"Yesterday, many other solar energy stocks rose sharply amid hopes that the merger will boost Taiwan's competitive edge in the global market," Tang said. "The three are simply playing catch-up after their trading resumed."

At a news conference held after the market closed Monday, Neo Solar Power, Gintech Energy and Solartech Energy announced they will merge, with Neo Solar Power the surviving company that will bring the other two enterprises fully under its corporate umbrella.

The merger will be achieved by a stock swap, with one Gintech Energy share to be swapped for 1.39 Neo Solar shares, and one Solartech Energy to be exchanged for 1.17 Neo Solar shares.

Once the deal is completed, expected to happen in the third quarter of 2018, Neo Solar Power will change its name to "United Renewable Energy Co." (UREC, 聯合再生能源) and be capitalized at NT$21.1 billion.

Neo Solar Chairman Sam Hong (洪傳獻) will serve as chairman of the the merged company, which is expected to have a solar cell production capacity of 5GW, or 50 percent of Taiwan's total.

The companies hope that following the merger, UREC can provide one-stop services from solar cell supply to back-end module production to strengthen its competitive edge in the global market.

But Tang was not convinced that the merger will solve the local solar cell sector's ills.

"Despite the merger, I'm still worried about the fundamentals of the solar energy industry, where price competition is escalating because Chinese firms have cut their prices to secure orders," Tang said.

"Few can be sure when these Taiwanese solar firms will swing to profit under the current unfavorable environment," Tang said. "I'm afraid that today's gains will be short-lived because investors still need real numbers for profit."

In the first half of this year, Neo Solar, Gintech Energy, and Solartech Energy incurred losses per share of NT$1.83, NT$2.27 and NT$1.63, respectively.

(By Jackson Chang and Frances Huang)