On January 21, Shanghai Electric Group Company Limited(601727) announced that Chongqing Shenhua film Cecep Solar Energy Co.Ltd(000591) Technology Co., Ltd. (hereinafter referred to as Chongqing Shenhua), a joint-stock enterprise with 20% equity, had accrued an asset impairment of about 1.4 billion yuan, which would lead to the insolvency of Chongqing Shenhua.
The reporter of the daily economic news noted that by the end of the third quarter of 2021, Shanghai Electric Group Company Limited(601727) had a long-term equity investment balance of about 232 million yuan in Chongqing Shenhua. In Shanghai Electric Group Company Limited(601727) , the investment loss will be fully recognized, which will also reduce the net profit of Shanghai Electric Group Company Limited(601727) 2021 by 232 million yuan.
In addition, Shanghai Electric Group Company Limited(601727) also guarantees the debt of Chongqing Shenhua. Shanghai Electric Group Company Limited(601727) indicates that the corresponding maximum risk exposure is no more than 300 million yuan.
Chongqing Shenhua insolvent
At the end of 2016, Shanghai Electric Group Company Limited(601727) announced that it had reached strategic cooperation with Shenhua Group and other companies on “copper indium gallium selenium technology”.
Chongqing Shenhua is one of the achievements of this strategic cooperation. According to the announcement of Shanghai Electric Group Company Limited(601727) , “copper indium gallium selenium technology” is a Cecep Solar Energy Co.Ltd(000591) battery technology that uses the chemical substances Cu (copper), in (indium), GA (gallium) and Se (selenium) to form an absorption layer on the substrate through co evaporation process. The main purpose of Chongqing Shenhua is to explore the application of this technology in the photovoltaic field.
At that time, in addition to Shanghai Electric Group Company Limited(601727) , the companies that funded the establishment of Chongqing Shenhua also included China energy conservation and emission reduction Co., Ltd. under Shenhua Group, a listed company under China energy conservation and emission reduction Co., Ltd. Shenzhen Laibao High-Tech Co.Ltd(002106) and Beijing low-carbon Clean Energy Research Institute under Shenhua Group
Image Source: Shanghai Electric Group Company Limited(601727) announcement screenshot
Up to now, the top three shareholders of Chongqing Shenhua are China energy conservation and emission reduction Co., Ltd., Shanghai Electric Group Company Limited(601727) and Shenzhen Laibao High-Tech Co.Ltd(002106) , holding 54%, 20% and 10% equity of Chongqing Shenhua respectively.
According to the Shanghai Electric Group Company Limited(601727) announcement, Chongqing Shenhua was established based on the industrialization project of copper indium gallium selenium Cecep Solar Energy Co.Ltd(000591) battery modules. However, the competitiveness of products using copper indium gallium selenium technology decreased due to changes in the photovoltaic industry. Therefore, Chongqing Shenhua decided to postpone the construction of the project and has not been put into operation so far.
On January 21 this year, Chongqing Shenhua held a meeting of the board of directors, deliberated and adopted the proposal on the provision for asset impairment, with an amount of about 1.42 billion yuan, which will change the owner’s equity of Chongqing Shenhua to about – 260 million yuan.
In response to the impact of Chongqing Shenhua, Shanghai Electric Group Company Limited(601727) said in its announcement: “according to the calculation of the company’s financial department, because Chongqing Shenhua will be insolvent after the provision for asset impairment, the company expects to recognize the investment loss of RMB 232 million for the long-term equity investment of Chongqing Shenhua, which is expected to reduce the company’s net profit to the parent in 2021 by RMB 232 million.”
In addition, it is worth noting that as of January 21, Shanghai Electric Group Company Limited(601727) has provided about 179 million yuan of guarantee for commercial bank loans of Chongqing Shenhua. Shanghai Electric Group Company Limited(601727) said: “if Chongqing Shenhua fails to repay relevant debts on time, the company needs to bear joint and several guarantee liabilities, and the corresponding maximum risk exposure is not more than RMB 300 million principal.”
thin film photovoltaic failure
According to Shanghai Electric Group Company Limited(601727) announcement, as of the end of the third quarter of last year, Chongqing Shenhua had total assets of about 2.23 billion yuan, total liabilities of about 1.07 billion yuan and total owner’s equity of about 1.16 billion yuan.
Among the assets of Chongqing Shenhua, the largest balance is the construction in progress, with a total of about 1.87 billion yuan. At present, the appraisal opinion given by the asset appraisal institution of Chongqing Shenhua is “the impairment of construction in progress is about 1.34 billion yuan”.
In other words, in the five years since 2017, Chongqing Shenhua’s projects under construction have been “scrapped” before they have been put into operation
summary of assets appraisal and consultation results of Chongqing Shenhua (base date: September 30, 2021)
Image Source: Shanghai Electric Group Company Limited(601727) announcement screenshot
As for the Central Plains Commission, Shanghai Electric Group Company Limited(601727) quoted the proposal of the board meeting of Chongqing Shenhua as saying that at present, crystalline silicon products are mainly used in the photovoltaic module market. After nearly 20 years of industrial development, crystalline silicon photovoltaic modules have matured the industrial chain through efficiency improvement, technological innovation and market scale development, and the cost has decreased rapidly. Copper indium gallium selenium thin film photovoltaic products, The R & D force is weak, the improvement of product transformation efficiency is slow, and the industrial chain is not mature. If the project is put into operation, Chongqing Shenhua will have upside down revenue and cost, resulting in large losses.
“At the same time, the advantages of copper indium gallium selenium battery are safety and beauty. Its products have unique advantages in the application of building curtain wall. However, this market segment is subject to the complexity of the construction industry and the constraints of current specifications, and it is impossible to have large-scale explosive growth in the short term.” According to the proposal of the board meeting of Chongqing Shenhua.
The reporter of the daily economic news noted that the explanation given by Shenzhen Laibao High-Tech Co.Ltd(002106) for the asset impairment of Chongqing Shenhua is basically consistent with Shanghai Electric Group Company Limited(601727) .
However, the asset classification of Chongqing Shenhua by Shenzhen Laibao High-Tech Co.Ltd(002106) is different from that of Shanghai Electric Group Company Limited(601727) . Shenzhen Laibao High-Tech Co.Ltd(002106) designated the equity investment in Chongqing Shenhua as “non tradable equity instrument investment measured at fair value and its changes included in other comprehensive income”. As of the end of last year, the book value of this asset in Shenzhen Laibao High-Tech Co.Ltd(002106) was about 125 million yuan.
Due to the differences in asset classification, the impairment of Chongqing Shenhua will not affect the net profit of Shenzhen Laibao High-Tech Co.Ltd(002106) 2021, but will reduce the total assets and owner’s equity of Shenzhen Laibao High-Tech Co.Ltd(002106) by about 125 million yuan.
