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Central shares (002129) have found themselves in a tough spot, caught between ambitious expansion plans and mounting financial pressure. While the entire photovoltaic industry was facing a difficult period, Central remained determined to grow. In August, the company announced it would become the largest shareholder in Inner Mongolia for a 7.5 GW photovoltaic power plant project—officially dubbed the "World's Largest PV Power Plant." The news immediately drew market attention, but behind the scenes, the company’s financial situation was far from stable.
The story of Central's journey into the solar sector began years earlier. When the company first listed on the SME board in 2007, it was primarily focused on producing semiconductor devices. However, its initial investment in a 6-inch, 0.35-micron power semiconductor line was plagued by losses. Despite starting mass production in late 2009, the project reported losses of over 61 million yuan in 2009, 36 million in 2010, and 39.95 million in 2011.
In 2009, Central took a major step into photovoltaics by establishing and investing in Inner Mongolia Zhonghuan Photovoltaic Materials Co., Ltd. to produce monocrystalline silicon for solar cells. This move coincided with a golden era for the solar industry, and the company’s stock soared. In 2010, Central saw revenue jump to 1.309 billion yuan—a 135% increase—and net profit reached 97.53 million yuan, up 207% year-on-year. By the first half of 2011, the company’s performance continued to shine, with revenue reaching 1.475 billion yuan and net profit hitting 185 million yuan, up 215% and 1114% respectively.
Encouraged by this success, the company launched a private placement plan in May 2011, aiming to raise up to 1.1 billion yuan for R&D and industrialization projects related to IGBTs and optoelectronic devices, as well as a second phase of a monocrystalline silicon material project. But the tide soon turned. As demand weakened due to the global financial crisis and domestic overcapacity hit the market, the photovoltaic industry faced a sharp downturn. Prices collapsed, and inventory piled up, leading to a dramatic fall in Central’s share price.
Central’s capital expenditure for expanding its monocrystalline silicon wafer production was extremely high, costing over 2 billion yuan and causing severe cash flow issues. An unnamed industry analyst told "Golden Securities" that the company had considered issuing bonds and even planned to re-sell shares in the secondary market, but both attempts failed. To survive, the company relied on guarantees and commissions from its controlling shareholders, which led to a significant rise in debt.
By the end of 2011, Central’s consolidated debt-to-asset ratio reached 70.77%, far above the industry average of 45%. In response, the company quickly moved to issue new shares to raise funds. In June 2012, it announced a non-public offering of up to 155 million shares, with the proceeds used to repay bank loans and improve liquidity. The repayment pressure was enormous, with 33 banks involved and total debts amounting to 12.22 billion yuan.
Despite these efforts, the company’s financial situation continued to deteriorate. By the third quarter of 2012, short-term borrowings had surged to 2.515 billion yuan, up 126% from the previous year, and the combined debt-to-asset ratio climbed to 74.06%.
The company’s recent stock issuance was approved by regulators, with the majority shareholder, Zhonghuan Group, and Bohai Information subscribing to the new shares under a three-year lock-in period. According to the plan, the company aimed to reduce its debt ratio to around 47.12%, close to the industry average.
However, the challenges remain. The third-quarter report showed an operating loss of 60.29 million yuan, and the company is now betting heavily on its photovoltaic power plant project. It has partnered with SunPower, Inner Mongolia Electric Power, and Hohhot Jinqiao to build a 100MW plant with a total investment of about 1 billion yuan. But the scale of the larger 7.5 GW project is staggering—estimated at 60 billion yuan, with Central needing to invest 24 billion yuan alone.
With current net assets of just 1.906 billion yuan, even after the planned fundraising, the company’s resources will be stretched thin. Whether this ambitious plan can succeed remains uncertain, especially given the challenges of land acquisition, environmental permits, and infrastructure development. For now, the focus is on completing the stock issuance and moving forward with the power plant project, though many in the industry remain skeptical about its feasibility.