Xinyi bets on solar projects rather than the markets


Chinese solar project developer Xinyi Energy has put its money where its mouth is when it comes to the compelling business case of photovoltaics, and could invest up to HK$1.04 billion (US$134 million) in new projects, rather than on the money markets.

The developer, ultimately controlled by solar panel glassmaker Xinyi Solar Holdings, posted a first-half update in Hong Kong yesterday which stated its directors had not found bond or other financial market investments attractive enough during the first half of the year, so the company is set to bet on more project acquisitions instead.

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Xinyi Energy explained it still had the billion or so in the bank following a shares issuance in May 2019 which raised a net HK$3.76 billion (US$484 million). The company had spent HK$2.04 billion to help it acquire solar projects that year and used a further HK$386 million (US$49.6 million) for working capital and refinancing loans. By pv magazine‘s rough calculation, that would leave an unspent balance of HK$1.33 billion (US$171 million) or so, but Xinyi Energy put the figure at around HK$294 million (US$37.8 million) lower.

Regardless, the developer in August announced it may devote the entire cash pile to acquiring more projects and its latest update spells out why, with Xinyi Energy reporting the 340 MW of generation capacity it bought last year had added HK$91 million (US$11.7 million) to first-half returns of HK$1.11 billion (US$143 million), up 30% from the HK$853 million (US$110 million) revenue posted in the first six months of last year.

That added up to a net profit for the shareholders of HK$621 million (US$79.9 million), up 42%, year on year, from HK$438 million (US$56.3 million).

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Xinyi Energy acquired three solar farms with a total generation capacity of 250 MW from controlling shareholder Xinyi Solar in the second quarter and will add another three (270 MW) in the final three months of the year. With another 80 MW added from an unrelated party during the first half, and Xinyi Energy eyeing 100 MW of grid-parity, unsubsidized projects by year end, the developer says it will add at least 700 MW of PV projects this year.

Unlike rival Chinese developers, who have dutifully toed the policy line by extolling the ultimate race-to-net-zero benefits of projects developed without subsidy, Xinyi Energy put a more pragmatic spin on the move away from subsidy, explaining it will ensure no big mismatches in its accounts as the result of waiting for long overdue payments from Beijing.

The spending spree has had an effect on the bottom line, however, with Xinyi Energy's current bank borrowings rising from HK$1.2 billion, at the end of last year, to HK$1.38 billion six months later. Non current borrowings more than trebled, from HK$653 million to HK$2.12 billion, and cash fell from HK$1.36 billion at the end of December, to HK$803 million.

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