GCL-Poly to buy solar assets for HK$26.4bn
GCL-Poly Energy, a Hong Kong-listed power plant operator, has agreed to acquire its chairman’s polysilicon business in China in a HK$26.4bn ($3.4bn) deal.
The group said it would buy Jiangsu Zhongneng, a manufacturer of upstream raw materials for solar cell production, from Zhu Gongshan, its chairman and controlling shareholder.
The deal is a big bet on the solar industry in China, a market on which solar cell makers from all over the world have set hopes but which is suffering from overcapacity and price drops, especially in the upstream segment Jiangsu Zhongneng is focused on.
To fund the purchase, GCL-Poly will issue 10bn new shares at HK$2.2 each, representing a 12 per cent discount to the company’s last closing price. It will also issue $350m in secured notes and pay Mr Zhu $200m in cash.
The deal will raise Mr Zhu’s stake in GCL-Poly from 34.47 per cent to 56.17 per cent. Morgan Stanley, currently the second largest shareholder, will see its holding drop from 15.72 per cent to 1.45 per cent.
Morgan Stanley declined to comment on the deal.
Mr Zhu said the acquisition would allow GCL-Poly, whose shares rose more than 20 per cent on Tuesday, to build large-scale solar power plants. “We expect the PRC government to initiate more incentives or subsidy programmes to encourage the adoption of solar power going forward. China’s government aims to more than double the share of renewables to 15 per cent by 2020,” he said.
In March, China’s ministry of finance announced a subsidy programme whereby the government offers to pay up to Rmb20 ($3) per watt of solar rooftop systems with a peak capacity of more than 50 kW. In addition, the government is working on proposals to subsidise solar power – a measure that in other markets has helped to drive up solar equipment installation rates. But only one project has been approved under the rooftop subsidy programme so far.
Dozens of facilities for polysilicon production all over China, started over the past two years, lie idle or have been postponed since the price of the upstream feedstock has plummeted from close to $500 per kilogram at its peak in 2008 to about $70 now.
Some Chinese media reported this year that Jiangsu Zhongneng was considering an overseas listing to raise capital for its ongoing capacity expansion, but nothing came of the plans.
The company produced 1,094 metric tons of polysilicon in the first quarter of this year. By the end of next year, its annual capacity is expected to soar to 21,000 metric tons, Mr Zhu said.
