Covid-19 hampering the survival prospects of private solar developers in China

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While China’s big solar manufacturers have been largely dismissive of the affects of the Covid-19 coronavirus on business, project company SFCE has highlighted the existential threat the pandemic poses to developers, particularly non-state actors.

The Hong Kong-listed company, formerly known as Shunfeng International, is desperately negotiating with a bevy of creditors as it continues to conduct a fire sale of PV projects which has been hampered by the measures imposed to halt the spread of the coronavirus.

SFCE in November announced the sale of 11 Chinese solar projects that would generate RMB1.63 billion (US$230 million) for the heavily indebted company. That sale, to the Zhonghe Shandong Energy Co Ltd business which is related to state controlled China National Nuclear Power Co Ltd, was originally said to involve the disposal of 540 MW of the 1,496 MW total generation capacity owned by SFCE at the time. An update on the sale made by SFCE at the end of March stated the total capacity concerned was 490 MW, however.

Complication

To date, SFCE has managed to push through the sale of only six of the 11 solar power companies because the remainder are in the Xinjiang Uygur Autonomous Province and their transfer has been held up by Covid-19 lockdown measures.

On March 18, SFCE announced the planned sale of another six of its Chinese project companies which amounted to the sale of a further 140 MW of generation capacity. That deal, which SFCE said would generate RMB469 million despite amounting to a book loss of RMB267 million on the estimated project value, would see the facilities bought by Zhejiang Chint Electrics Co Ltd but requires SFCE shareholder approval. Details for the shareholder vote were due to be released by Friday but have now been pushed back to June 5.

Perusal of the list of creditors SFCE is negotiating with illustrates the bind the company is in.

JIC Trust Co Ltd has been owed RMB490 million since August and won an order from the People’s High Court of Zhejiang that SFCE settle the amount and pay interest of RMB97 million plus penalty interest of RMB37 million. SFCE says the money owed relates to one of its project companies which is due to be transferred to the creditor to settle the issue, without specifying which project company or how much generation capacity was concerned.

Creditors

Donghai Securities Co Ltd has been owed RMB550 million since March 31 last year, along with 17 bond holders who are claiming HK$550 million (US$71 million). True Bold Global Ltd was due HK$190 million since March 31, and then December 31 last year and Sino Alliance Capital Ltd HK$1.3 billion since the end of the year. China Minsheng Bank Corp Ltd’s Hong Kong branch has also been owed HK$320 million since the end of the year.

Chongqing International Trust Co Ltd has agreed to postpone payment of RMB666 million it has been owed since January and March last year until September 30 this year but SFCE is currently due to pay China Minsheng a further HK$280 million by July 15 and then HK$380 million by December 18.

Further convertible bond (CB) claimants were outlined in the unaudited annual figures for last year published at the end of March. They amount to the holders of RMB296 million of a CB issued in 2016 which was, at that point, due for settlement by April 25 and appears to remain unsettled according to subsequent updates. The holders of the company’s fourth CB issue, which is also overdue, are owed HK$545 million.

Debt mountain

By pv magazine’s calculations, that leaves SFCE on the hook for around US$761 million by the end of the year, only US$88 million of which appears due for settlement in connection with JIC Trust.

Small wonder SFCE, which replaced chairman Zhang Fubo with CEO Wang Yu in definace of corporate governance guidelines this year, speaks of Covid-19 “wreaking havoc in respect of the worldwide community” and restricting the number of buyers as it scrambles to sell off assets to keep its creditors happy.