The photovoltaic storage giant makes another significant move.

Recently, Suntech Power announced that the company plans to issue Global Depository Receipts (GDRs) abroad and apply for listing on the Frankfurt Stock Exchange in Germany (hereinafter referred to as "Deutsche Börse").

The proceeds from this GDR issuance will be in US dollars, with the total amount raised (including issuance costs) converted not exceeding 4.878 billion yuan. After deducting the issuance costs, the funds raised will be entirely used for the annual production of 20GWh advanced energy storage equipment manufacturing projects, overseas inverter equipment and energy storage product expansion projects, digital upgrade projects, and the construction of the Nanjing Research and Development Center.

However, there is some skepticism in the market. On one hand, the current trend of GDR financing has slowed down, with many companies choosing to terminate the issuance; and Suntech Power has substantial existing funds, with the total amount raised this time not even reaching 30% of the company's cash on hand. On the other hand, in the first half of this year, Suntech Power's overseas revenue and energy storage business revenue both declined, but now it is proposing a huge expansion plan again, what is the intention?

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Raising over 4.8 billion yuan to go public in Germany

Suntech Power was established in 1997 and went public on the ChiNext board of the Shenzhen Stock Exchange in 2011. Since its listing for more than a decade, Suntech Power has raised a total of about 8.154 billion yuan through IPOs, issuing short-term financing bills, and additional issuances. Based on this calculation, the amount raised from this GDR issuance has already exceeded half of this figure.

It is understood that GDR is a type of interconnected depositary receipt, usually represented as stocks or bonds that are publicly issued globally and can be traded on two or more financial markets. Since 2021, when the China Securities Regulatory Commission expanded the scope of the "Shanghai-London Stock Connect" business, A-share listed companies have gradually set off a wave of GDR financing.

However, with the introduction of new GDR regulations, regulatory policies have become more stringent on application materials, especially regarding the part about raised funds, and many companies have chosen to terminate the issuance. iFinD data shows that so far in 2024, eight listed companies have announced the termination of GDR issuance, with seven planning to list on the Swiss Stock Exchange and one planning to list on Deutsche Börse.

In terms of the amount of funds raised, the required investment is not high for Suntech Power, and it is even less than 30% of the company's current cash on hand. As of June 30, 2024, Suntech Power's cash on hand was 16.38 billion yuan, with short-term borrowings of 5.729 billion yuan, total current assets of 79.587 billion yuan, and total current liabilities of 49.558 billion yuan, indicating that the company currently has relatively ample funds.

In addition, Suntech Power disclosed that before the funds raised from this issuance are in place, the company will invest in advance with self-raised funds according to the actual situation of the investment projects, and replace them according to the relevant regulations after the funds are in place. After the funds are in place, if the actual net proceeds from the issuance are less than the total amount of funds to be invested, within the scope of the investment projects for this issuance, the company will adjust and finally determine the specific investment projects, priority order, and specific investment amounts for each project according to the actual amount of funds raised, based on the urgency and importance of the projects. The company will solve the shortfall of the raised funds with self-raised funds.So, why does "not short of money" Sungrow still issue GDRs?

Sungrow stated in its announcement that issuing GDRs can help its global development strategy. In the first half of this year, Sungrow's overseas business sales revenue accounted for 43.44%, becoming an important source of its revenue. However, the company's overseas inverter equipment capacity accounts for a low proportion of the overall capacity, and there is no energy storage system capacity overseas. Against the backdrop of frequent local conflicts and occasional international trade frictions, the ability and flexibility of global delivery need to be improved urgently.

Some industry insiders have pointed out that although issuing GDRs helps to improve the international reputation of enterprises, it also means the expansion of the listed company's A-share capital, which may affect its A-share stock price and the rights and interests of A-share investors. Sungrow has also issued a risk warning of diluting immediate returns for this issuance.

On the same day of announcing the issuance of GDRs, Sungrow also announced that the company originally planned to disclose the "2024 Third Quarter Report" on October 30, but due to the arrangements and audit requirements related to the overseas issuance of GDRs, it has applied to the Shenzhen Stock Exchange for a delay in disclosure, and the disclosure time will be postponed until after the stock market closes on October 31.

Against the trend, increase investment in energy storage business

In terms of investment projects, 70% of the funds raised this time are used for energy storage-related projects. Specifically, Sungrow plans to use 1.992 billion yuan to build an annual production of 20GWh advanced energy storage equipment manufacturing project; 1.76 billion yuan to build an overseas inverter equipment and energy storage product expansion project; 630 million yuan to build a digital upgrade project; 496 million yuan to build a Nanjing R&D center construction project.

It should be pointed out that against the background of the company's overall performance growth in the first half of this year, Sungrow's energy storage business and overseas market revenue have rarely declined.

Sungrow's 2024 mid-year report shows that the company achieved a revenue of 13.476 billion yuan in overseas regions (including China's Hong Kong, Macao and Taiwan) in the first half of the year, a year-on-year decrease of 12.65%, the first decline since 2014, and the proportion of revenue in overseas regions (including China's Hong Kong, Macao and Taiwan) also decreased by 10.46 percentage points year-on-year.

At the same time, Sungrow's energy storage business with the highest gross profit margin also encountered a cold snap. On the one hand, the company's energy storage system gross profit margin in the first half of the year was 40.08%, an increase of 9.42 percentage points year-on-year; on the other hand, the business revenue was 7.816 billion yuan, a year-on-year decrease of 8.3%, the first decline since 2017, and the proportion of total revenue also decreased to 25.2%. In this regard, Sungrow said that it was mainly affected by the rhythm of delivery and revenue confirmation.

At the same time, the energy storage industry is facing fierce competition. It is reported that the current lithium battery energy storage cell unit price is approaching 0.3 yuan/Wh, the lithium battery energy storage system unit price has decreased by 49% compared with the same period last year, and has broken through 0.5 yuan/Wh, and the average winning price of energy storage engineering general contracting (EPC) in the first half of the year has decreased by 27% year-on-year.As one of the earliest new energy companies to enter the energy storage track in China, Sungrow continues to increase its investment. Previously, Sungrow has revealed on multiple occasions that 2024 is the true starting year for the company's energy storage business, with a shipment target of over 20GWh, and both market size and the company's market share are expected to increase.

In the first half of this year, Sungrow signed a 7.8GWh energy storage project, the largest in the Middle East, with Saudi ALGIHAZ, an 880MWh independent energy storage power station, the largest in Latin America, with Latin American Atlas Energy Group (Atlas), one of the largest energy storage power stations in Europe with 800MWh with French Engie Energy Group, and the largest battery energy storage project in the UK with 320MW/640MWh with SSE, and connected to the UK's highest voltage level power grid. Among them, the order capacity of the Middle East energy storage project alone accounts for 74.29% of the company's energy storage system shipments last year.

In the announcement of this GDR issuance, Sungrow further stated that the current utilization rate of energy storage system capacity has approached saturation, and capacity expansion is imminent. In the medium to long term, driven by multiple factors such as global industry policies, the increase in the proportion of new energy power generation installations, and the improvement of energy storage economics, the company's existing capacity is far from meeting the broad market demand in the future, and it is urgent to prepare for capacity construction.

In addition, after adding new capacity for inverter equipment and energy storage systems overseas, the company's overseas capacity ratio will increase. This will be beneficial for further ensuring the supply of the company's global market orders and improving delivery satisfaction.

However, some industry insiders have warned that although the overseas market has a higher gross margin, the actual costs faced by energy storage companies going overseas may far exceed expectations. In the short term, energy storage companies also need to be vigilant against trade barriers and other issues.