Shareholder dissent clouds boardroom appointments at GCL-Poly

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Shareholders passed all the resolutions tabled at the annual general meeting held by polysilicon manufacturer GCL-Poly today but the scale of opposition to some of the motions indicates not all stakeholders are happy to pursue an expand-at-all-costs strategy.

Dissenting voices at such affairs usually fail to register much more than 1% of the holders of company stock, but figures of around 16%, 12.5% and 9% were marked down in the ‘against’ column of an update published on the Hong Kong Stock Exchange this morning.

The most eye-catching vote saw the holders of 1,212,335,565 shares in the business – 15.98% of the stock – vote against the re-election of Zhu Yufeng as an executive director of the business. Zhu is closely associated with the power project development business GCL is rapidly winding down in order to finance its pursuit of becoming a pure manufacturer so it was not clear whether the sizable opposition to his reappointment was an affirmation of support to the expansionist strategy, or a howl of protest.

Holders of 12.45% of GCL stock opposed the re-appointment of Zheng Xiongjiu as an executive director and perhaps most notable was the thumbs-down registered by the holders of 9.05% of the shares to the re-appointment of GCL chairman Zhu Gongshan as executive director.

Shareholder unrest

With more than 9% of shareholders opposing the standard mandate giving the board the power to dilute stock and initiate share buybacks at GCL, a significant minority of stock holders appear to be unhappy with some of fundraising measures taken by company executives to pay down the mountain of debt accrued in expanding polysilicon and wafer production capacity.

Like its Tier 1 peers, GCL-Poly is rapidly ramping up its production capacity for polysilicon and wafers to grab market share during a global solar boom.

But with debts standing at RMB61.3 billion ($8.86 billion) a year ago, the manufacturer has since announced further big investments, including RMB1.35 billion in upgrading its polysilicon facilities in Xuzhou, contributing to a RMB4-5 billion fund in the city of Leshan and more recently jointly funding a RMB9.13 billion cashpile to raise its wafer production capacity in northern China.

That has meant various measures have been taken by the board to try and stay on top of mounting debts, including a nine-year, RMB600 million sale-and-leaseback deal related to one of its PV projects, the sell-off of a majority stake in a 19-project Chinese portfolio that amounts to 977 MW of capacity, and the sale of a majority stake in its GCL New Energy Holdings project development business to power company China Huaneng Group.

GCL’s board yesterday announced plans for an 8.24% dilution of company stock with a shares issue intended to raise HK$680 million (US$87 million) for debt repayment and it could be measures like that which stirred the opposition seen today to a renewal of the shares mandate routinely awarded to the boards of listed companies.