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In the midst of a tough winter for the photovoltaic industry, Central Shares (002129) continued to show strong ambitions for expansion. In August, the company announced its role as the largest shareholder in a massive 7.5 GW photovoltaic power station project in Inner Mongolia, dubbed the "World's Largest PV Power Plant." This move immediately drew market attention. However, despite being state-owned, the company’s financial situation has been unstable, raising questions about whether it can keep up with its ambitious plans.
Central Securities started as a semiconductor manufacturer when it listed on the SME board in April 2007. Its initial IPO project, a 6-inch 0.35-micron power semiconductor line, faced continuous 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, the company entered the photovoltaic sector by establishing Inner Mongolia Zhonghuan Photovoltaic Materials Co., Ltd., producing monocrystalline silicon for solar cells. The photovoltaic boom brought high hopes, and the company’s shares soared.
In 2010, Central achieved revenue of 1.309 billion yuan, a 135% increase, and net profit of 97.53 million yuan, up 207%. By the first half of 2011, revenue reached 1.475 billion yuan, with net profit rising 215% and 1,114%, respectively. This success led to overconfidence and aggressive investments, including a private placement plan to raise 1.1 billion yuan for R&D and industrialization projects.
However, the global financial crisis hit, leading to overcapacity and falling prices in the domestic market. Central’s stock price collapsed, and the company faced severe liquidity issues. High capital expenditures for monocrystalline silicon production drained its funds, forcing the company to consider bond issuance and secondary market sales, which ultimately failed.
To survive, Central relied on guarantees and commitments from its controlling shareholders, but this led to a sharp rise in debt. By the end of 2011, the company’s debt-to-asset ratio reached 70.77%, far above the industry average of 45%.
Faced with mounting debt, Central launched a non-public offering in June 2012, aiming to raise up to 1.9 billion yuan, with 1.222 billion yuan allocated for repaying bank loans. The company had 33 banks involved in its debt, with repayment deadlines stretching into early 2013.
Despite these efforts, the company’s financial condition worsened. Short-term borrowings surged to 2.515 billion yuan by the third quarter of 2012, and the debt-to-asset ratio climbed to 74.06%. Analysts noted that regulatory restrictions limited the use of raised funds, but the deal was approved due to support from major shareholders.
On November 19, the company received approval for the new share issue. While the move was seen as necessary to ease pressure, many remain skeptical about its long-term viability. With operating losses continuing to grow, Central is now betting on its large-scale photovoltaic power plant project.
The company plans to invest 400 million yuan in a joint venture with SunPower, Inner Mongolia Electric Power, and Hohhot Jinqiao Urban Construction, aiming to build a 100 MW solar power plant. However, the total investment for the 7.5 GW project is estimated at 60 billion yuan, with Central needing to contribute 24 billion yuan. Given its current net assets of around 1.9 billion yuan, the funding gap remains huge.
Industry experts are skeptical about the feasibility of the project, citing challenges such as land acquisition, environmental approvals, and infrastructure development. As Central moves forward, the question remains: will this bold bet save the company or push it further into financial trouble?