http://www.ft.com/cms/s/0/6c74497e-a62a-11e4-abe9-00144feab7de.html#axzz3Q6CrsAO7

Earlier postings:

(1) A little-known Hong Kong-listed firm has come out of nowhere to become the world’s largest solar-power company by market value. A tight relationship with its parent company should give investors reason to worry whether its time in the sun will last (Link)

(2) Short sellers feel the heat from Chinese solar group Hanergy (Link)

(3) The Convoy Financial-Finsoft-Hanergy connection and aggressive accounting (Link)

Last updated: January 28, 2015 7:29 am

Breakneck growth of Hanergy raises questions

Miles Johnson in London and Lucy Hornby in Beijing

Li Hejun, founder and owner of Hanergy, is China’s fifth-richest man

It is a Chinese company that promises to revolutionise the way solar power is used and to become the Apple of green energy. The breakneck growth of Hanergy Group, the world’s largest solar company by market value, has helped to make its founder China’s fifth richest man. Shares in its $18bn Hong Kong-listed subsidiary, Hanergy Thin Film Power Group, have risen more than 300 per cent since the start of 2014. Hanergy is building factories across China and has snapped up four overseas developers of thin-film technology — a still evolving application — since 2009. Founder Li Hejun has told investors that Hanergy Group is destined to become the industry leader although, as yet, only a 10th of the world’s solar production is of this thinner, lighter technology because costs are higher than for other panels.

The Financial Times, in analysing recent financial statements of the company, has found some unconventional practices behind Hanergy Group’s soaring fortunes. It has been racking up enviable revenues largely through sales between its listed subsidiary, HTF, and itself. While many of its rivals have struggled to remain profitable, HTF, which sells equipment used to make solar panels, has reported net profit margins of over 50 per cent.

It is now worth more than three times as much as its largest competitor, the US thin film solar panel company First Solar. In China, HTF is worth more than all other listed China solar companies combined. Its shares rose 10 per cent in intraday trade on Tuesday alone. On Wednesday, its shares fell as much as 5.1 per cent before recovering slightly to trade down 3.2 per cent at HK$3.61.

Documents reviewed by the Financial Times show that much of the growth comes from within. Nearly all of HTF’s HK$14.8bn in reported revenue since 2010 has been from sales of equipment to its parent, Hanergy Group, which controls 73 per cent of its shares. Its 2013 annual report — the company’s most recent full-year accounts — shows that only 35 per cent of these contracts have been settled, with the balance held as receivables.

Read more: http://www.ft.com/cms/s/0/6c74497e-a62a-11e4-abe9-00144feab7de.html#axzz3Q6CrsAO7