Hanergy Thin Film’s Profit Surges on Sales and Disposals

Hanergy Thin Film Power Group Ltd., the Chinese solar manufacturer whose market value has climbed to $36 billion, said profit surged 64 percent last year following the sale of five power projects in China.

Net income totaled HK$3.31 billion ($427 million), up from HK$2.02 billion a year earlier, according to a Hong Kong stock exchange filing. The company restated its 2013 profit after the acquisitions of two companies. Sales rose almost threefold to HK$9.6 billion.

Hanergy sold the photovoltaic power plants in China in 2014 for 1.42 billion yuan ($229 million), a net gain of about 778 million yuan, according to the statement. The results cap a tumultuous year in which Hanergy became the world’s biggest solar company by value, making its chairman, Li Hejun, a billionaire and raising questions about whether it’s overvalued.

Li owns more than half of the shares in Hanergy Thin Film and controls the company through a closely held Beijing-based parent called Hanergy Holding Group Ltd. Shares of the listed company have more than quadrupled in the past six months.

Valuation questions -- and the pattern of trades in the company’s stock -- have prompted Hanergy to issue at least two statements rebutting suggestions that either the company or its chairman manipulated its share price.

Biggest Customer

About 61 percent of the company’s revenue comes from sales it makes to the parent company Hanergy Group and its affiliates, according to the statement Monday. The publicly traded entity makes factory equipment that produces thin-film solar panels. Closely held Hanergy Group makes the panels and installs them, though it has never disclosed its production output. Hanergy Thin Film also buys PV panels from its parent company to make into finished solar parks.

The Financial Times first raised questions about that relationship on Jan. 28. Since then, the stock of Hanergy Thin Film has risen 86 percent. Monday’s statement from the company gave more detail about that relationship.

In one note to the report, Hanergy Thin Film said its parent company hasn’t yet delivered 689.2 megawatts of solar modules it ordered, which resulted in the parent repaying the listed company HK$1.26 billion before the fiscal year closed on Dec. 31.

Monday’s statement also showed that Hanergy Thin Film’s receivables surged 86 percent last year to HK$4.3 billion, with the parent company responsible for about half of the outstanding sum. A footnote in the document said the parent company settled its account as of March 30.

Shipment Outlook

Lacking from the earnings report is an overall estimate for how much equipment it will ship or install this year, a figure that’s prominent in the reports of panel makers such as Trina Solar Ltd. and Yingli Green Energy Holding Co.

Hanergy outlook notes the worldwide surge in solar power, growing support from China’s government. Last month, it agreed to supply a 600-megawatt production line to Macrolink New Resources Technology Ltd.

It’s also building a 400-megawatt solar plant in Ghana and a 50-megawatt plant in Henan, China. It opened a facility in Silicon Valley to develop new applications for solar cells and plans to introduce its first solar-powered vehicle this year.

Yingli, which last year was overtaken by Trina as the biggest solar module supplier, said it has 1.6 gigawatts of projects at different stages of approval across China. Trina expects at least 4.4 gigawatts of module shipments this year.

Hanergy has said the surge in the value of Hanergy Thin Film’s may be a result of the Chinese government’s focus on the environment and renewable energy or the Hong Kong stock exchange’s link with ones in mainland China, which has brought in new investors.

Analysts Unavailable

Three analysts, Penny Chen of BNP Paribas Equity Research, Kenny Tang of AMTD Asset Management Ltd. and Andrew Zamfotis of Eva Dimensions LLC, couldn’t be reached for comment on Monday.

Hanergy has a market value of HK$279.9 billion, higher than all other listed Chinese solar companies combined and six times the value of Tempe, Arizona-based First Solar Inc., the biggest producer of thin-film solar panels.

A year ago, the Kowloon headquarters of Hanergy Thin Film housed a little-noticed subsidiary of Li’s Hanergy Holding, which initially was a hydroelectric-dam operator with more than 6 gigawatts of projects.

Solar Investments

The company has been investing in thin-film technology since 2009. It’s bought four overseas companies since 2012 -- the U.S. producers Global Solar Energy Inc., Miasole Inc. and Alta Devices and the Solibro unit of Germany’s Q-Cells.

The surge in Hanergy’s shares has increased scrutiny of the company’s finances. On Feb. 27, analysts Charles Yonts and Johnny Lau at CLSA Asia-Pacific Markets in Hong Kong issued a report saying the stock was wildly inflated. Jenny Chase, lead solar industry analyst at Bloomberg New Energy Finance, published a note on March 6 saying Hanergy is working with “unproven” technology and that it hasn’t detailed a level of installations that would help justify its valuation.

When the FT wrote another story on March 25 showing that Hanergy’s shares listed in Hong Kong tend to rise in the final 30 minutes of the trading day, the company issued a statement dismissing the story as “innuendo.”

— With assistance by Feifei Shen, and Guo Aibing

Before it's here, it's on the Bloomberg Terminal.