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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  GCL-Poly Energy Holdings Limited    3800   KYG3774X1088

GCL-POLY ENERGY HOLDINGS LIMITED

(3800)
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GCL Poly Energy : INTERIM REPORT 2020

09/17/2020 | 04:55am EST

Bringing

Green Power

to Life

同鑫.同夢.同行

2020 INTERIM REPORT

Contents

2 Financial Highlights

4 Chairman's Statement and CEO Review of Operations and Outlook

8 Management Discussion and Analysis

27 Report on Review of Unaudited Condensed Interim Consolidated Financial Statements

29 Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

31 Unaudited Condensed Consolidated Statement of Financial Position

34 Unaudited Condensed Consolidated Statement of Changes in Equity

37 Unaudited Condensed Consolidated Statement of Cash Flows

39 Notes to the Unaudited Condensed Interim Consolidated Financial Statements

91 Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures

94 Option Schemes

  1. Interests and Short Positions of Substantial Shareholders
  2. Corporate Governance and Other Information

103 Corporate Information

Financial Highlights

Six months ended 30 June

2020

2019

Change

% of change

RMB'000

RMB'000

RMB'000

(unaudited)

(unaudited)

Revenue

Sales of wafer

2,572,834

4,535,386

(1,962,552)

-43.3%

Sales of electricity

2,970,185

3,421,501

(451,316)

-13.2%

Sales of polysilicon

1,015,188

1,289,009

(273,821)

-21.2%

Processing fees

357,390

310,133

47,257

15.2%

Others (comprising the sales of ingots)

243,643

445,806

(202,163)

-45.3%

7,159,240

10,001,835

(2,842,595)

-28.4%

Loss attributable to owners of the Company

(1,995,988)

(997,530)

(998,458)

100.1%

Change

% of change

RMB cents

RMB cents

RMB cents

Loss per share

- Basic

(10.20)

(5.51)

(4.69)

85.1%

- Diluted

(10.20)

(5.51)

(4.69)

85.1%

02 GCL-Poly Energy Holdings Limited Interim Report 2020

Financial Highlights

30 June

31 December

2020

2019

Change

% of change

RMB'000

RMB'000

RMB'000

(unaudited)

(audited)

Extracts of unaudited condensed consolidated

statement of financial position

Equity attributable to owners of the Company

20,517,708

22,250,159

(1,732,451)

-7.8%

Total assets

95,262,019

100,436,959

(5,174,940)

-5.2%

Bank balances and cash, pledged and

restricted bank and other deposits*

7,840,689

8,515,445

(674,756)

-7.9%

Indebtedness (bank and other borrowings, lease

liabilities, notes and bonds payables, and

loans from related companies)#

53,165,365

55,372,519

(2,207,154)

-4.0%

Key financial ratios

Current ratio

0.64

0.53

0.11

20.8%

Quick ratio

0.63

0.51

0.12

23.5%

Net debt to equity attributable to owners of the

Company

220.9%

210.6%

10%

4.7%

  • Amount includes pledged bank deposits, bank balances and cash and a deposit pledged at a related company classified as held for sale of RMB79,517,000 (31 December 2019: nil) and a deposit pledged at a related company of RMB58,000,000 (31 December 2019: RMB38,000,000).
  • Amount includes indebtedness classified as held for sale of RMB1,500,734,000 (31 December 2019: nil).

Interim Report 2020 GCL-Poly Energy Holdings Limited 03

Chairman's Statement and

CEO Review of Operations and Outlook

Since the beginning of 2020, the global manufacturing chain has been subject to negative impacts to various extents owing to unsettling factors such as the sudden outbreak of "COVID-19" and escalating domestic and international risks and challenges. Against this backdrop, photovoltaic companies in China have resumed production operations in the fastest pace possible and sustained stable development, credit to their strong resilience and solid foundation forged in previous periods, favourable national policies and the customary upward trend of the industry. According to the National Energy Administration, new installed capacity for PV power generation in China for the first half of 2020 increased by 0.88% to 11.52 GW, as compared to 11.4 GW for the same period in 2019, marking the first positive growth in new installed capacity during the first half of the year since 2018. Given the current unusual circumstances, such hard-earned growth has provided a powerful boost to confidence across the industry and contributed to greater enthusiasm in the market. According to the latest industry analysis report of BloombergNEF (BNEF), the estimated global installed capacity for the year will range between a low-case scenario of 111 GW and a best-case scenario of 141 GW. According to the latest forecast of the China Photovoltaic Industry Association (CPIA), domestic installed capacity of China could reach 40 GW or above.

