The torrid financial position facing Chinese solar project developers has again been emphasized in an update released today by Hong Kong-listed SFCE.
Shareholders in the former Shunfeng International business will gather on July 2 to decide whether to approve a desperately needed sale of 140 MW of project capacity in Xinjiang as creditors gather.
The proposed sale of the six solar project businesses in question would generate a sale price of RMB181 million (US$25.5 million) plus settlement of RMB288 million the project companies owe to parent SFCE, according to the board of the selling company.
However, an extraordinary passage of today’s lengthy circular admits SFCE will be entirely dependent on the goodwill of project buyer Zhejiang Zhengtai New Energy Development Co Ltd when it comes to the project payables which make up the lion’s share of the anticipated windfall. SFCE said it had been unable to insist on the right to cancel the project sales in the event of the RMB288 million of project payables not being handed over by the project companies being sold or the buyer, which is a subsidiary of Zhejiang Chint Electrics.
No bargaining chips
SFCE said it was negotiating with one hand behind its back because of a desperate need to immediately raise cash – with project sales the only way of doing so – and because there were no other potential buyers of the Xinjiang facilities.
The company also revealed it has been in talks with a potential buyer of a further 180 MW of its remaining 868 MW portfolio, with the unnamed buyer having already carried out due diligence on the nine projects in question.
SFCE again pointed to two years’ worth of overdue subsidies for a financial bind which saw it report a RMB8.56 billion (US$1.2 billion) net cash shortfall last year. Attempts to pay off short-term creditors were further delayed by Covid-19 restrictions which delayed the completion of six of a planned 11 project sales agreed last year.
In a reminder of the creditors circling, SFCE said it has been trying since early February to extend until the end of this month the settlement of HK$500 million (US$64.5 million) it owes Sino Alliance, HK$200 million owed to China Minsheng Banking Corp Ltd, HK$190 million owed to True Bold Global Ltd and HK$545 million owed to 17 bondholders. The company hopes to settle those debts out of the delayed payment for the coronavirus-affected sales agreed last year.
SFCE has thus far been unable to extend the payment date for HK$120 million it has owed China Minsheng since the end of last year and a further HK$280 million will fall due to the same creditor by July 15. Some RMB666 million is due for settlement with Chongqing International Trust by September 30 and the holders of a RMB275 million convertible bond (CB) have agreed to hold off until last year’s sales are completed or October 25, whichever is earliest. Holders of a 2015 CB worth RMB550 million have agreed to be patient until the settlement of the 2019 project sales and the latest transaction. China Minsheng will be due another HK$380 million by December 18 and Sino Alliance HK$800 million by the end of the year. SFCE has at least persuaded JIC Trust Co Ltd to hold off until it can settle the RMB490 million owed it through further planned project sales.
The heavily indebted solar developer has said it will settle RMB250 million of its more pressing debts if shareholders wave through its proposed 140 MW Xinjiang sale next month, as RMB150 million is needed for engineering and equipment payables for its remaining project assets, RMB40 million for operations and maintenance costs and RMB29 million for the costs associated with the sale.
That, of course, will depend on those unsecured project payables arriving and it is perhaps not surprising the SFCE board confirmed it has no plans to develop any new project capacity in the financial year ahead.
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