Cross-border investment helps to resist cyclical fluctuations in coal industry

Shanshan Coal International recently responded to the Shanghai Stock Exchange's inquiry on matters related to strategic cooperation. Shanshan Coal International previously announced that the company and Junshi (China) Energy Co., Ltd (Junshi) signed the Strategic Cooperation Framework Agreement to jointly invest in the construction of a 10G heterojunction battery production project.

The Shanghai Stock Exchange asked the company to explain that the company's main business is coal production and trade, the company's specific consideration of this cross-border investment in the production of heterojunction batteries; the company's resources allocation of relevant professionals, equipment, technology in the field of heterojunction batteries, combined with the company's previous heterojunction batteries-related industries. Business experience shows whether the company has the corresponding operational capacity for the project; the company's current asset-liability ratio is 79.37%. Please clarify the source and arrangement of funds for this investment, and explain the specific impact of this investment project on the company's financial situation in the light of the current situation of debt maturity, operating income, cash flow and so on. Shanshan Coal International said that the company's main business is coal production and coal trade, and this cross-border investment is mainly based on further broadening the company's industrial layout to achieve the extended development consideration in the energy industry. The company plans to lay out the production and manufacture of heterojunction batteries. The aim is to optimize the industrial structure and create a two-wheel-driven development model for coal production and new energy development on the basis of doing well in the main coal industry, which will help the company resist the cyclical fluctuations in the coal industry and enhance its comprehensive competitive strength. At the same time, Shanmei International also said that the company has not yet set up a professional management team and equipped with professional R&D personnel in the field of heterojunction batteries.

There are two considerations for this company: one is to ensure the normal operation of the project based on the existing professional team of Junshi Company; the other is to synchronously carry out the introduction and reserve work of professional management personnel and technical R&D personnel in this field, so as to ensure the improvement of the follow-up management ability.

As for equipment and technology reserve, because the company is preparing to lay out the field of heterojunction batteries for the first time, there is no relevant reserve, but the premise and foundation of this cooperation is Junshi's equipment design, designated production capacity and technical advantages in the field of heterojunction batteries, the company will rely on Junshi's equipment and technology. Advantages actively promote this cooperation. Shanshan Coal International believes that the signing of the Strategic Cooperation Framework Agreement is only the preliminary intention of cooperation between the two sides, and does not involve specific amounts. The two sides have not yet consulted on the specific details of the investment amount. If the project is determined, the company will adopt various means to raise funds, including but not limited to: operating profit of the company; financing obtained by issuing shares or bonds of the company; bank project loans obtained by the company or the project company; investment of the company's current or future partners, etc. The annual report of 2018 shows that Shanmei International's current asset-liability ratio is 79.37%. The source of funds for this investment has also attracted the attention of regulators.

Shanmei International said in its inquiry and reply that in the first quarter of 2019, the company realized 8.08 billion yuan in business income, generated 625 million yuan in net cash flow from business activities and 3.871 billion yuan in cash and cash equivalents balance at the end of the first quarter. Up to now, all maturing debt financing has been continued as planned until the end of 2019. The maturity of debt financing is 7.726 billion yuan.

However, at present, because the two sides have not signed a formal investment agreement on the cooperative project, the company can not determine the specific amount of investment, and can not predict the impact of the investment project on the company's financial situation for the time being.

In addition, up to now, the company and Junshi Company have only reached a preliminary intention to cooperate, and the details of the amount and proportion of their respective contributions and whether there are financing arrangements have not yet been determined. The announcement discloses that Junshi is mainly engaged in research and development, equipment manufacturing, product production and sales and integrated services of the new generation of high-efficiency solar cells (HDT). The Shanghai Stock Exchange requires Shanshan Coal International to make supplementary disclosure: the historical evolution of Junshi Company, ownership structure chart, actual controllers and so on. It also explains whether there is a relationship between the actual controllers of Junshi Company, Junshi Technology (Hong Kong) Co., Ltd. and Junshi Company and the listed companies, whether they directly or indirectly hold the shares of listed companies, and whether they intend to do so. In this transaction, Junshi will play an important role in equipment, process technology and related intellectual property rights.