If a year-on-year doubling of profits for Chinese thin film production equipment maker Hanergy Solar failed to stir investors this week, the company's interim figures will have made interesting reading for EU anti subsidy investigators.
Investors who delved into the 74-page unaudited figures for the first six months of the year will have noted a net profit figure of HK$1.44 billion (US$186 million, up from HK$772 million for January-July 2012) masked the fact majority shareholder Hanergy Group and its subsidiaries were Hanergy Solar's main breadwinner.
In fact in the trade receivables section of the figures, it is revealed contracts with Hanergy Holding Group Ltd and affiliates account for all of the HK$5.76 billion gross figure due to Hanergy Solar from customers for contract works and the net figure for account receivables.
A footnote to the figures goes on to state Hanergy Group which upped its shareholding in Hanergy Solar from 20.28 per cent to 50.65 per cent on February 27 and further again in June was overdue by HK$3.7 billion on June 30, repaying HK$1.03 billion of that since August 28.
The fact Hanergy Group has agreed to settle the remaining HK$2.7 billion or so by September 30 will do little to dissuade investors Hanergy Solar needs a more diverse customer base for its thin film manufacturing equipment.
Details of Chinese state support
Of more interest to EU-China anti subsidy case watchers will be various statements in the report about state support for solar in the People's Republic (PRC).
The figures reveal Bermuda-registered Hanergy Solar banked government grants of HK$32 million in the first half, having not received any for the same period of 2012 and that it was among certain ‘high and new technology enterprises' which will benefit from a preferential income tax rate of 15 per cent.
Referring to state council guidelines on encouraging a healthy solar industry, the Hanergy Solar report adds: ‘Tax breaks will be offered to solar companies that acquire others, merge or reorganize their operations to improve performance. In addition the PRC government has encouraged financial institutions to provide credit support to solar PV companies with profitable orders, advanced technology, independent intellectual property rights and large development potential, before going on to speculate about possible VAT reductions for the solar industry.
Hanergy Solar admits it is placing all its eggs in one basket in relation to Hanergy Group, adding: ‘During the past six months the Group (Hanergy Solar) has significantly increased its delivery of turnkey production lines to Hanergy Group which has resulted in the superior 1H 2013 financial performance'.
Hanergy Solar points out the EU-China anti dumping trade deal which set a minimum price for solar wafers, cells and modules does not apply to thin film products and thus represents ‘a wide window of opportunity for thin film players to take advantage of the market opening and expand their market share in the global solar market.'
The report also speculates Hanergy Solar-manufactured module customers ie Hanergy Group are likely to survive consolidation in the industry because of the company's emphasis on high efficiency products.
And Hanergy Solar announced its intent to diversify half of the business into downstream projects through a new Hanergy Global Solar Power and Applications Group focusing on solar projects, building integrated (BIPV) and building attached PV (BAPV) and applications such as solar appliances.
As part of the planned diversification, Hanergy signed a 105 MW U.S. project on July 31 although a planned 4.4 MW scheme in Portugal fell through over price negotiations.
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