October 12 is a special historical moment for GCL New Energy (00451.HK). After two and a half years of arduous trek, it will complete a long march to repay 500 million US dollars in debt.

After the market on October 12, GCL New Energy announced that it would transfer all of its shares in its 583.86MW photovoltaic power plant to GCL Energy Technology (002015.SZ), an A-share listed company. The equity consideration for the entire project was approximately RMB 1,004 billion, with a total repayment of approximately RMB 1,602 billion.

According to the Zhitong Finance App, the total amount of this transaction is 583.86MW, with projects spread across 13 provinces, involving 36 target companies, including about 70MW for rooftop distributed projects, and the rest are ground photovoltaic projects. There are 13 transferors, all of which are 100% owned platform companies under GCL New Energy.

The transaction consideration of $1,004 billion is similar to the asset valuation of $1.08 billion issued by Cai Delliang, a third party valuation company, plus about 600 million yuan in transactions from related parties, so the total amount to be repaid is 1.6 billion yuan.

“The money obtained after the sale of the power plant will be used to return GCL New Energy's last US dollar bond project.” A person familiar with the matter close to GCL New Energy told the Zhitong Finance App that currently only the last debt of more than 77 million US dollars left for GCL New Energy has yet to be returned.

Due to delays in receiving the previous 9.2 billion yuan of state aid, GCL Renewable Energy proposed the “Bermuda Restructuring Plan” on December 23, 2020, which aims to restructure the 500 million US dollar debt due in 2021 and is 7.1% senior notes, which was finally passed by the Bermuda Supreme Court on June 11, 2021.

After the restructuring plan for 500 million US dollars of debt was successfully cleared, GCL New Energy accelerated its business transformation. It sold a total of about 6.5 GW of stock assets. The timely sale of existing assets relieved GCL New Energy's financial pressure caused by arrears in state aid payments, and also provided sufficient financial guarantees for enterprise transformation.

From January to October 2022, GCL Renewable Energy repaid 200 million US dollars of debt in three installments, and subsequently repaid more than 200 million US dollars of debt one after another. Today, the sale of power plant assets will be sufficient to cover the remaining payments of more than 77 million US dollars in US dollars. At the same time, GCL New Energy may pay off all of its 500 million US dollars of debt in 2023.

Note: GCL New Energy's balance sheet for the past 4 years

According to GCL New Energy's announcement, after signing an equity transfer agreement for the photovoltaic power plant with GCL Energy Technology, GCL Energy Technology first made a payment of 300 million yuan to GCL New Energy as goodwill money. This will speed up the repayment process of 77 million US dollars of debt.

It is worth noting that after the target company is announced, GCL New Energy will be able to reduce principal and interest expenses by nearly 310 million yuan. Financial reports show that in 2023H1, GCL New Energy's balance ratio was 47.46%, down 36 percentage points from the same period in 2019.

But this is not the key. What is most critical is the deep meaning behind the completion of this $500 million debt buyback, that is, GCL New Energy's cash flow may have improved rapidly, while laying the groundwork for future Ethiopia-Djibouti gas projects and laying the foundation for the operation of smart photovoltaics.

The announcement emphasized that in addition to repaying its debts, the money obtained from the sale of the power plant was also mainly used to support investments in natural gas, liquefied natural gas, operation and management services divisions.

After the debt time bomb was removed, a clear main line was about to come out: GCL Group may turn GCL New Energy into an important platform to undertake the company's natural gas business; from a technologically advanced photovoltaic power plant builder to become the world's leading photovoltaic power plant operation and maintenance service provider.

In fact, after the 583.86MW photovoltaic power generation project is announced, the company will focus on natural gas, photovoltaic power plant operation services, and technology services.

In the announcement, GCL Energy Technology and GCL agreed that with the exception of the 4 distributed projects under construction (a total of 20 MW), the remaining 32 parallel existing power stations (564 MW in total) will continue to be operated and maintained by New Energy Operation Technology Co., Ltd.

According to reports, the total operating and maintenance capacity of wind and wind storage currently operated by GCL New Energy is close to 8 GW. Relying on the “Internet of Things+Big Data” technology, GCL New Energy aims to become the most professional, most growing, and most competitive photovoltaic power plant operation and maintenance service provider, and aims to have an operation and maintenance scale greater than 20 GW by 2027, ranking first in the industry.

In terms of natural gas operations, with Zhu Gongshan, the founder of GCL Group, became the chairman of the board of GCL New Energy in September 2022, clearing the last-mile hurdle for the Ethiopia-Djibouti oil and gas project to be injected into GCL New Energy.

At the end of 2013, GCL Group officially launched the Ethiopia-Djibouti oil and gas project, which is currently the largest natural gas development project for a domestic non-“ three-barrel oil” company to “go overseas”. The project has resource reserves of 5 trillion cubic meters of natural gas and about 4 billion tons of crude oil. GCL has been exploring and developing the project for 45 years.

Now it seems that a clean company without much debt is the ideal vehicle for transforming the new energy business and injecting it into the Ethiopia-Djibouti gas project. This is probably the deep meaning behind GCL Group's three years of perseverance to complete repayment of 500 million US dollars of debt.

The market will wait for a new answer from GCL New Energy after completing the debt statement.