Both the Wall Street Journal (WSJ) and the Financial Times (FT) have recently attempted to delve into the financial and business operations of the Hanergy group of companies with mixed success.
The driver for the scrutiny has been due to a combination of factors that include the profile of its founder and majority shareholder Li Hejun, cited by Forbes as China’s fifth richest man, which are primarily attributed to Hanergy’s stock valuation (Hanergy Thin Film Power Group) after a massive 300% rise in the share price through 2014.
The company has a market cap of over HK$130 billion (US$17 billion) but such valuation doesn’t come from revenue or profit generation metrics.
Interest in Hanergy from the WSJ and the FT would seem to have been sparked by a detailed research note from renewables analyst, Charles Yonts at independent investment firm CLSA, based in Hong Kong.
The report, in the possession of PV Tech doesn’t pull its punches with the title; “Are they really that good? Hanergy: House of cards or card shark?”
Yonts, like the FT highlighted that the majority of sales, outside its hydro-electric business have come from internal sales within the group in relation to its a-Si thin-film equipment sales (formerly Apollo Solar), yet end product sales have been elusive.
Yonts overall conclusion on Hanergy was that the current valuations did not come close to its current financial position, rather than concluding something more sinister was afoot.
However, the FT article pinpoints issues with Hanergy’s a-Si nameplate capacity levels against actual shipments, compounded by remarks in an interview they had with Hanergy Thin Film’s CEO, Frank Dai Mingfang.
Dai, reiterated previous financial filings on the fact that the company had supplied 2.4GW of equipment to the parent company over several years but as Yonts has highlighted in his report finding any data on actual shipments and customers for the modules proved fruitless. Dai avoided giving the FT any further insight into that issue.
The WSJ also noted in a story in early January, 2015 that Hanergy Thin Film’s margins were 53.8%, compared to First Solar’s of 8.6%. Rightly, the WSJ story pinpoints that such profit levels were “mostly on paper” as the parent company has perennially delayed paying its subsidiary and as yet never fully paid for the 2.4GW of equipment.
However, should the BIPV market ever take-off, a-Si thin-film modules could be the best contender to gain significant market share and Hanergy could potentially have a good business in that market.
Neither the WSJ or FT articles spent much time analysing Hanergy’s plans for the acquired CIGS thin-film firms, which should the planned ramp of capacity in this sector actually be accomplished the company can use the modules across utility-scale, commercial and residential rooftop markets globally. Hanergy would also potentially have a good business in this field.
Scrutiny of Hanergy has only just started, yet the key will be observing its roll-out of CIGS production and its PV project pipeline that results in grid connections in 2016 onwards.