GCL calls off Chinese wafer business sale

With analysts predicting Tuesday’s International Trade Commission (ITC) ruling in the U.S. would prompt Chinese solar manufacturers to repatriate manufacturing operations after the Taiwanese loophole was closed, Chinese giant GCL Poly today announced a dramatic u-turn on its plan to dispose of its domestic wafer and ingot manufacturing business.

The plan to dispose of wafer and ingot manufacturing assets in Jiangsu province in two separate deals for RMB8 billion ($1.3 billion) to ease the company’s debt burden and focus on the higher margins offered by polysilicon was abandoned today (Friday), the date by which GCL had to publish details of an extraordinary meeting to push through the sale.

No reasons for the abrupt change of heart were given in the announcement made by GCL to the Hong Kong stock exchange but the decision comes in the wake of the ITC ruling that hiked duties levied on Chinese-made solar products featuring Taiwanese cells sold into the U.S.

GCL had agreed to sell a wafer factory and an ingot facility in Wuxi to Jiangsu Golden Concord Energy Company, which is part-owned by GCL executive directors Mr Zhu and Zhu Yufeng for RMB2.1 billion ($337.6 million) with Mr Zhu planning to transfer the assets to Shanghai Chaori, as part of that company’s restructuring plans.

In a separate deal, GCL had agreed to sell six wafer factories in the Jiangsu provincial cities of Suzhou, Xuzhou, Changzhou, Yanghzhou and Taicang, as well as an ingot factory in Xuzhou, to Shanghai Miaochang for RMB5.9 billion ($948 million).

Sale would have reduced debt burden

The abandoned sale would have seen GCL’s debt pile – which rose from HK$32.8 billion ($4.2 billion) to HK$44.256 billion ($5.7 billion) between the end of 2011 and the end of June – reduced to HK$27.697 billion ($3.57 billion).

According to GCL’s earlier filings to the Hong Kong exchange, the sale would have created a one-off profit of HK$2.457 billion ($316 million) for GCL, transforming its balance sheet by turning $13.125 billion of net liabilities into $1.195 billion of assets by selling off a wafer business that, in the first six months of year, offered margins of 16.1% compared to the 25.6% seen in the poly business.

With the sale off, GCL will also terminate a wafer supply deal which would have seen it supply up to $257.4 million worth of wafers next year, and up to $159.6 million worth in 2016, to Konca Solar, in return for Jiangsu Golden Concord assuming a 70.19% stake in Konca.