Hanergy cancels mutli-billion dollar contract with parent company

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Beleaguered Chinese manufacturer Hanergy Thin Film Power has cancelled a controversial module supply deal with its parent group.

Announced in February, the so-called master supply agreement with Hanergy Group had become one of a number of controversies centring on Hanergy TF, whose shares have been suspended by the Hong Kong Securities and Futures Commission (SFC).

In a statement today to the Hong Kong Stock Exchange, Hanergy TF said its agreement with Hanergy Group had been terminated following “arm’s length negotiations” between the concerned parties.

Under the deal Hanergy Group would have purchased thin-film modules in each financial year from 2015 to 2017 in a deal that would have been worth over HK$50 billion (US$6.4 billion) to Hanergy TF.

However, along with the stratospheric rise in Hanergy TF’s stock market value, which fell off a cliff in May, its deal with its parent group had become a source of some controversy for the company in recent months.

In today’s statement, Hanergy TF the agreement had been terminated “to further minimise the amount of connected transaction” between the two entities.

It went on to say that termination of the deal would allow Hanergy Group to draw on a wider pool of suppliers and “enhance the flexibility of its downstream business”.

However, the master supply agreement had included the planned 600MW capacity expansion in China of two acquired CIGS thin-film companies, Solibro and Miasole. 

German-based specialist PV equipment supplier, Singulus Technologies had won orders from Hanergy TF to supply both CIGS buffer layer deposition and inline vacuum coating machines.

The equipment orders were valued at around €20 million, with large prepaid deposits. 

Hanergy TF had not had prior manufacturing experience with CIGS technology and had focused on less sophisticated a-Si process equipment.

The master supply agreement between Hanergy TF and Hanergy Group had been the foundation of its in-house business transactions and major revenue streams, later boosted by several external transactions for a-Si BIPV production plants and operational service contracts with three China-based firms with no prior PV manufacturing involvement or product experience. 

Hanergy TF recently reiterated that two of these unheard of transactions in the PV industry would still proceed, including the deal with Shangdong Macrolink New Resources Technology and Inner Mongolia Manshi Investment Group. The Company has not received confirmation from Baota Petrochemical Group that the deal would still go ahead. 

All three transactions included Hanergy TF offering new shares in the company at a significantly higher value than the sales contracts, based on the then share price of Hanergy stock.

Hanergy TF suspended trading of its share on the Hong Kong exchange in May after its stock price fell 47% in less than a day. This prompted the SFC to launch a probe into Hanergy’s affairs and last week the body took the unusual step of ordering Hanergy to keep its shares suspended.

Hanergy TF has threatened to challenge its suspension.

Additional reporting by Mark Osborne, senior news editor.

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