During this unusual year, the strong leaders in the PV industry emerged even stronger and became trend buckers against the epidemic. As a PV enterprise that had lived through multiple industry cycles, GCL-Poly committed itself to profound self-reflection in response to the fast-evolving innovation of the industry, revisiting its product positioning and exploring ways to implement reforms from a pragmatic point of view, actively adjusting its strategic deployment and firmly grasping any opportunities amidst challenges as it followed a path of qualitative development in fulfillment of its social responsibility, with the determination and persistence befitting a sustainable business enterprise.

Business Review for the First Half of 2020

During the first half of 2020, GCL-Poly produced approximately 17,881 MT of rod silicon and 14,328 MW of wafers, respectively. As of 30 June 2020, GCL-Poly recorded revenue of RMB7,159 million, representing a decrease of 28.4% as compared with the same period in 2019; gross profit amounted to approximately RMB1,804 million, representing a decrease of 23.4% as compared with the same period in 2019; loss for the period attributable to owners of the Company amounted to approximately RMB1,996 million and basic loss per share was approximately RMB10.20 cents.

During the period, GNE's total PV installed capacity was approximately 7,043 MW, a decrease of 1.94% as compared with the same period in 2019. Total revenue from PV power generation business amounted to approximately RMB2,731 million, representing a decrease of 13.9% as compared with the same period in 2019. Profit attributable to shareholders of the GNE Group amounted to approximately RMB42 million and basic earnings per share was approximately RMB0.22 cents.

04 GCL-Poly Energy Holdings Limited Interim Report 2020

Chairman's Statement and CEO Review of Operations and Outlook

Market-oriented focus on the principal business

In view of intricate international developments and opportunities arising from the rotation of industries, GCL-Poly monitored the situation and made diligent efforts to enhance its inherent strengths in close tandem with market developments, overcoming difficulties and making radical changes where necessary. Nevertheless, we remained committed to achieving ongoing cost reduction and efficiency enhancement, as we strengthened our business foundation with a strong focus on our principal operations to increase our competitiveness by achieving excellence in industrial operations. In the meantime, the Company continued to deepen its cooperation with financial institutions and explore initiatives for collaborative financial innovation with the aim of further optimising its balance sheet and financing structure, so that it will be well-positioned for the next cycle of steady development with adaptive preparations and strategic plans for transformation in place.

Polysilicon: Xuzhou base resumed operation of existing facilities with new FBR capacity poised for operation

During the first half of the year, we experienced a setback with our new installed capacity as the impact of the epidemic was felt, resulting in a notable decline in prices for all sections along the industry chain, with the prices of polysilicon falling to historic low. With the gradual waning of the global pandemic, industrial production has returned to a level similar to that prior to the outbreak, and delayed projects in the first half of the year will go a long way driving retaliatory rebound in the installed capacity of the industry during the second half of the year. Since the end of the second quarter, there has been a rapid upsurge in polysilicon prices driven mainly by the growth in orders backed by emerging global demand for installed capacity, coupled with the commissioning of the new capacities of downstream water manufacturers. Jiangsu Zhongneng Polysilicon Technology Development Co., Ltd.* (江蘇中能硅業科技發展有限公司), a wholly-owned subsidiary of GCL-Poly, benefited from the recovery as a first-tier enterprise among global suppliers of silicon materials and reported marked improvements in production and sales. Jiangsu Zhongneng is hopeful of a turnaround to profit for the full year based on the latest forecasts of market trading prices in August.

