Ex-Hanergy boss Li Hejun banned from acting as director or being involved in the management of any corporation, for up to 15 years
Sorry state of affairs a far cry from heady days of 2015 when the firm’s market valuation at one point exceeded that of all its mainland competitors combined
Li Hejun, briefly ranked by the Hurun rich list as China’s richest person in 2015 thanks to the sky-rocketing valuations of his Hong Kong-listed vehicle Hanergy Thin Film Power (HTF), has been brought back to earth with a thump.
The 48-year-old native of Heyuan, Guangdong province, shot to fame in 2002 when his privately-owned Hanergy Holdings Group – which owns 74.8 per cent of the listed unit – won the right to build the 2,400-megawatt 20 billion yuan Jinanqiao hydro-electric power plant in Yunnan province.
He was famous in the state-firm-dominated power sector not only because his firm was the country’s first and only privately owned firm to be allowed to invest in a hydropower project of Jinanqiao’s scale, but that it also managed to raise the required financing, and then completed it in 2012.
That hydro investment earned him his first pot of gold – but his foray into the solar power sector some seven years ago, and subsequent dealings between Hanergy Holdings and HTF, has left a deep scar on his entrepreneurial resume.
On Monday, the Securities and Futures Commission sought a Hong Kong court order banning Li – HTF’s former chairman – and four current independent non-executive directors, from acting as directors or being involved in the management of any corporation, for up to 15 years.
The SFC has also sought a court order demanding Li’s Hanergy Holding pay all its outstanding receivables due to HTF, arising from two huge solar panel production equipment sales contracts in 2010 and 2011. A contract of guarantee to secure such payment is also being sought.
HTF must meet those conditions before the SFC will even consider letting its shares resume trading, besides submitting detailed disclosures on the company’s activities, business, assets, liabilities, financial performance and prospects.
The SFC alleged Li and his fellow directors to have “failed to question the viability of HTF’s business model” and “properly assess the financial positions of the connected parties and hence the recovery of the receivables due from them”.
The sorry state of affairs is a far cry from the heady days of 2015 when the company’s market valuation at one point exceeded that of all its mainland competitors combined and more than five times that of United States-based First Solar, the leader in thin-film technology, also used by HTF.
With a market value of over HK$300 billion, HTF was once the 16th-largest firm listed on the Hong Kong bourse, even more valuable than blue-chips Hang Seng Bank, the MTR, even the stock exchange itself.
Its share price surged 664 per cent in the 12 months before a sudden sell-off in May 2015 that saw it nearly halve in value within 70 minutes, before trading was suspended.
Many mainland investors too were caught by the subsequent prolonged suspension, as it was one of the most traded stocks by them using the Shanghai-Hong Kong Stock Connect scheme, which allows cross-border trading of stocks listed in the two cities’ bourses.
Market observers remain sceptical at best, on HTF’s future prospects, even if Hanergy Holding does manage to pay off the huge sums owed to HTF.
“Why would Hanergy Holding pledge good assets to fulfil bad contracts?” Brock Silvers, managing director of Shanghai-based financial advisory firm Kaiyuan Capital told the South China Morning Post.
“Who would advise the purchase in today’s [far-from lucrative solar power panel] market which is worth US$9 billion of solar production lines?”
“Under normal circumstances those contracts would be abrogated. And without those contracts, there’s very little left of HTF.”
At the end of June last year, HTF had HK$2.64 billion of trade receivables owed by Hanergy Holding, of which HK$1.68 billion was overdue by 12 months, according to its interim financial report.
Multi-year supply agreements by the parent to buy US$8.5 billion of solar panel production lines from Hanergy Thin Film allowed the latter to book handsome profit growth for several years before 2015, which helped drive up its share price.
The production lines, if built and installed, had the annual capacity to produce 10 gigawatts (GW) worth of solar panels – a third of all those installed in China last year.
Hanergy has a two-year deadline to pay HTF from the court order. The first hearing into its progress will be on May 31 this year.
Li and his fellow directors have no plans to contest the court proceeding against them, HTF said on Monday.
While its hydropower plant is considered a cash cow, it remains unclear how Hanergy Holding may ever finance the huge sums owed to HTF.
Hanergy Holding has borrowed billions of yuan in recent years from lenders through various trust investment products, which are more lightly regulated than bank loans and carry much higher interest rates, online marketing materials for the products claim.
It even borrowed 330 million yuan over six years by selling and leasing back one of Li’s private jets to Hong Kong-listed Noble Century Investment Holdings in early 2015, according to Noble’s filing to the stock exchange.
Li Hejun agreed a year ago to sell HTF’s shares at a whopping 94.5 per cent discount to their last publicly traded price to raise HK$537 million, a stock exchange filing showed.
Hong Kong Securities Association chairman Benny Mau said he supported the SFC’s action on Tuesday, but urged the regulator to move faster on handling future cases of companies that become embroiled in such prolonged trading suspensions.
“Hanergy has been suspended from trading since May 2015, and it took almost 20 months for us to see any legal action being taken by the SFC against the directors, or to hear details of the conditions under which the company can resume trading,” Mau said.
“It is fully understandable that the SFC needs time to carry our its investigation. But investors want to see the companies in which they invest resume trading as soon as possible.”
Mau suggested the SFC issue guidelines in future for the resumption of time frames be set – maybe six months to a year – for companies in prolonged trading suspensions.
Louis Tse Ming-kwong, a director of VC Brokerage, said the SFC’s requirement for the parent company to repay money owed to HTF would help safeguard the interest of the small shareholders of Hanergy HTF.
SFC executive director Tom Atkinson said in October the regulator has shifted its investigative focus towards fraud and misconduct at the corporate level, adding as such the malpractice had cost the Hong Kong stock market HK$200 billion.