The financials of tycoon Li Hejun’s Hanergy remains a mystery
Saturday, 28 March, 2015, 4:03am
Eric Ng eric.mpng@scmp.com
Analysts raise doubts over Hanergy’s dubious deals and shaky numbers amid a rally in the stock
It is the brightest spark in the solar industry, but Hanergy Holding Group’s dubious deals and shaky numbers are casting a shadow over its runaway success. The company is behind listed Hanergy Thin Film Power Group (Hanergy TFP), the world’s biggest solar company by market value whose rocketing share price and trading volume pivot on the parent’s giant hydropower project. The shares of this project have been pledged to support the company’s foray into the risky thin-film solar power business.
But it is not entirely clear how unlisted Hanergy, set up in 1994 as a small hydropower plant investor, booked 10 billion yuan (HK$12.6 billion) of sales and 1.77 billion yuan in net profit in 2013, but only 2.72 billion yuan of sales and 674 million yuan in net profit from the Jinanqiao hydro project – its mainstay. The figures are listed in an online sales document issued last month on a trust investment product sold through China Minsheng Trust.
“I’m not sure about the revenue and profit gaps,” said CLSA head of sustainable research Charles Yonts, who has written two reports on Hanergy TFP and its huge connected transactions with its parent since December.
The transactions committed Hanergy TFP to buy US$8.5 billion worth of production lines for making solar panels from the parent, which in turn will sell up to US$2.2 billion of panels to Hanergy TFP for building solar farms.
The lucrative deal has boosted Hanergy TFP’s profit and shares in the past few years.
Hanergy has not responded to the South China Morning Post‘s request for information on what business made up the major differences between the revenue and profit figures of Hanergy and the Jinanqiao project in Yunnan province.
The lack of clarity about the assets and profit sources of privately held Hanergy would not help it build investor confidence in its listed unit, Hanergy TFP, whose multibillion-dollar transactions with its parent and the dearth of solar farms built by third-party customers using its panels have raised questions about their sustainability.
“I don’t know how much of its parent’s solar panel production capacity really exists and is in operation. You don’t see much of its products in the field,” said Frank Haugwitz, the founder of consulting firm Asia Europe Clean Energy (Solar) Advisory.
The parent’s need to borrow billions of yuan in recent years from lenders through various trust investment products, which are less regulated compared to bank loans and carry much higher interest rates, has also raised eyebrows.
The group even borrowed 330 million yuan for six years by selling and leasing back one of chairman Li Hejun’s private jets to Hong Kong-listed Noble Century Investment Holdings last month, according to Noble’s filing to the stock exchange.
Hanergy TFP’s rocketing share price and high valuation have raised concerns that it may be a bubble waiting to burst.
“This stock is strictly for speculation. There is little in its fundamentals you can rely on,” GEO Securities chief executive Francis Lun Sheung-nim told the Post.
If the bubble bursts, it would hurt mainland investors, who have been buying the stock in past months through the Shanghai-Hong Kong Stock Connect that allows cross-border trading between the two cities.
Hanergy TFP ranked as the most actively traded stock in southbound trading in the scheme in 15 of the 21 trading days to March 25 and is among the top three for all but one of the 21 days.
The stock has jumped 240 per cent in the past four months, prompting market watchers including corporate governance activist David Webb to call it a bubble.
It is worth six times the value of US-based First Solar, widely considered the global leader in the thin-film solar business. It is also worth more than all of its industry peers in China combined. Most of its rivals saw substantial share price declines in the past six months.
Hanergy TFP’s rally meant it has a market value of HK$275 billion, ranking it the 19th-largest Hong Kong-listed stock on Thursday, ahead of Hang Seng Bank and Sands China. Yet the company is scantily covered by analysts.
In December, Yonts said the listed unit was overvalued by at least 100 per cent, even assuming it could deliver on all its ambitious business plans.
Its share price has soared 140 per cent since.
While investors struggled to understand Hanergy TFP, they know even less about its parent.
According to the online sales document, Hanergy has issued an 18-month investment product through China Minsheng Trust to raise 600 million yuan. A form of non-bank borrowing, it is backed by the pledging of shares of the Jinanqiao project with the trust firm, which administers the scheme on investors’ behalf.
Investors putting at least one million yuan in the product are entitled to receive a 10 per cent annual interest, much higher than bank deposits of 2 to 3 per cent.
