In 2018 and 2022, Tongwei Shares and Longji Green Energy signed major sales contracts for 55000 tons and 203600 tons of high-purity crystalline silicon, respectively.
In the downward cycle of the photovoltaic industry, two billion dollar giants, Tongwei Shares (600438. SH, with a market value of 101.7 billion yuan) and Longji Green Energy (601012. SH, with a market value of 141.1 billion yuan), announced their partnership.
On May 11th, Tongwei Corporation announced that its six subsidiaries (hereinafter referred to as “Sellers”) had recently signed sales contracts for high-purity crystalline silicon products with Longji Green Energy and its nine subsidiaries (hereinafter referred to as “Buyers”).
The sales contract stipulates that from 2024 to 2026, the buyer shall purchase no less than 862400 tons of high-purity crystalline silicon products from the seller. The purchase price shall be determined through monthly negotiations, and the total contract transaction amount shall be based on the final transaction amount.
Based on the latest issue (May 8, 2024) of the Silicon Industry Branch of the China Nonferrous Metals Industry Association, which announced the average transaction price of domestic N-type materials at 45300 yuan/ton, the estimated total amount of this contract is about 39.1 billion yuan (including tax).
The reporter noticed that the silicon material bulk order signed between Tongwei Group and Longji Green Energy is not the first cooperation between the two parties. Tongwei Group signed major sales contracts with Longji Green Energy in 2018 and 2022, respectively, for 55000 tons and 203600 tons of high-purity crystalline silicon.
When it comes to the potential impact of the newly announced long-term cooperation, Tongwei Shares believes that this contract is a daily operational long-term sales contract. The signing of this contract is conducive to the stable sales of the company’s high-purity crystalline silicon products, in line with the company’s future business plan, and has a positive impact on the company’s business performance. “The company’s main business will not become dependent on the counterparty due to the performance of this contract, and will not affect the independence of the company’s business.”
Tongwei Co., Ltd. stated that the calculation of the 39.1 billion yuan contract did not take into account factors such as future price changes in the polycrystalline silicon market, and there is a certain degree of uncertainty, which does not constitute a performance commitment.
Tongwei Group also pointed out the relevant risks of contract performance.
For example, in the process of performance, if there are significant changes in policies and market environment or significant force majeure factors, there is still a risk that the contract cannot be fulfilled on time or in full; Due to changes in the macroeconomic environment and market supply and demand, there may be discrepancies between the total sales amount and the current estimated value.
Since last year, the prices of the photovoltaic industry chain have declined. According to the 2023 financial report of Tongwei Group, at the end of 2023, the average selling prices of the four main links in the photovoltaic industry chain, including high-purity crystalline silicon, silicon wafers, batteries, and photovoltaic modules, decreased by 80%, 58%, 60%, and 45% respectively compared to the beginning of the year. In the fourth quarter, the prices of silicon wafers, batteries, and modules hit historical lows.
In 2023, Tongwei Group has a production capacity of 450000 tons of high-purity crystalline silicon and a construction capacity of 400000 tons.
“Last year, the average production cost of the company’s high-purity crystalline silicon products dropped to below 42000 yuan/ton, significantly leading the industry average level.” Tongwei Group stated in its 2023 financial report that the company’s high-purity crystalline silicon business still achieved a net profit of over 45000 yuan per ton under the impact of the significant decrease in product prices in 2023.
As of December 31, 2023, the total assets of the buyer – Longji Green Energy were RMB 163.969 billion, and the net assets attributable to the shareholders of the listed company were RMB 70.492 billion; In 2023, the operating income was 129.498 billion yuan, and the net profit attributable to the shareholders of the listed company was 10.751 billion yuan.