silicon leader daquan energy (SH688303, stock price 27.24 yuan, market value 58.43 billion yuan) is facing a lawsuit, the plaintiff asked the listed company to compensate about 1.959 billion yuan.

on January 23, daquan energy disclosed a lawsuit-related announcement. The general situation is that the plaintiff believes that the failure of Daqo Energy to fulfill its contractual obligations constitutes a fundamental breach of contract. The plaintiff's initial claim for compensation was 0.39 billion yuan. In September 2023, the plaintiff applied to change the claim, demanding that the amount of compensation be increased to about 1.959 billion yuan.

In this case, Daqo Energy stated that this lawsuit is a litigation dispute between the company and the supplier over the performance of the contract and the quality of the target product. The listed company believes that there is no fundamental breach of the relevant agreement, and the company does not recognize the plaintiff's claim.

The original told its fundamental breach

On January 23, Daquan Energy announced that it recently received a court summons and related litigation materials from the Intermediate People's Court of the Eighth Division of Xinjiang Production and Construction Corps.

the plaintiffs in this case are Xinjiang xian an new materials co., ltd. (hereinafter referred to as plaintiff 1) and Xinjiang dengbo new energy co., ltd. (hereinafter referred to as plaintiff 2), and the defendant is daqo energy. Plaintiffs I and II are affiliated enterprises, both of which provide silicon core processing services for Daqo Energy. Daquan Energy provides polysilicon materials. Plaintiff One is responsible for pulling silicon rods and Plaintiff Two is responsible for cutting silicon cores.

Daquan Energy and Plaintiff I signed a "Business Cooperation Agreement" in January 2022, agreeing that the defendant would lease its plant to Plaintiff I as a crystal-pulling production plant, and use the outsourcing processing mode to weigh the silicon material and hand it over to Plaintiff I and its related parties for silicon core processing.

at the same time, it is agreed that plaintiff 1 and its related parties shall ensure that the silicon core is delivered to the defendant according to the quantity and delivery date agreed in the contract signed with the defendant (the original announcement here is "plaintiff 1 and its related parties shall ensure that the silicon core is delivered to the defendant according to the quantity and delivery date agreed in the contract signed with the defendant and the defendant", which is suspected, so it is slightly modified), and to ensure that under the premise of meeting the quality index requirements of the defendant, when the paid-in registered capital of plaintiff one reaches 33.49 million yuan and above, the defendant and its affiliated companies have exclusive procurement obligations to plaintiff one and its affiliated companies.

Defendant and Plaintiff II signed an "Annual Contract" in July 2022, agreeing that Defendant entrusts Plaintiff II to carry out silicon core cutting and arrange for silicon rod pulling. The specific silicon rod pulling work shall be implemented by Plaintiff I, and the entrusted processing fees for silicon core under the "Annual Contract" shall be settled by Defendant and Plaintiff II.

plaintiff 2 believes that after the expiration of the validity period of the annual contract (April 30, 2023), the defendant has not renewed the new contract with plaintiff 2, and since April 19, 2023, the defendant has not issued a purchase order to plaintiff 2. it has reason to believe that the defendant and its related parties have turned to cooperate with other suppliers on their own, which constitutes a fundamental breach of the business cooperation agreement, therefore, a lawsuit was filed in the court in June 2023, requesting the cancellation of the "Business Cooperation Agreement" signed by the plaintiff and the defendant, and the defendant's compensation for his economic losses totaling 0.39 billion yuan.

The "Daily Economic News" reporter noted that in September 2023, the plaintiff submitted an "Application for Change of Litigation Request" to the court, requesting that the amount of compensation be increased from 0.39 billion yuan to 1.96 billion yuan.

Listed companies say little impact

However, Daquan Energy believes that this lawsuit is a litigation dispute between the listed company and the supplier over the performance of the contract and the quality of the subject product.

Daquan Energy believes that the plaintiff in this lawsuit is not a signatory to the Business Cooperation Agreement. The corresponding request and amount claimed by the plaintiff in the lawsuit are calculated according to the combined expected profits of the two plaintiffs during the longest duration of the Business Cooperation Agreement, and do not represent the amount agreed in the Business Cooperation Agreement or its actual losses.

Daquan Energy believes that it has always attached importance to operating in compliance with the law and fulfilled its relevant obligations in accordance with the terms and requirements of the Business Cooperation Agreement and the Annual Contract, and there is no fundamental breach of the aforementioned agreement, so the listed company does not recognize the plaintiff's claim. Daqo Energy will pay close attention to and take effective measures to actively respond to the lawsuit to clarify the truth and effectively safeguard the interests of the company and its shareholders.

The company stated that the total amount involved in this lawsuit (the amount requested by the plaintiff) accounted for 10.24 of the company's most recent audited net profit attributable to shareholders of the listed company, which is a small proportion and will not affect the company's daily production. Production and operation have a significant impact, and the company expects that this lawsuit will not have a direct negative impact on the company's profit and loss for the time being. In view of the fact that the case involved in this lawsuit has not yet been heard, the final judgment is still uncertain, and the impact on the company's current and future profit and loss cannot be predicted at present. The final actual impact shall be subject to the court's judgment, and the specific accounting treatment and impact shall be subject to the current annual audit results.

A reporter from the "Daily Economic News" inquired about industrial and commercial information and found that the only shareholder of Xinjiang Dengbo New Energy Co., Ltd. is the natural person Jin Sheng. The largest shareholder of Xinjiang Xian 'an New Materials Co., Ltd. is Xinjiang Sokos New Materials Co., Ltd. Xinjiang Sokos New Materials Co., Ltd. also invested in Xinjiang Xinte Crystalline Silicon High-Tech Co., Ltd., with a 5.7 percent stake. It is worth mentioning that the largest shareholder of Xinjiang Xinte Crystalline Silicon High-Tech Co., Ltd. is Xinte Energy (HK01799, stock price 9.45 Hong Kong dollars, market value 13.51 billion Hong Kong dollars).