① Ottway and Jiejia Weichuang stated that this debt-to-equity swap is aimed at resolving the problem of customer arrears as soon as possible, accelerating the recovery of company loans, and at the same time helping to strengthen cooperation with customers;
② An IPO gambling agreement has been set up for this debt-to-equity swap. Runyang shares need to complete the A-share listing or be merged within five years. This poses certain challenges for Runyang, which is currently experiencing losses in performance, compounded by litigation, production suspension and other storms.

“Science and Technology Innovation Board Daily” February 26 (Reporter Yu Jiaxin and Li Yu) On the evening of February 25, photovoltaic equipment manufacturers Ottway and Jiejia Weichuang successively announced that they would increase their capital to Runyang shares through a “debt-to-equity swap” approach. Among them, Jiejia Weichuang subscribed for 8.0899% of Runyang’s equity with 720 million yuan in creditor’s rights, and Aotwai subscribed for 2.0225% of the equity with 180 million yuan in creditor’s rights. The target companies were valued at 8 billion yuan.

Regarding the above situation, Runyang shares responded to the reporter of the “Science and Technology Innovation Board Daily” today (February 26),”The main reason for the two major equipment leaders to increase capital this time is that Runyang’s capital chain has been consolidated and various bases are resuming work and production. Coupled with the booming business in the United States, the overall market is still relatively optimistic about the development of Runyang. At present, the company’s operations are normal. Runyang has never given up seeking a listing in the capital market.”

Not long ago, on February 14 this year, Tongwei announced that its merger plan to acquire Runyang for 5 billion yuan was terminated. Regarding the reasons for termination, it stated that the parties to the transaction had conducted multiple rounds of detailed and comprehensive communication and consultations, but as of now, some commercial terms still failed to reach agreement.

Compared with the capital increase terms, Tongwei’s 5 billion cash purchase plan comes with strict performance commitments and integration requirements, while Ottway and Jiejia Weichuang’s “debt-to-equity swaps” have set an “IPO bet” clause.Industry insiders believe that this reflects that the two equipment manufacturers ‘demands for Runyang may focus more on short-term risk resolution than long-term control competition.

From Tongwei Holdings ‘failure to increase capital by the two major equipment manufacturers in the “debt-to-equity swap”

Runyang Co., Ltd.’s main business is the research and development, production and sales of high-efficiency solar products. In addition to photovoltaic cells, the company has further extended its upstream and downstream industrial chains, forming an industrial silicon production capacity of 55,000 tons and a polysilicon production capacity of 130,000 tons in the upstream of the photovoltaic industry chain, with a crystal pulling capacity of 7GW, and a slicing capacity of 10GW; a module production capacity of 13GW is formed downstream of the industrial chain, and some photovoltaic power station businesses are also deployed.

Previously, in August 2024, photovoltaic leader Tongwei announced that it planned to increase its capital in Runyang shares by no more than 5 billion yuan, and planned to obtain a controlling stake of no less than 51%. The transaction amount was the largest merger in the photovoltaic industry in recent years. However, after half a year of consultations, on February 14 this year, Tongwei announced the termination of the transaction, mainly because “some commercial terms could not be agreed.”

At that time, regarding the purpose of the acquisition, industry insiders mentioned Tongwei or Junyang’s overseas production capacity layout (such as bases in Thailand and Vietnam) and the channel advantages of the component brand “RUNERGY” in the U.S. market. However, the market speculated that Runyang’s performance in 2024 was under pressure, compounded by rumors of overseas factory closures and patent litigation risks, causing Tongwei to have doubts about asset quality and synergy.

Compared with Tongwei Co., Ltd., whose main businesses are quite overlapping, the capital increase parties of Runyang Co., Ltd., Jiejia Weichuang and Aotewei, are both downstream manufacturers engaged in photovoltaic equipment business, which belongs to the upstream and downstream relationship of the industrial chain.

A reporter from the Science and Technology Innovation Board Daily noticed that unlike the acquisition purpose of Tongwei to gain control, the two major equipment manufacturers Aoteway and Jiejia Weichuang both mentioned thatThis debt-to-equity swap aims to resolve the problem of customer arrears as soon as possible, speed up the recovery of corporate loans, and at the same time help strengthen cooperation with customers.

The announcement shows that the creditor’s rights of Otway and Jiejia Weichuang on Runyang shares originated from equipment sales. As of the end of 2024, Otway’s subsidiary’s creditor’s rights against Runyang and its subsidiaries were 180 million yuan, and Jiejia Weichuang’s subsidiary’s creditor’s rights were 720 million yuan. After the capital increase, Tao Longzhong, the actual controller of Runyang, the shareholding ratio of Runyang, dropped to 28.96%, and Yueda Group held 17.98%. After the conversion, it is estimated that based on the current shareholder list of Runyang, Jiejia Weichuang and Aotewei will rank among Runyang respectively. The fourth and seventh largest shareholders of Runyang shares.

