Shuifa playing central role in bailing out distressed Chinese PV developers

The state-owned construction business which saved Singyes Solar with a US$200 million bail-out is now preparing to invest in a 75% stake in debt-saddled peer China Solar, whose shares have been unlisted since August 2013.

The central role being played by state-owned Chinese construction conglomerate Shuifa in bailing out the nation’s distressed solar developers has been emphasized by the news a subsidiary of the state enterprise is poised to become majority owner of a revived China Solar.

Trading in China Solar shares has been suspended on the Hong Kong exchange since August 2013 and it has now emerged the state backer which white knight investor and property magnate Cheung Shun Lee is set to entice into restarting the business is none other than Shuifa, in the guise of its Lukong Water Group Co Ltd unit, as administered by the state entity’s authorities in the Chinese province of Shandong.

In fact, the reverse takeover being proposed by Lee which would see the Shuifa subsidiary own almost 75% of a restructured China Solar was held up while the construction group completed its HK$1.55 billion (US$200 million) bail-out of fellow debt-saddled, Hong Kong-listed solar project business Singyes Solar in November.

Reverse takeover

Completion of that move cleared the way for Lee to formulate a convoluted reverse takeover proposal which would involve the Excel Deal subsidiary of Shuifa-owned China Solar agree to buy an 81% stake in three Chinese PV projects with a total generation capacity of 100 MW from Shuifa-owned Singyes for HK$835 million.

China Solar, with those operational generation assets secured, would then be revived by Shuifa’s Lukong unit subscribing to HK$560 million shares to own 74.9% of the restructured business, part funded by HK$50 million of a HK$95 million sweetener loan offered by Lee’s Happy Fountain operation to entice Shuifa to the table. Happy Fountain will subscribe to HK$45 million shares – 6% – of the new business, using the balance of that loan and Shuifa-owned Lukong would then sign up to a further HK$35 million share issue to be repaid in HK$30 million equity and HK$5 million cash down the line.

Creditors

The exercise would generate HK$89 million to pay off China Solar’s 42 creditors who are claiming HK$600,000 in directors’ fees, HK$2.7 million in professional fees, HK$4.4 million rent, HK$40.4 million to settle convertible bonds, HK$10 million in corporate bonds, HK$25.3 million in promissory notes, unsecured loans of HK$3.8 million, HK$500,000 in tax and HK$800,000 of ‘other liabilities.’ Those creditors include the Ankang business owned by Wong Sin Hua Felix, who in June 2015 had acquired rights to an historic winding up order against China Solar previously held by controversial former chairman Yeung Ngo.

It was the Ankang business which, until now, had obstructed the planned purchase of the 100 MW of Chinese solar projects by Lee, under his plans to revive China Solar.

The proposed reverse takeover of China Solar by Shuifa will now go to a vote by independent shareholders on a date to be fixed.

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