Suniva SQN Asset Finance Income

SQN Asset Finance Income’s Suniva to benefit from tariff protection

SQN Asset Finance Income Fund (SQN) has provided an update on Suniva, in which it notes that the White House has now announced protective measures, which it says are aiming to ensure the long-term viability of the US solar cell manufacturing industry. It says that this action is intended to restore a fair and competitive market and recognizes the vital function enterprises like Suniva contribute to US energy independence and national security. It also says that, not only is this a positive outcome for Suniva, it is a crucial step toward broader trade discussions which could bring further benefit to the industry and Suniva, specifically.

Statement from the US trade representative

“The U.S. Trade Representative will engage in discussions among interested parties that could lead to positive resolution of the separate antidumping and countervailing duty measures currently imposed on Chinese solar products and U.S. polysilicon. The goal of those discussions must be fair and sustainable trade throughout the whole solar energy value chain, which would benefit U.S. producers, workers, and consumers.”

What are the tariff rates?

The tariffs will start at a rate of 30% and decline 5% per year over four years. SQN says that these tariffs are generally in line with Suniva’s expectations at the onset of the petition. It also says that the quota of 2.5Gw per year of imports is an acceptable level given the size of the US market and the current domestic manufacturing capacity. These tariffs, which will take effect within 15 days, should pave the way for Suniva to be in a position to repay SQN’s investment.

Suniva should be able to repay its loan from SQN

SQN says that the will take effect within 15 days and should pave the way for Suniva to be in a position to repay SQN’s investment. It also says that further announcements will be made as details of the implementation become available over the coming weeks.

SQN’s loan to Suniva

In August 2015, SQN entered into a 5-year financing arrangement with Suniva that was secured by its manufacturing and production equipment and supported by a parental guarantee from a Hong Kong-listed public company. In the NAV as at 30 August 2017, the amount outstanding to the Company was $29.9m (£24.3m), which represented approximately 6.8% of the ordinary share class. The Suniva investment has not been held by the C shares.

ITC Ruling

On 22 September, the United States International Trade Commission (“ITC”) rendered its decisions on Suniva and Solar World’s petition under Section 201 of the Trade Act of 1974, seeking protection for the solar manufacturing industry in the United States. This said that, consistent with the data collected and the presentations made by Suniva and Solar World at the hearing on 15 August 2017, the ITC found that substantial damage has been caused to the U.S. solar manufacturing industry by the overcapacity of foreign imports. As a result, the ITC said that it would be making a recommendation to the White House to provide protection for U.S. solar manufacturers by 13 November 2017.

What did the petition cost?

SQN Asset Finance spent $4.0m in legal fees and other costs (0.83 % of the ordinary shares’ assets) on this case.

SQN Asset Finance Income’s Suniva to benefit from tariff protection : SQN

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