Industry analysts believe that this “debt-to-equity swap” strategy or the “defensive” measures taken by the two major equipment manufacturers against the industry’s downturn are also a “bet” on the viability of core customers.

While the performance of the photovoltaic industry is generally under pressure, photovoltaic “sellers” performed strongly. Jiejia Weichuang predicts that its net profit attributable to its parent company in 2024 will be 2.3 billion yuan to 3.1 billion yuan, a year-on-year increase of 40.8%-89.77%. In the first three quarters of the same year, Ottway achieved net profit attributable to its parent company of 1.166 billion yuan, a year-on-year increase of 36.91%.

However, as the overall market enters a reshuffle period, photovoltaic manufacturers in the middle and lower reaches are still facing certain risk of payment back. From January to October 2024, Runyang achieved operating income of 12.289 billion yuan and a net loss of 596 million yuan. In 2023, Runyang’s revenue and net profit amounts will be 26.313 billion yuan and 2.662 billion yuan respectively.

However, Runyang’s net operating cash flow from January to October 2024 was not disclosed. Combined with its net profit loss and total liabilities of as high as 29.862 billion yuan (as of the end of October 2024), equipment manufacturers make it difficult to collect money through traditional collection methods. The “debt-to-equity swap” plan converts accounts receivable into equity. Although it cannot be realized immediately, it can reduce the pressure on bad debt accrual and optimize financial statements.

At the same time, the two equipment manufacturers are trying to maintain customer relationships through equity binding. Runyang Co., Ltd. still has a large cell production capacity. In 2023, it ranks among the top five global shipments and is a major purchaser of photovoltaic equipment. Industry insiders mentioned that if they stop production due to a break in the capital chain, Otway and Jiejia Weichuang will face the risk of losing orders. Through debt-to-equity swaps, we can not only avoid customer collapse, but also pave the way for future equipment sales.

Behind gambling listings: performance pressures, litigation disputes and high-level changes

According to the supplementary agreement mentioned in the announcement, Runyang shares need to complete the A-share listing or be merged within five years, otherwise the actual controllers Tao Longzhong and Jiangsu Yueda Group Co., Ltd. will need to repurchase their shares.

Throughout the listing process of Runyang shares, in March 2022, its GEM IPO application was accepted by the Shenzhen Stock Exchange and successfully passed the meeting in November of the same year. At that time, Runyang’s performance exploded along with the photovoltaic upward cycle. Its revenue increased from 3.026 billion yuan in 2019 to 10.617 billion yuan in 2021; in 2022, it doubled to 22.038 billion yuan, and its net profit for the same period reached 2.057 billion yuan.

As its performance soared, Runyang shares set a target of 4 billion yuan for IPO fundraising. More than half a year after the meeting, in June 2023, Runyang Shares submitted for registration, and the registration took effect in the same month. However, until the registration approval automatically lapsed one year later, Runyang shares had not yet been listed as expected.

What followed was a double “face change” in its performance and shipments. From January to October 2024, Runyang achieved operating income of 12.289 billion yuan and a net profit of 596 million yuan. At the same time, after ranking third in the world in terms of photovoltaic cell shipments for three consecutive years, Runyang’s ranking will fall back to fifth in the world in 2023, and will fall out of the top five by 2024.

In the downward cycle of the photovoltaic industry, Runyang shares have more difficult problems. In May and September 2024, Trina Solar twice sued Runyang shares in the U.S. court for patent infringement. The case is still under trial. If Trina Solar wins the case, Runyang may face the risk of being unable to produce and sell in the United States, which will further reduce its overseas advantages.

At the same time, Runyang shares are facing internal personnel changes.After Tongwei terminated its capital increase, Tang Jun, the company’s general manager, was revealed to have resigned. After Jiangsu Yueda Group increased its capital by 1 billion yuan in September 2024, changes occurred in the senior management of Runyang Co., Ltd. Tianyan information shows that on September 28 of that year, the company’s chairman was changed from founder Tao Longzhong to Zhang Naiwen, secretary of the Party Committee and chairman of Yueda Group. Tao Longzhong was transferred to director and general manager, forming a “double general manager” structure with the former general manager Tang Jun. It is generally believed in the industry that this personnel adjustment may be inevitable.

For the future development of Runyang shares,”Science and Technology Innovation Board Daily” will continue to pay attention to it.