(Bloomberg) -- Swiss solar-panel maker Meyer Burger Technology AG is planning to sell new shares as it bids to turn around its unprofitable business by shutting one of Europe’s largest production sites and stepping up US output.

It will seek shareholder approval next month for a rights issue of as much as 250 million francs ($284 million) to finance the completion of its Colorado and Arizona manufacturing facilities, the company said in a statement on Friday. Meyer Burger is one of a number of European manufacturers that are struggling after cheap Chinese products flooded the market.

Meyer Burger fell as much as 21% in Zurich trading, before erasing those losses. 

Sentis Capital, the company’s largest shareholder with a 10% stake, said it intends to buy as much as 50 million francs of stock in the rights issue. “We also have great respect for and trust in the people and the management team of Meyer Burger,” it said in the same statement.

The company’s survival depends on a successful share sale, according to Zuercher Kantonalbank. “The risk of insolvency has not yet been averted,” it said in a note.

The firm will halt output in March at its Freiberg plant in Germany, which employs about 500 people, and expects significant cost savings from April. Meyer Burger flagged its shift to the more attractive US market last month, saying that a final decision on the factory closure would depend on whether policy measures to help European solar makers were taken.

Political Realities

“We are disappointed that we have to stop the production in Freiberg due to the political realities,” Chief Executive Officer Gunter Erfurt said on a conference call. “Cementing China’s dominance in the sector cannot be a strategy.”

The German economy ministry was aiming to find a solution by Feb. 21 as part of a wider package to help the industry, but faces opposition from the pro-business Free Democratic Party. Still, Meyer Burger said the federal government of Germany has approved an export agency credit guarantee of up to $95 million for its US investment.

The guarantee will enable the continued operation of the Hohenstein-Ernsthal site in Saxony, with machines manufactured there also destined for export, according to a spokeswoman for the German economy ministry.

Meyer Burger — which has offtake agreements until 2032 — is also seeking tax credits and loans from the US government to close its 450 million-franc funding gap and ramp up its new American units. President Joe Biden’s Inflation Reduction Act has increased the appeal of the US market.

Trade restrictions imposed by India and a US ban on Chinese panels suspected of being made with forced labor have also led to the redirection of modules to Europe. The European Union has said it wants to prioritize home-grown clean tech, but less than 2% of demand for solar there is met by products from the region, with about 90% of components coming from China.

“Due to a lack of European protection against unfair competition from China, nearly four years of hard work by great employees in Europe is at risk,” Sentis said.

Still, Meyer Burger CEO Erfurt said there’s an option to ramp up production again at Freiberg, a decision that can be taken until mid-March. He added that certain parts of the company’s business such as research and development will remain in Germany.

What Bloomberg Intelligence Says

“Meyer Burger may need up to 250 million francs ($284 million) of additional funding to shift production to the US from Europe under its turnaround strategy, though incentives included in the US’s Inflation Reduction Act could help lift midterm profitability by the same amount.”

— Alessio Mastrandrea and Rob Barnett, BI clean energy analysts

Click here to read the full research note

--With assistance from Paula Doenecke.

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