China’s solar major GCL to get US$ 1 billion investment from Taiping Insurance coverage
Shares of GCL New Energy(GNE ), the solar farm unit of the world’s largest photovoltaic panel products producer GCL-Poly Energy, surged as much as 11.5 per cent after China Taiping Insurance coverage tentatively consented to buy a significant stake that will help relieve the business’s heavy debt load.
Under a non-legally binding “cooperation structure arrangement”, Taiping Financial Holdings, the “overseas extensive financial investment platform” of state-owned China Taiping Insurance coverage Group, would lead a HK$ 8 billion (US$ 1 billion) fund to make the purchase, according to GCL New Energy’s filing to Hong Kong’s bourse late on Monday.
The to-be-established fund will buy new GNE shares and bonds convertible into shares for a total of around HK$ 8 billion. China Taiping Insurance Group is also the controlling investor of Hong Kong-listed China Taiping Insurance Holdings.GNE shares closed the morning trading session at twelve noon 4.9 per cent greater at 64 HK cents, after altering hands at as high as 68 HK cents. The shares to be bought will represent less than a 30 per cent stake– the threshold above which the purchaser will have to make a mandatory offer to purchase all of the shares from GNE’s other owners. “The GNE directors are of the view that the possible membership represents an important opportunity for the GNE Group to generate a group of investors with strong monetary background, “the filing said. It also stated the membership might improve GNE’s liquidity position and boost its financial versatility essential for future company advancement. The shares’purchase price will be 10 per cent lower than the typical closing cost of GNE in
the previous 10 trading days preceding the framework contract. The bond-to-share conversion cost will be subject to further conversations. Taiping Financial will serve as the fund
‘s supervisor. The agreement was subject to due diligence on GNE, in addition to approval
by a bulk of GNE’s shareholders, the filing said. The GNE directors are of the view … an important opportunity for the GNE Group to bring in a group
of investors with strong financial background GNE is 62.28 per cent owned by GCL-Poly. UBS head of Asian utilities research Simon Powell said numerous pension funds and private equity companies had actually been investing into solar and wind farms, attracted by their long term stable money streams that match their responsibilities to customers. But in China, the lack of long term power purchase agreements, such as 25-year ones popular overseas, might be an obstacle, he noted.Daniel Yang, an equity expert covering China’s utilities and renewable resource sector, stated major arrears in aid payments and uncertainty of future state support policy were also barriers investors in the wind and solar sector face. Xu Yang, vice-president of GCL New Energy last month said the company was owed 4 billion yuan( HK$ 4.72 billion)of subsidies, on which no interest would be paid.The company has actually sought financing from renting firms to fund brand-new jobs. In the very first half, it made a net profit of 485 million yuan and incurred finance costs of 606 million yuan while its typical borrowing cost
was 6.8 percent.