GCL-Poly's R&D, production and sales teams for polysilicon are among the best in the industry with access to proprietary polysilicon technology developed over more than a decade of stable production and operation of polysilicon and further complemented by the patented silicon-methane fluidized bed (FBR) technology team and equipment acquired from SunEdison, U.S. in 2017. Our technology for granular silicon has been applied at our polysilicon base in Xuzhou and facilitated stable mass production on a continuous basis. Its quality has been well testified and recognised by downstream mono-wafer customers. The Xuzhou Base currently has a production capacity of 6,000 tonnes of granular silicon, which is expected to increase to over 10,000 tonnes within the year, while further new capacities are scheduled for commissioning next year. Given GCL's investment, experience and capability in polysilicon developed on the back of intensive effort over the years, we firmly believe that we are capable of conducting our principal business in a more refined manner, producing better quality at lower costs as we continue to offer customers with world-class polysilicon products and grow GCL into a world-class brand for polysilicon.

Interim Report 2020 GCL-Poly Energy Holdings Limited 05

Chairman's Statement and CEO Review of Operations and Outlook

Wafer: augmenting the effect of the Company's unique advantage with a diverse range of complementary products meeting the requirements of "large-size" terminals

In view of diverse customer requirements and changing market preferences, GCL-Poly has also continued to drive the strategy for product transformation and upgrade in an active manner. In respect of mono wafer, GCL-Poly has adopted a complementary approach to develop its mono wafer capacity via a range of pathways. In addition to maintaining our market shares in Ningxia Base and Zhonghuan Phase IV, we are looking to expand our mono wafer capacity according to market requirements and supply competitive mono wafers. By the end of 2020, the Company is expected to own a mono wafer capacity in excess of 10 GW. In connection with multi-wafer and quasi- mono wafer, while maintaining its production and promotion, the Company has adopted defined customisation in a departure from its tradition, which is conducive to the effective control of inventory level while substantially meeting the differentiated requirements of customers. In addition, the Company will optimise its customer mix in a proactive manner in a bid to lock-inlong-term orders from quality customers at an early stage and ensure optimal capacity utilisation as well as maximum profitability.

The unique advantage enjoyed by GCL-Poly as a vertically integrated business model in the upstream sector has been obvious in the current seller's market for the full industry chain. We have been able not only to ensure priority supply of products, but also to conduct internal control and coordination with substantially increased economic efficiency, resulting in greater competitiveness for the Company's products. Meanwhile, to further strengthen our cashflow books and leverage old assets to create new value, we have been actively taking up orders for OEM cutting operations, with a view to increasing utilisation of our cutting capacity without affecting our own operations.

Optimising balance sheet structure to facilitate industry upgrade

Subsidiary GNE will dispose its solar farms to recoup capital and lower its debt, so as to alleviate the pressure of project financing and further increase its rate of return on capital. On 21 January 2020, the Group announced that it had entered into the first batch of share purchase agreements with Huaneng, upon the completion of which more cooperation opportunities could be discussed and further disposals will be actively carried forward. The aforesaid measures have not only allowed the Group overcome cash flow pressure, but have also marked a huge step in GNE's future move towards an asset-light approach. It is also worth noting that relevant national authorities have recently sent out positive signals on the solution of new energy subsidy, and it is hopeful that the issue of overdue new energy subsidies will be effectively alleviated or even settled once and for all in the near future, upon which there will be a radical turnaround in the financial conditions of the Company.

06 GCL-Poly Energy Holdings Limited Interim Report 2020

Chairman's Statement and CEO Review of Operations and Outlook

Outlook

Despite the difficulties encountered amidst the epidemic, the PV industry is expected to return to the normal course of development in no time given its unique positioning as a highly flexible operation with incessant supply of resources, and the positive trend of stability and growth for the global PV market should remain unchanged. From a long-term perspective, economic stimulus measures adopted in different parts of the world should play an important role in driving national economic recovery and development, fostering healthy business environments and channeling investments for the solar energy sector, thereby lending a positive outlook on the global PV market. According to the forecasts of a number of international agencies, the installed capacity and power generation volume of the global PV industry will embrace growth to various extents in the coming years with encouraging momentum. According to SolarPower Europe (SPE), the installed capacity of the global PV industry is likely to exceed the TW mark in 2022 and may reach 1.678 TW by 2024 according to optimistic predictions. Based on best- case scenarios, the annual installed capacity of the global PV industry will grow from 138.8 GW in 2020 to 255 GW in 2024.

