(1) With rumors of overseas factories falling into shutdowns and patent litigation disputes with Trina Solar, Runyang's still advantageous polysilicon production capacity is far from being able to support this transaction of up to 5 billion yuan;

(2) Analysts believe that mergers and acquisitions are considered to be an effective way to solve involution, but the asset-liability ratio of photovoltaic enterprises is generally high, and mergers and acquisitions are more difficult.

In the face of thousands of announcements of listed companies every day, what should I read? What is the point of the announcement of major events, which is often dozens of pages and hundreds of pages? There are a bunch of professional terms in the announcement, I don't know if it's good or bad? Please take a look at the "Speed Reading Announcement" column of the News Department of the Financial Associated Press, and our reporters stationed all over the country will bring you accurate, fast and professional interpretation on the night of the announcement.

Finance Associated Press, February 14 (Reporter Liu Mengran) After half a year of consultations, Tongwei shares (600438. SH) announced the termination of its proposed acquisition plan of Jiangsu Runyang New Energy Technology Co., Ltd. (hereinafter referred to as "Runyang Shares") for 5 billion yuan.

Regarding the reason for the termination, Tongwei Co., Ltd. said in the announcement issued this evening that the parties to the transaction have conducted several rounds of detailed and comprehensive communication and consultation, but so far some commercial terms have not been agreed.

It is worth noting that Tongwei also said that the two sides intend to explore the operation cooperation of the polysilicon business. Runyang was once one of the leading companies in the P-type cell era, but its industrial chain has long been extended upstream to industrial silicon, polysilicon and silicon wafers, and downstream to module sales.

A market analyst told the Financial Associated Press reporter that the purpose of Tongwei's acquisition of Runyang is mainly to be optimistic about Runyang's overseas production capacity and sales channels. However, with Runyang embroiled in rumors of overseas factory shutdowns and a patent litigation dispute with Trina Solar, its advantages may no longer be there. For Tongwei, Runyang's polysilicon production capacity is far from being able to support this transaction of up to 5 billion yuan.

The $5 billion acquisition plan was terminated

In August last year, Tongwei Co., Ltd. announced that it planned to increase its capital to Runyang Co., Ltd. and obtain its controlling stake. Tongwei and Runyang have ranked among the top five in the industry in terms of cell shipments for many years. The total amount of the transaction does not exceed RMB 5 billion, which is also the largest transaction amount in the photovoltaic and even new energy fields in recent years.

But in September last year, Jiangsu Runyang Century Photovoltaic Technology Co., Ltd., located in Yancheng, Jiangsu Province, which is one of the main operating entities of Runyang's battery business, was shut down, and the Financial Associated Press had an exclusive report on the incident. In addition, according to a number of people familiar with the matter, Runyang's silicon wafer factories in Yunnan and other regions and Thailand factories are also facing varying degrees of production and operation pressure. The battery factory that was exclusively "booked" by Tongwei 5 billion The important domestic base has been suspended

Tongwei did not disclose the details of the disagreement between the two parties. However, the reporter of the Financial Associated Press noticed that at the beginning of the acquisition, Tongwei shares had set a number of "thresholds" for the conditions for reaching the transaction, such as: requiring Jiangsu Yueda Group, a state-owned shareholder of Yancheng, to increase the cash capital of Runyang shares by 1 billion yuan. According to public information, Jiangsu Yueda Group increased its capital by 1 billion yuan to Runyang shares in September last year, completed industrial and commercial changes, and became the actual controlling and single largest shareholder of Runyang shares.

Since then, many production bases of Runyang Co., Ltd. have repeatedly reported news of shutdown and resumption of production. However, in the downward cycle of the photovoltaic industry, there are more thorny problems in front of Runyang shares.

Runyang's overseas module production and sales channels are considered to be another important advantage to attract Tongwei's M&A, and according to Runyang, its "RUNERGY" is the leading brand in terms of PV module sales in the United States.

