Zhitong Financial App News, Xiexin New Energy (00451) announced that on October 12, 2023, the first batch of sellers (all indirect subsidiaries of the company) intend to sell all the shares of the first batch of target companies (except Tongyu Xiexin) and about 88.58% of Tongyu Xiexin at a consideration of about 990 million yuan. The second batch of sellers, all indirect subsidiaries of the company, intend to sell all the shares of the second batch of target companies to Suzhou Industrial for a consideration of RMB 14.3159 million.
The net cash proceeds from these transactions (i.e. consideration of approximately RMB1.0044 billion, deferred receivables of RMB399 million and total net payables of approximately RMB199 million) are expected to be approximately RMB1.602 billion, which the Company intends to use to repay its debts and to support investments in natural gas, liquefied natural gas and operations and management services.
Upon completion of the sale, the target company will no longer be a subsidiary of the company and the profit and loss as well as assets and liabilities of the target company will no longer be consolidated in the group's consolidated financial statements. The group's liabilities will be reduced by about 2.591 billion yuan and the group's asset-liability ratio will be reduced by about 16%, thus effectively reducing financial risks.
It is reported that the first batch of target companies have 31 operating photovoltaic power stations in China, with a total grid-connected capacity of about 558 megawatts. The second batch of target companies have five operating photovoltaic power stations in China with a grid-connected capacity of about 25.86 megawatts.
The sale is the final step for the group to sell all its photovoltaic plants (except those in the United States), achieve its development goal of "transformation and upgrading" and transition to a light asset model, the announcement said. Photovoltaic power generation business is a capital-intensive industry, the construction of photovoltaic power stations needs to rely on external financing, and the recovery of capital investment takes a long time. In addition, electricity price subsidies (that is, government subsidies) account for more than 50% of the company's total revenue in each fiscal year. The long delay in the collection of electricity price subsidies has seriously affected the group's cash flow. In view of the fact that the target company is highly dependent on external financing to obtain investment funds for the development of new photovoltaic power plant projects and the operating cash flow of day-to-day operations, any change in interest rates will affect the capital expenses and financial expenses of the target company, thus affecting the operating performance of the group. In addition, there is a high degree of uncertainty about whether the target company can successfully renew its existing loans or obtain new capital in the current economic environment, which will increase the liquidity risk of the group. As a result, the company has transformed its business model into a light asset model, and the sale of all its photovoltaic power plants is an effective way to reduce debt and interest rate risk.
In addition to optimizing its financial structure under the light asset model, the Group seeks business development opportunities by providing operation, management and maintenance services, in particular to other photovoltaic power plant operators in China, including buyers of several photovoltaic power plant projects sold by the Group, thereby generating additional stable sources of income. At the same time, the Group can continue to reduce financial costs and liabilities by virtue of its strong development strength, scientific research capabilities and rich intelligent operation experience in the field of photovoltaic energy development and power operation.