The forced sale of nine solar projects developed by Shunfeng International, with a total generation capacity of 180 MW, is set to remove the heavily-indebted company's biggest overdue debt, albeit at a book loss of RMB651 million (US$102 million).
Shunfeng had agreed to sell the projects to Chongqing Future Investment Co Ltd on December 16, 2015, just 11 days after opening a line of credit with Chongqing worth up to RMB1.5 billion (US$236 million).
On the day the sale agreement was signed, Shunfeng drew down an initial RMB700 million in loans from Chongqing and used RMB294 million (US$46.2 million) to pay itself and other creditors sums owed to them by the project companies which were set to transferred. Five days later, Shunfeng repaid RMB200 million (US$31.4 million) back to the lender.
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When the proposed solar project sale fell through, the parties signed a termination agreement, on June 21, 2016, which committed Chongqing to transferring the shares in the projects back to Shunfeng upon receipt of RMB650 million from the latter, plus a further sum stipulated by the terms of the walkaway deal.
Shunfeng subsequently devoted RMB400 million of the RMB700 million (US$110 million) it had initially drawn down from Chongqing towards the RMB650 million it had to hand over after the deal collapsed, but the cash-strapped developer told the Hong Kong Stock Exchange today, RMB33.5 million (US$5.26 million) of that return fee remains to be settled.
On September 25, 2017, Chongqing and Shunfeng subsidiary Shanghai Shunneng agreed that the stock in the holding company of the solar projects, plus five of the nine project companies themselves, be pledged to Chongqing to guarantee Shunfeng honor its debts to the latter.
With that arrangement in place, Shunfeng borrowed a further RMB750 million from Chongqing four days later, and immediately used RMB500 million (US$78.5 million) of it to settle principal and interest owed from the previous loan.
On September 30 last year, the monies owed by the solar developer to Chongqing – amounting to RMB666 million (US$105 million) – became overdue. The solution settled upon by Chongqing, it was announced yesterday, is to force the sale of all nine solar project companies to Xinjiang Silu Qianyuan Energy Co Ltd in a cash and stock deal worth RMB1.1 billion (US$173 million), with cash making up RMB686 million of the purchase price.
That is around RMB651 million less than the book value of the projects but would remove liabilities of RMB990 million (US$155 million) from Shunfeng's books. The value of the deal will also leave a cash surplus of RMB356 million (US$55.9 million) over and above what Shunfeng owes Chongqing.
The RMB666 million owed by Shunfeng to Chongqing is similar to the HK$800 million (US$103 million) it has owed Sino Alliance since the end of last year. The last statement of Shunfeng's borrowings issued indicated the developer has owed HK$172 million (US$22 million) to True Bold Global Ltd since November 2019; HK$351 million (US$45 million), also to Sino Alliance, since the end of 2019; and RMB330 million to investors in a 2015 corporate bond, since March last year. The company missed a deadline, on October 25, to repay RMB255 million (US$40 million) owed to backers of a 2016 corporate bond, and the deadline for settlement of HK$175 million owed to Rainbow Fort Investments was due to expire two days ago.
The company – which is hoping to sell off seven different solar projects, with a generation capacity of 283 MW – also has to find HK$300 million (US$38.5 million) for China Minsheng Banking Corp by the end of the year.
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