Sale of controlling stake in China’s largest poly maker falls through

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A brief, two-page statement issued to the Hong Kong Stock Exchange an hour ago is all that was required to signal the collapse of Shanghai Electric’s deal to take a controlling stake in China’s largest polysilicon maker – and perhaps to fire the starting gun on a painful round of consolidations across the nation’s solar industry.

In a statement to the exchange issued at 2.22pm CET, GCL-Poly Energy Holdings Ltd – parent company of Chinese poly making subsidiary Jiangsu Zhongneng – announced the proposed CNY12.75 billion ($1.86bn) agreement had fallen through because “both parties believe that the timing and conditions for proceeding on the potential disposal [by GCL-Poly] are not mature enough”.

With the Beijing authorities having unexpectedly called time on solar incentives at the end of May, quite when a Chinese solar manufacturing market set to be lashed by huge overcapacity will be ‘mature enough’ again is anybody’s guess.

Electrical equipment manufacturer Shanghai Electric had announced plans to a acquire a 51% stake in Jiangsu Zhongneng two months ago, with the poly maker at that point valued at CNY25 billion.

With no reason to anticipate anything other than a repeat of last year’s solar boom in China at that point, the purchaser was set to enter the solar marketplace in a big way by taking over a company that couldn’t produce polysilicon quickly enough to satisfy the domestic market.

After the abrupt policy turnaround in May, however, Jiangsu Zhongneng – which had announced plans to raise CNY300 million with an asset sale of its own last November in order to finance a new 40,000-60,000 MT polysilicon fab in the Xinjiang region – now probably looks like rather more of a gamble in a market set to be saturated by polysilicon just as global demand wanes.

The bullish nature of the solar materials market before May was also demonstrated by GCL-Poly’s plans for a separate 20,000 MT polysilicon manufacturing unit in Xinjiang.

There are plenty of other big players throughout the Chinese solar industry that will eye today’s announcement with trepidation.