During the course of the said growth, GCL-Poly will seize every opportunity with its full effort and leverage its existing advantages to focus on its principal business of PV materials. Through the core products of our Solar Materials (polysilicon and wafer) segments, we will continue to enhance our competitiveness, while making flexible adjustments to our product mix in tandem with the requirements and developments of the market. In the meantime, we will drive asset disposal by developing incubative assets through the recycling of existing assets, while enhancing asset value by developing new businesses and optimising existing ones. We are profoundly aware that only through radical internal evolution will we be able to reap success in the future. We also firmly believe that, following technological progress, industrial upgrade, market optimisation and the reshaping of business landscape, GCL-Poly will emerge stronger, healthier and in a more disciplined manner as it embraces the new era of development.

Finally, we would like to express sincere appreciation to the Company's Board of Directors, management team and all staff for their hard work and dedication during the first six months of 2020. We are also deeply grateful to the Company's shareholders and partners for their strong support.

Interim Report 2020 GCL-Poly Energy Holdings Limited 07

Management Discussion and Analysis

Overview

The first half of 2020, the novel coronavirus ("COVID-19") pandemic has affected the entire world. The tension in the China-US relation has adversely influenced the global economic landscape. During the period under review, the negative market sentiment has deteriorated the solar industry, which affected our performance.

Results of the Group

For the period ended 30 June 2020, the revenue and gross profit of the Group were approximately RMB7,159 million and RMB1,804 million, respectively, representing a decrease of 28.4% and 23.4% respectively as compared with approximately RMB10,002 million and RMB2,354 million in the corresponding period in 2019.

The Group recorded a loss attributable to the owners of the Company of approximately RMB1,996 million as compared to loss attributable to owners of the Company of approximately RMB998 million in 2019.

Placing of new shares

During the period under review, the Company placed 1,300,000,000 shares at a price of HK$0.203 per share. The net proceeds of the placing, after taking into account all related costs, fees, expenses and commission of the placing, is approximately HK$260 million. The net proceeds have been used for repayment of existing borrowings and for general corporate purposes.

Segment Information

The Group are reported on the three operating segments as follows:

  1. Solar Material business - mainly manufactures and sales of polysilicon and wafer to companies operating in the solar industry.
  2. Solar Farm business - manages and operates 371 MW Solar Farms, of which 18 MW is located in the United States and 353 MW is located in the PRC. These Solar farms were constructed or acquired by the Group prior to obtaining a controlling stake in GCL New Energy Holdings Limited ("GNE Group" or "GNE").
  3. New Energy business - represents the business operations of GNE, which is principally engaged in the development, construction, operation and management of Solar farms.

08 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

The following table sets forth the Group's operating results from operations by business segments:

Six months ended

Six months ended

30 June 2020

30 June 2019

Segment

Segment

Revenue

(loss) profit

Revenue

(loss) profit

RMB million

RMB million

RMB million

RMB million

Solar Material Business

4,189

(2,023)

6,580

(1,311)

Solar Farm Business

239

41

249

64

Sub-total

4,428

(1,982)

6,829

(1,247)

New Energy Business1

2,731

172

3,173

554

Total

7,159

(1,810)

10,002

(693)

1. The segment profit from operations of the New Energy business includes reported net profit of GNE Group of approximately RMB191 million (six months ended 30 June 2019: RMB571 million) and allocated corporate expenses of approximately RMB19 million (six months ended 30 June 2019: RMB17 million).

Business Structure

The Group is principally engaged in: (i) manufacturing and sales of polysilicon and wafers for solar industry and (ii) the development, construction, operation and management of solar farms.