However, Runyang is embroiled in a patent dispute with another module leader, Trina Solar. Trina Solar filed a lawsuit in the U.S. District Court for the Central District of California against Runyang for infringement of two of its TOPCon technology patents.

On September 30, 2024, Trina Solar filed a Section 337 investigation application with the ITC of the United States, and Runyang Co., Ltd. was listed as a defendant. If Trina Solar wins the lawsuit, Runyang may face the risk of not being able to produce and sell in the United States.

Under the coercion of multiple risks, the integrated layout and overseas channel advantages of Runyang shares have been greatly reduced. When talking about the termination of the transaction, a number of industry insiders believe that there are expectations. At the same time, in the current industrial background, many aspects of photovoltaic are facing huge production and operation pressure, and there is no need for Tongwei to increase the "burden" at this time.

Why is the photovoltaic merger and reorganization "thundering and raining"?

Since the fourth quarter of 2023, this round of PV industry downturn has lasted for more than a year, and judging from the recently disclosed 2024 performance report, the performance of listed companies in the PV industry is generally facing losses.

In the face of the continuous decline in product prices and gross profit margins, and the limited operating rate of production capacity, mergers and acquisitions are considered to be an important way to solve the "involution". A number of business people called for a huge waste of capital resources in the photovoltaic industry in recent years, and mergers and acquisitions are an effective means to solve the industry's dilemma. It is necessary to break the state of fragmentation and over-investment, and promote the clearance of backward production capacity.

However, at this stage, it is not easy to achieve the merger and reorganization of photovoltaic production capacity. Judging from public information, except for the merger and acquisition of Runyang shares by Tongwei Co., Ltd., which has been terminated, there are few integration between leading enterprises in the industry. In November last year, *ST Zhongli (002309.SZ) signed a "Pre-Reorganization Investment Agreement" with Changshu Guangsheng New Energy Co., Ltd., a subsidiary of C&D Co., Ltd. (600153.SH). On December 9, Xiamen C&D Group took over Wuxi Suntech Solar Power Co., Ltd.

In addition to the impact of technology iteration, the existing production capacity faces a greater asset impairment risk, and the large-scale expansion in the early stage has led to a high asset-liability ratio of photovoltaic enterprises. According to the prospectus of Runyang shares, from 2020 to 2022, the company's asset-liability ratios were 75.48%, 81.39% and 79.17%, respectively, which were significantly higher than the asset-liability ratios of listed companies in the industry in the same period.

Some analysts pointed out that for photovoltaic companies, the difficulty and cost of financing at this stage have increased significantly, and it is also difficult to improve the debt ratio in the future.

According to statistics from industry institutions, as of the end of September 2024, the overall asset-liability ratio of 121 photovoltaic companies was 61.64%, a year-on-year increase of 1.97 percentage points. There are 28 companies with an asset-liability ratio of more than 70%, 10 companies with a debt ratio of more than 80%, and 4 companies with an asset-liability ratio of more than 100% (insolvency).

It is worth noting that even industry leaders with high hopes for mergers and acquisitions are also facing pressure from high asset-liability ratios. As of the first three quarters of last year, among the top five photovoltaic leaders, LONGi Green Energy (601012. SH) and Tongwei have asset-liability ratios of 59.20% and 69.04%, while Trina Solar (688599. SH), JinkoSolar (688223. SH), JA Solar (002459. SZ) has exceeded 70%, reaching 74.57%, 71.89% and 72.15% respectively.

In terms of performance, a number of photovoltaic companies set the highest loss records last year. Among the above five companies, only JinkoSolar maintained a positive net profit, while LONGi Green Energy, Trina Solar, JA Solar and Tongwei Co., Ltd. are expected to have net profit losses of 8.2 billion to 8.8 billion yuan, 3.2 billion to 3.8 billion yuan, 4.5 billion to 5.2 billion yuan and 7 billion to 7.5 billion yuan respectively. Collection

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