- Chint Solar says it will divest 100% stake in its PV module production business that it operates as Chint New Energy
- Its decision is due to increasing raw material prices and supply chain difficulties being faced by the PV industry in the current environment
- Majority of Chint New Energy will be held by Chint’s largest shareholder Chint Group after the transaction is complete
China’s Chint Solar is divesting its 100% stake in the company’s solar PV cells and module production business operating as Chint New Energy to 13 companies, citing the impact of ‘violent fluctuation’ of upstream raw material prices in the PV industry on the business.
The divestment will occur for Chint New Energy’s business of 11 subsidiaries including Astronergy Solar USA, Chint Solar (Australia), Astronergy Solar Canada, among others. However, the majority stake will be held by the company’s largest shareholder Chint Group so the business will still remain in-house.
In a stock exchange announcement, the management pointed out at the skyrocketing costs of PV raw materials as silicon, glass and plastic films, and volatility of the business compounded by the sharp increase in difficulty of managing supply chain.
Of the transferred entities, there are companies whose gross profit margin has fluctuated between 3.8% to -7.3% for 4 consecutive years while for some gross margin experienced a sharp decline from 19% in 2019 to 0.7% in 2021.
In the absence of any guarantee of complete cost pass-through to the downstream and sensitive nature of upstream raw material prices, the company has decided to divest its stake which will enable it to reduce the disturbance caused by raw material prices and achieve profitability.
Informing its shareholders of the same, management said the decision was taken to maintain the certainty and stability of profitability of listed companies and reduce its R&D expenditure that’s needed in the PV industry to keep technology up to date.
For instance, as it explains, every 1 GW N-type module production capacity requires an estimated RMB 500 million investment, but with uncertainty related to the size of cell or cell technology between P-type and N-type, the expenditure needs to be carefully assessed.
Under new shareholders, the company can avoid risks related to technical investments. At the same time, Chint Solar can concentrate on its power plant development and low-voltage electrical appliances business, creating an industrial synergy, it further added.
All the transferred companies will continue to invest in component manufacturing after the acquisition is complete. The proposal has been approved by the company’s Board of Directors, and needs to be vetted by the 2021 Annual General Meeting to come into force.