GCL Poly realizes swift $166m profit in Xuzhou to pay down debt


GCL-Poly has been on the fundraising trail again, this time with plans to sell its stake in polysilicon products manufacturer and seller Xinjiang GCL.

Predictably, with GCL, it is not a straightforward affair but, provided shareholders wave through the move at an extraordinary general meeting, it will generate a tidy expected profit of RMB1.14 billion ($166 million), with a fair slice of that coming from the public coffers.

The sale of the 31.5% stake of Xinjiang GCL New Energy Materials Technology Co Ltd held by GCL-Poly Energy Holdings Ltd indirect, non-wholly owned subsidiary Jiangsu Zhongneng Polysilicon Technology Development Co Ltd is related to the establishment of a fund to boost the clean energy credentials of the city of Xuzhou in April.

At that point, GCL’s Jiangsu Zhongneng announced it was contributing RMB1.35 billion towards a RMB3.35 billion fund to “promote the industrial transformation and upgrading of Jiangsu Zhongneng and the competitiveness of Xuzhou enterprises in the photovoltaic and other clean energy industries”.

GCL unit profits on investment

It was made clear at the time, the fund that was being 40% financed with Jiangsu Zhongneng cash would be permitted to invest money back into that GCL subsidiary as well as helping finance an “intelligent slicing” project being carried out by GCL-Poly Energy Holdings.

It appears the investment is already paying dividends for Jiangsu Zhongneng with the proposed stake sale – which would dispose of Xinjiang GCL as a GCL-Poly subsidiary – set to raise RMB2.5 billion, representing a gain of RMB1.15 billion for the investor.

Inevitably, given the scale of debt being accumulated by GCL-Poly as it continues to frenetically ramp up polysilicon production capacity, the windfall will be used for “repayment of debts and normal operation”, according to a filing made yesterday by the Hong Kong-listed parent.

Interestingly, with pv magazine having named state-owned entities Xuzhou City Guidance Fund and Xuzhou Economic and Technological Development Zone Jinlong Lake City Investment Co Ltd as two of the four non-Jiangsu Zhongneng investors in the Xuzhou fund in April, yesterday’s update mentioned, as general partners in the deal, Jiangsu Zhongke Yishang Investment Management Co Ltd and Shanghai Zhongping Guohao Asset Management Co Ltd.

Further state support

GCL also revealed, in a separate Hong Kong filing today, there is a significant element of state cash involved in its proposed sale of 19 PV projects in China with a combined power generation capacity of 977 MW.

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GCL-Poly Energy Holdings wants shareholders to approve a sale of 70% of the company’s stake in seven PV project companies in China at an extraordinary general meeting in Hong Kong on July 17.

The board says the stake sale should generate another RMB2 billion to help pay down debt. The holding would be sold to Shanghai Rongyao New Energy Company Ltd and its financing partner Tibet Yunshang Investment Fund Management Co Ltd, which GCL hopes will go on to use some of a purported RMB6 billion warchest to acquire further Chinese PV assets.

Today’s filing indicated the GCL stake sale would require Beijing’s approval as the state-owned Yunnan Energy Investment Group Co Ltd contributed RMB2.94 billion of those Tibet Yunshang funds.

Xinyi Glass issues strong rebuttal

As investors continue to focus on the levels of debt being accumulated by Chinese manufacturers, Wuhu-based Xinyi Glass yesterday felt the need to issue a string rebuttal of claims made about its funding of dividends in a report published by GMT Research.

The Hong Kong based accounting research firm highlighted the recent stake sale in solar glass business Xinyi Solar as symptomatic of an approach to funding Xinyi Glass dividends from offshore – ie non-Chinese mainland – asset sales and borrowings, rather than by using remittances from its business in China.

The Xinyi Glass board yesterday dismissed what it described as “baseless accusations” in a report it said contained “misleading and inaccurate assertions”.

The board stated the company’s non-Chinese operations, including in Hong Kong, were enough to fund dividends without dipping into its Chinese profits, however it did add its “available banking facilities” were a supplementary source of income for dividend purposes.

“All members of the board vigorously deny the conclusions in the report,” added the filing.

This story was amended on 27/06/19 to include details of GCL’s proposed stake sale in 977 MW of PV projects in China.

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