Through China Credit Trust, Hanergy raised about 2.1 billion yuan through a three-year trust investment product, also backed by the project. Matured in September 2013, it paid investors an interest of 8 per cent.
Another two-year product through China Fortune International Trust raised at least 522 million yuan in 2010.
According to Hanergy’s website, it has hydropower projects with a total generating capacity of more than 6,000 megawatts (MW), enough to meet power demand from more than three million mainland households.
Its website lists four operating hydro plants, including the mainstay 2,400 MW Jinanqiao plant, whose four generating units came on stream between 2011 and 2012. The other three, in Guangdong and Yunnan, have a combined generating capacity of 82 MW.
Hanergy has an 80 per cent stake in Jinanqiao.
The project is the world’s largest hydro plant built by a privately owned firm, according to Sichuan Trust, which also issued a trust product for Hanergy.
Hanergy recorded revenue of 6.92 billion yuan and net profit of 790 million yuan in 2012, with total assets of 43.1 billion yuan and net assets of 5.7 billion yuan at the end of that year, according to Sichuan Huasheng, a company hired by Sichuan Trust to value Hanergy’s assets.
Hanergy’s non-hydro revenues appear modest, based on its website’s description of its assets. They include 131 MW of operating wind farms and 3,000 MW of solar-panel manufacturing plants, whose utilisation has been low.
According to a January report by the Financial Times, filings by eight of Hanergy’s nine solar-panel factories to the State Administration for Industry and Commerce showed combined sales of only 315 million yuan and a combined loss of 38 million yuan in 2012.
It quoted Frank Dai Mingfang, a director of Beijing-based Hanergy and the chief executive of listed Hanergy TFP, as saying that the performance of the factories in 2013 “should be much better and 2014 should be good”, without giving figures.
Hanergy’s top China tycoon boss Li Hejun promises more miracles
Saturday, 28 March, 2015, 4:03am
Eric Ng eric.mpng@scmp.com
Li Hejun, the man behind Hanergy Holding Group, is media-shy but not reserved when it comes to voicing his vision about the future of thin-film solar power as a solution to the world’s need for more but cleaner energy.
“Hanergy is a miracle maker and Jinanqiao hydropower station was the first miracle we made,” the chairman says on the company website. “I believe that together we can continue to make many more miracles.”
In the book he wrote and published early last year, New Energy Revolution – the Power to Change China and the World, he said the “solar revolution” would be a key support for the country in realising the “China dream”.
Frank Haugwitz, the founder of consulting firm Asia Europe Clean Energy (Solar) Advisory who has met Li a few times, described him as “outspoken, smart, visionary and ambitious”.
In terms of bullishness on the prospect of solar energy relative to other solar-panel maker bosses on the mainland, “he tops them all”, he said.
Li made his money from hydropower and invested in a small number of wind farms, but soon switched his focus to the solar sector, he added.
He invested in the amorphous silicon thin-film technology, which was low in efficiency and uncompetitive, before going on a shopping spree in the past few years for overseas technology firms that tried but failed to bring the copper-indium-gallium- selenide thin-film technology to economically viable mass production.
“He is betting on a different horse,” Haugwitz said. “The solar panel sector is already crowded with established producers using the crystalline silicon technology, but few thin-film-based makers are in mass production.”
Li, a 47-year-old native of Heyuan, Guangdong province, shot to fame in May last year when he was ranked by Guangdong government-backed New Fortune magazine as the mainland’s top tycoon with an estimated personal fortune of 87 billion yuan (HK$110 billion).
As shares in Hanergy Holding’s listed unit Hanergy Thin Film Power Group soared, last month’s Hurun Report put his wealth at US$26 billion, placing him as the mainland’s richest person.
A mechanical engineering graduate from Beijing Jiaotong University, Li told the New Fortune magazine that he never worked in a company or the government before starting his own electronic-parts trading venture after borrowing 50,000 yuan from a professor.
He made a foray into the hydropower business when he set up Hanergy in 1994. The firm won the right to build the 2,400-megawatt Jinanqiao hydro plant in 2002 and finished it in 2012.
Hanergy stood out as the mainland’s first and only privately owned firm to be allowed to invest in a hydropower project of Jinanqiao’s scale.
“No one in China at the time believed we could build this massive project,” Li told CNBC last month in an interview in which he spoke English at times. “There was a lot of debate among senior government leaders whether to give us the project, and in the end they gave us a chance and we didn’t disappoint.”
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