A subsidiary of polysilicon giant and solar developer GCL Poly has revealed the ongoing transactions that enable money to circulate up and down the company via a complex system of subsidiaries and shareholdings.
With GCL-Poly Energy Holdings Ltd one of the Chinese polysilicon producers ‘maxing out’ its borrowings in a breakneck race for global market share, the business needs to sweat assets to raise funds for ever larger production equipment expansions.
The update made by GCL New Energy Holdings Limited – in which GCL Poly holds a 62.28% interest – to the Hong Kong stock exchange after trading hours today reveals a subsidiary of GCL New Energy has signed a three-year agreement to pay $500,000 per year to a subsidiary of its main shareholder, in return for management services related to GCL New Energy solar assets in South Africa and the U.S.
But the expense is far from bad news for GCL New Energy thanks to pre-existing commitments which ensure money flows in the opposite direction too. Just 11 days ago, GCL New Energy signed a deal for the provision of similar management services, which it will provide to an indirect subsidiary of GCL Poly, ensuring it will bank RMB405,000 ($58,600) during the next year. That deal related to a 5.9 MW solar plant in Wuhan city.
Furthermore, two one-year service agreements signed in September – and related to the two phases of a 40 MW PV project in Jinzhai county – are already earning GCL New Energy RMB3 million from another major shareholder: GCL System Integration, which has a 10.01% stake in GCL New Energy. Those deals were also, of course, arranged through a GCL System subsidiary.
Based on today’s renminbi-dollar exchange rate, the four agreements mean GCL New Energy will be only $6,936 (and 22 cents) out of pocket after paying out for the services agreed this evening – for the first year of its three-year arrangement at least. Plus, several business entities linked to the GCL brand will be booking regular income. Quite what independent shareholders will make of it all is another question entirely.