LONGi Solar has warned of reduced profits after Yunnan Province, where a significant portion of its manufacturing output resides, cancelled a previously-struck power pricing agreement.
In a statement to the Shanghai Stock Exchange issued earlier today, LONGi said that it had been informed by authorities in Yunnan earlier this month that the province could no longer honour a preferential power pricing agreement struck between the two parties in 2016.
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As a result, LONGi will instead pay standard market-based prices for its power consumption, resulting in a material adverse impact on the manufacturer’s profits. LONGi noted that electricity costs account for about 15% of the total production cost of wafering.
LONGi further warned that capacity expansion projects that are still ongoing in Yunnan could be revised as a result of the power price revision.
Between 2016 and the end of 2021, LONGi has deployed around 67GW of silicon pulling capacity and 57GW of wafering capacity in Yunnan, the latter of which makes up more than half (54%) of LONGi’s total wafering capacity as of the end of last year.
In addition, several capacity expansion projects had been earmarked for Yunnan, including a 30GW cell production facility slated for construction in Qujing. These facilities have not yet started construction, and higher than expected power prices now casts doubt over these expansions.