Tuesday, October 23, 2007

LDK's Bold Announcement

LDK Solar (LDK) said Monday it signed a contract worth about $534 million to supply solar wafers to solar cell maker Canadian Solar Inc. (CSIQ) The three year deal calls for LDK to begin delivery of the multicrystalline wafers in 2008, with 50 megawatts worth of capacity scheduled in the first year. $534 million that's a lot of money isn't it?

LDK currently has a positive working capital position of approximately $60 million. We are as yet unsure of the impact of the inventory valuation controversy. In any event $534 million is huge in relation to the working capital position.

Canadian Solar, whose market cap is one third the size of LDK, has a positive working capital ratio of approximately $95 million. Current cash on hand is approximately $23 million. How do you run a $534 million dollar deal through those numbers?

Also Canadian Solar has not issued their own press release about the deal.

At the same time the market place is clearly having well publicized problems with silicon supply.

LDK and associated entities need to communicate more clearly and connect all the dots or else face a huge credibility problem. Class action lawsuits have already been filed. This would be a good place for regulators to start making some inquiries and clear the air.