Trina Solar's very understanding banks...

Trina Solar is fast becoming a test-piece about just how understanding a Chinese bank can become.

They have just produced some pretty ordinary numbers (as pre-announced) but it the massive changes in their balance sheet that are really interesting.

Trina Solar Limited
Unaudited Consolidated Balance Sheet
(US dollars in thousands)
			June 30		March 31		June 30
			2011		2011		2010
ASSETS
Current assets:
Cash and cash equivalents			$            630,978		$        489,820		$          639,517
Restricted cash			53,260		64,813		45,758
Marketable Securities			315		426		443
Inventories			226,303		179,780		96,395
Project assets			43,472		42,110		23,877
Accounts receivable, net			584,046		542,967		313,042
Current portion of advances to suppliers			64,049		82,370		42,895
Prepaid expenses and other current assets, net			101,948		90,297		53,256
Total current assets			1,704,371		1,492,583		1,215,183
Property, plant and equipment			751,480		663,851		533,795
Project assets- long term			2,614		-		-
Prepaid land use right			36,661		36,854		27,139
Advances to suppliers - long-term			129,138		94,807		87,205
Investment in affiliates			320		319		-
Deferred tax assets			14,667		15,405		10,481
Other noncurrent assets			28		196		1,352
TOTAL ASSETS			$         2,639,279		$     2,304,015		$       1,875,155
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term debt			$            342,953		$        153,286		$          161,557
Accounts payable			315,004		253,223		197,789
Convertible note payable			137,870		137,065
Income tax payable			20,139		46,656		9,436
Accrued expenses and other current liabilities			130,305		132,487		60,220
Total current liabilities			946,271		722,717		429,002
Long-term bank borrowings			382,631		295,652		331,152
Convertible note payable			-		-		134,644
Accrued warranty costs			50,205		44,194		27,508
Other noncurrent liabilities			17,223		18,454		14,740
Total liabilities			1,396,330		1,081,017		937,046
Ordinary shares			40		40		40
Additional paid-in capital			646,925		644,628		638,457
Retained earnings			579,183		567,423		291,572
Other comprehensive income			16,601		10,707		8,040
Total shareholders' equity			1,242,749		1,222,798		938,109
Non-controlling interest			200		200		-
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$         2,639,279		$     2,304,015		$       1,875,155

Cash went up from $490 million to $631 million - an increase of $141 million.

But that was the end of the balance sheet good news.

Short term debt went up from $153 to $343 million. They borrowed $190 million short term.

And long term debt went up from $296 to $383 million. They borrowed another $87 million.

So another way to look at it is that the company chewed through a net (190+87-141=) 136 million despite their (much lower) stated profit.

What gives? Its a widget company with stated profit but cash burn.

Actually we know what gives - the company still can't sell their product to customers that actually pay.

Inventory went up from $180 to $226 million. This company is still shipping to warehouses...

Receivables went up from $543 to $584 million. So they are selling to people who are slow to pay (but who have probably already received irrevocable delivery of solar panels and installed them into levered solar parks. (The project financier almost certainly has the collateral now!)

The rest of the cash burn wasn't really burn - it was (another) large increase in capacity. These increases are happening despite the obvious problems this company has in selling its inventories.

As I said - the banks are very understanding.

And they will need to be because the company has contracted to buy lots more silicon and it needs to increase its output substantially. They tell us that the silicon price will be lowered in accordance with the contract. That is great: they are going to need it.

Today at my office in Sydney I was cold-called by a solar panel installer. Business is quiet so they were drumming up business. They want to sell me panels at an installed price (with inverters etc).  The panel price was $1.35 per watt. Not kidding - way below where Trina is currently booking sales.

The brand was Alex Panel - another company which the salesman assured me was "planning to list on the New York Stock exchange".

Trina say next quarter will be better. At $1.35 per watt sold by retail-cold-call in Sydney I don't quite see it.



John