The Group owns 62.28% equity interest in GNE. GNE is a listed company in Hong Kong (Stock code: 0451). Except for 371MW Solar Farm that were constructed or acquired by the Group prior to obtaining a controlling stake in GNE, the Group primarily develops, constructs, operates and manages downstream Solar Farms through the platform of GNE.

Interim Report 2020 GCL-Poly Energy Holdings Limited 09

Management Discussion and Analysis

For illustrative purpose, if excluding GNE Group and recognising the cost of investment in GNE and the perpetual notes receivable from GNE as non-current assets, the effect of de-consolidated GNE Group as at 30 June 2020 would be as follows:

Deconsolidated

The effect of

adjustment

de-consolidated

The Group

GNE Group

(note)

GNE Group

RMB million

RMB million

RMB million

RMB million

Total assets

95,262

52,856

(5,005)

47,411

Total liabilities

70,202

42,686

(370)

27,886

Bank balances and cash, pledged and

restricted bank and other deposits

7,703

1,815

-

5,888

Pledged deposits at related companies

58

3

-

55

Bank balance and cash classified as

held for sale

80

80

-

-

Subtotal

7,841

1,898

-

5,943

Indebtedness

Bank and other borrowings

43,870

28,729

-

15,141

Lease liabilities

2,110

1,158

-

952

Notes and bonds payables

3,954

3,802

(272)

424

Loans from related companies

1,730

1,295

-

435

Indebtedness for solar farm projects classified

as held for sale

1,501

1,501

-

-

Subtotal

53,165

36,485

(272)

16,952

Note:

Deconsolidation adjustments mainly included:

  • The Group's cost of investment in GNE amounted to be RMB2,365,304,000.
  • The GNE's perpetual notes of RMB1,800,000,000 subscribed by the subsidiaries of the Group and its relevant interest accrual.
  • The transaction balances with GNE Group and other eliminations.

10 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

Business Review

Solar Material Business

Production

The Group's Solar Material business belongs to the upstream of the solar supply chain, which supplies polysilicon and wafer to companies operating in the solar industry. Polysilicon is the primary raw material used in the solar wafer production. In the solar industry supply chain, wafers are further processed by downstream manufacturers to produce solar cells and modules.

Polysilicon

As at 30 June 2020, part of the annual production capacity of rod silicon of the Group's Xuzhou base switched to that of 30,000 MT of granular silicon, resulting in a decrease in production capacity of rod silicon from 70,000 MT to 36,000 MT for the period. As of 30 June 2020, production capacity of granular silicon was 6,000 MT. During the six months ended 30 June 2020, the Group produced approximately 17,881 MT of rod silicon, representing a decrease of 51.1% as compared to 36,592 MT for the corresponding period in 2019. The decrease in production was mainly due to deconsolidation of Xinjiang GCL as a result of disposal of 31.5% of equity interest in the fourth quarter last year. During the six months ended 30 June 2020, production volume of granular silicon was 2,442 MT.

Wafer

As at 30 June 2020, as a result of an enhancement in cutting efficiency and the commissioning of specialised cutting machines, the Group's annual wafer production capacity increased from 35 GW to 40 GW. During the six months ended 30 June 2020, the Group produced 14,328 MW of wafers in aggregate (including 7,288 MW of OEM wafers), representing a decrease of approximately 2.3% from 14,658 MW (including 4,006 MW of OEM wafers) for the corresponding period in 2019, while the production volume of wafers (excluding OEM wafer) recorded a decrease of 33.9%.

Sales Volume and Revenue

During the six months ended 30 June 2020, the Group sold 17,489 MT of rod silicon and 14,419 MW of wafers (including OEM wafer of 7,132 MW), representing a decrease of 15.6% and 2.2%, respectively, as compared with 20,731 MT of rod silicon and 14,737 MW of wafers (including OEM wafer of 4,012 MW) for the corresponding period in 2019, while sales volume of wafers (excluding OEM wafer) recorded a decrease of 32.1%.

