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Jinko Collapses 28% Amidst Environmental Crisis

Shares in JinkoSolar Holdings (JKS) fell a full 28% today after the company was forced to idle its manufacturing facility in Haining following three days of protests over allegations that the facility has been polluting the local river.

The difficulties relate to one of the company’s wholly-owned subsidiaries, Zhejiang Jinko, and the company has now admitted that the local environmental protection authority is investigating the allegations that the company has been discharging hazardous waste into a river:

“There have been reports that Zhejiang Jinko Co., Ltd. (“Zhejiang Jinko”), a wholly owned subsidiary of JinkoSolar in Haining, Zhejiang Province, China, discharged hazardous waste into a river, prompting local residents to protest at its facility from September 15 to September 17, 2011. The local environmental protection authority is investigating the incident. In response to the concerns of local residents and in full cooperation with the local government’s investigation, Zhejiang Jinko has suspended operations at its facility in Haining until the impact of any potential environmental damage has been assessed and remedied. An initial investigation conducted by the local environmental protection authority indicates that the pollution may have been caused by the improper storage of waste containing fluoride”.

You can read the full Press Statement here.
Following the protests over the weekend and the onset of the investigation, JinkoSolar has now closed the plant, which has a 1.1 GW capacity in solar cell production. Jinko’s main operations are at its Shangrao facility, where it produces silicon ingots, silicon wafers and final solar modules. The impact of the closure of the Haining plant is mainly therefore on wafer to cell production and the company intends to bring in a third-party cell producer via a ‘tolling’ facility. JA Solar, for example, has a decent business in solar cell ‘tolling’ for outside module manufacturers. Beyond the environmental and image costs of this crisis, that will certainly hit Jinko’s margins.

The company has, however, said that it expects the plant to be shut down temporarily for only a few days. Much will no doubt depend on the result of the investigation. However, clearly the last thing that the solar industry needs is to be seen as a cause of pollution.

I continue to have no positions in solar or clean energy in general whilst the overall macroeconomic environment seems difficult – for a recap, see my article on general market risk from the beginning of the month.

Disclosure: I have no positions in the stocks discussed.