Net profits of Hanergy Thin Film Power Group (HK$)
Move reflects shortage of cash, change in firm's strategic vision: analysts
Hanergy Holding Group plans to sell its stake in its prized hydroelectric power plant assets, on condition that the buyer also purchase part of its stake in its beleaguered Hong Kong-listed subsidiary Hanergy Thin Film Power Group, a move intended to ease pressure on cash flow, Shanghai-based news portal thepaper.cn reported Saturday.
A large State-owned enterprise is in talks with Hanergy Holding Group, and the buyer will have to purchase a 15 percent stake in a bundled sale if it acquires Hanergy Holding Group's hydropower plant assets, thepaper.cn reported, citing unidentified sources.
Hanergy has kept its hydropower assets unlisted.
An employee at Hanergy's PR department told the Global Times Sunday that he needed to verify the contents of the report with the company's senior management on Monday.
Experts said the move, if confirmed, would show that Hanergy is facing a shortage of cash and it may be considering a change in its thin-film business.
Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, said the hydro-power assets are Hanergy's best assets and they are scarce items on the market.
"Although hydropower plants can generate cash flow on a constant basis, selling part of its assets will allow the company to raise a much larger sum of money in a very short time," Lin told the Global Times Sunday.
Wu Chenhui, an independent analyst who follows the new energy sector, told the Global Times Sunday that hydropower assets are classified as clean energy, so they are enticing to investors. The reported bundled sale requirement shows that the parent company is very keen on involving more investors.
Hanergy's valuation peaked at $48 billion in March, making Li Hejun, chairman of Hanergy Holding Group, one of the richest men in the Chinese mainland.
Its troubles began when the China Business News published reports in April raising questions about its reliance on connected transactions between its parent company and subsidiaries.
Hanergy's share price plummeted by nearly half in less than one hour on May 20. The Hong Kong securities regulator subsequently suspended the trading of its shares amid a probe into the plunge. The shares have since been removed from relevant international indices.
Hanergy shares are still suspended amid the ongoing probe in Hong Kong. The company has meanwhile faced several setbacks.
Hanergy's partnership with Sweden-based furniture giant IKEA Group, in which Hanergy would install rooftop solar panels for IKEA, had ended on November 1.
The completion date of a share subscription deal signed between Hanergy and conglomerate Macrolink Holding Co was postponed from October 31 this year to April 30, 2016, Hanergy said on November 2.
Hanergy and Inner Mongolia Manshi Investment Group Co waived a March 30 deal under which the latter was to subscribe between 110 million and 1.1 billion shares at HK$5.38 ($0.69) each, after the latter failed to reach a pre-discussed condition related to equipment sales, according to a company statement filed to the Hong Kong bourse on December 2.
A similar deal, under which Baota Petrochemical Group Co was to subscribe between 300 million and 3 billion Hanergy shares at HK$5.38 each, was also waived for the same reason.
The two deals could have raised a combined HK$22 billion at their upper range for Hanergy.
The failure of these deals showed investors' declining confidence in Hanergy's growth, Lin said.
Hanergy may have expanded too rapidly and out of sync with market demand, Lin said.
"Thin-film power units lack market recognition and the [related-party] transactions … meaning the companies did not make much money out of it," Wu said. "For investors, it is vital to consider whether the price they pay is worth the money."
In 1994, Li spent about 10 million yuan ($1.56 million at current exchange rates) on a small hydropower plant with an installed capacity of 1,500 kilowatts in Heyuan, South China's Guangdong Province.
Since then, Li's hydropower assets expanded to include many more such facilities across China.
