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Solar giant accused of cooking its books

Former senior staff at Trony claim panel maker exaggerated sales and output figures presented in prospectus for initial public offering

PUBLISHED : Monday, 22 April, 2013, 12:00am
UPDATED : Monday, 22 April, 2013, 2:50am

Mainland solar panel manufacturer Trony Solar massively over-reported its sales and production data at the time of its listing, two former managers at the Shenzhen-based firm claimed.

Trony claimed in its listing prospectus in September 2010 to be the world's fourth-largest producer of thin-film solar panels by production volume in 2009, and told prospective investors that it had 145 megawatts (MW) of annual output capacity.

It raised HK$1.73 billion from its initial public offering to expand production capacity and repay a US$30 million loan due to chairman Li Yi.

But the firm's actual production capacity was less than 20MW in 2009, the two former senior managers told the South China Morning Post on condition of anonymity.

Even after a new 20MW production line was added but not put into operation, its capacity was far below the 205MW Trony later reported that it had on June 30, 2011, they said.

The two said that based on actual shipment volumes, the company's sales were less than 10 per cent of the 610 million yuan (HK$758 million) reported for the six months to December 31, 2011 and 1.35 billion yuan reported for the 12 months to June 30, 2010.

One of the former employees said an investigation under way into the matter was "going nowhere" since most records for proper auditing and control had been destroyed.

A spokesman for Trony would not comment on the allegations.

A person familiar with the situation said a whistle-blower had lodged a formal complaint about the allegations to Hong Kong Exchanges and Clearing and the Securities and Futures Commission. Both regulators said they would not comment on individual cases.

Trading in Trony shares was suspended last June after the company told investors the board had identified "possible discrepancies" in its financial records. An independent investigation committee comprising its three independent directors was formed.

In the past 13 months, however, company filings show the three directors have resigned, along with a chief financial officer, a co-president, an executive director, a non-executive director, a finance director, a sales director, and a vice-president of production.

The former employees claimed that Li had been "hiding" in the United States since late 2011 and controlling affairs from abroad.

The Trony spokesman said the firm had cut its workforce by about a third to less than 700 amid difficult conditions in the solar equipment market. He also said Li was in the US seeking business opportunities, but would not say how long he had been absent from China.

Law firm King & Wood Mallesons was appointed in July as the firm's Hong Kong legal adviser, and in turn appointed PricewaterhouseCoopers Consulting in September to carry out a forensic review of its books, including sales and purchase transactions as well as its cash position. So far, Trony has not disclosed any findings from the review, except to say it was continuing.

Frustrated by a lack of disclosure on the progress of the investigation, substantial shareholders ICBCI Fund Management, Hong Kong Sincere Investment, and China Huadian Capital, had sent Trony's management a joint letter demanding disclosure of the latest development, two people with direct knowledge of the matter said. ICBCI, Hong Kong Sincere, and PWC would not comment. China Huadian could not be reached.

Sincere is wholly owned by New Huadu Industrial Group, a conglomerate controlled by Fujianese tycoon Chen Fashu. China Huadian Capital is wholly owned by China Huadian Group, one of the mainland's five state-owned power generation majors.

US banking major JP Morgan Chase and semiconductor giant Intel bought a combined US$45 million of preference shares in Trony in September 2008. They were redeemed by Trony for US$60 million in April 2010, when the firm got US$60 million of new investments from ICBCI Fund Management and Hong Kong-based hedge fund Shikumen Capital Management.

Li, who owed ICBC International Finance US$30 million, cancelled half the loan amount by transferring some Trony shares to its creditor's associate firm ICBC International Strategic Investment in May 2010.

JP Morgan, ICBC International, and CLSA were joint global co-ordinators of Trony's IPO in October 2010.

ICBCI Fund Management owns 10.3 per cent of Trony and ICBC International Strategic owns 3.2 per cent.

The IPO's cornerstone investors, Hong Kong Sincere and China Huadian, each hold 1.6 per cent.

Trony had until May 8 to appoint new independent non-executive directors to fulfil listing-rule requirements, its spokesman said.

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