The average selling prices (excluding tax) of rod silicon and wafer were approximately RMB53.2 (equivalent to US$7.56) per kilogram and RMB0.353 (equivalent to US$0.050) per W respectively for the six months ended 30 June 2020. The corresponding average selling prices of rod silicon and wafer for the six months ended 30 June 2019 were approximately RMB60.9 (equivalent to US$9.01) per kilogram and RMB0.423 (equivalent to US$0.062) per W respectively.

Revenue from external customers of the Solar Material business amounted to approximately RMB4,189 million for the six months ended 30 June 2020, representing a decrease of 36.3% from approximately RMB6,580 million for the corresponding period in 2019. It was mainly attributable to a decrease in both sales volume and selling price of wafers (excluding OEM wafer).

Interim Report 2020 GCL-Poly Energy Holdings Limited 11

Management Discussion and Analysis

Cost and Segment Result

The Group's polysilicon and wafer production costs mainly depend on its ability to control raw material costs, lower energy consumption, achieve economies of scale in its operations and streamline production processes. Benefited from the application of new technologies, the decrease in raw and auxiliary material costs, technological advancements and further increase in production volume, the overall manufacturing cost decreased. The Group will continue to push forward cost reduction and control measures.

Despite the continuous decrease in production costs for the Company, gross profit margin for the Solar Material business changed from positive gross profit margin to negative gross profit margin of -4.3% due to the sharp decrease in selling prices of photovoltaic products in the first half of the year. Nevertheless, as the impacts of the global pandemic gradually subside, prices along the full industry chain surged, as demonstrated by the rebound in selling prices of photovoltaic products in early August, while production in the industry has recovered to pre- pandemic levels.

Solar Farm Business

Overseas Solar Farms

As at 30 June 2020, the Solar Farm business includes 18 MW of solar farms in the United States. Besides, 150 MW solar farms in South Africa, which was partnered with CAD Fund, commenced operation in 2014 with the total effective ownership of 9.7% owned by the Group.

PRC Solar Farms

As at 30 June 2020, the Solar Farm business also includes 10 solar farms in the PRC, with installed capacity and attributable installed capacity unchanged at 353.0 MW and 289.3 MW, respectively.

Sales Volume and Revenue

For the six months ended 30 June 2020, the electricity sales volume of Solar Farm business overseas and in the PRC were 14,834 MWh and 238,611 MWh respectively (2019: 14,413 MWh and 246,999 MWh, respectively).

For the six months ended 30 June 2020, revenue for Solar Farm business was approximately RMB239 million (2019: RMB249 million).

12 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

New Energy Business

Capacity and Electricity Generation

As at 30 June 2020, the aggregate installed capacity of grid-connected solar power plants of the Group, including subsidiaries, joint ventures and associates, was 7,043MW (31 December 2019: 7,145MW). Details of capacity, electricity sales volume and revenue for the six months ended 30 June 2020 are set out below.

Number of

Aggregate

Grid-

Average

Tariff

solar power

Installed

connected

Electricity Sales

Tariff

Subsidiaries by provinces

Zones

plant

Capacity(1)

Capacity(1)

Volume

(Net of Tax)

Revenue

(MW)

(MW)

(million kWh)

(RMB/kWh)

(RMB million)

Inner Mongolia

1

11

359

359

293

0.76

223

Qinghai

1

3

107

107

77

0.81

62

Xinjiang

1

1

20

20

63

0.74

46

Ningxia

1

6

233

233

169

0.69

117

21

719

719

602

0.74

448

Qinghai

2

6

179

179

123

0.64

79

Xinjiang

2

2

47

47

32

0.80

26

Shaanxi

2

18

1,018

1,018

786

0.70

548

Yunnan

2

8

279

279

207

0.65

134

Jilin

2

4

51

51

39

0.74

29

Sichuan

2

2

85

85

69

0.80

55

Liaoning

2

3

47

47

32

0.69

22

Gansu

2

2

39

39

29

0.74

21

45

1,745

1,745

1,317

0.69

914

Jiangsu

3

40

543

543

325

0.85

276

Jiangxi

3

5

192

192

93

1.01

93

Shaanxi

3

1

6

6

3

0.66

2

Hebei

3

1

21

21

15

0.46

7

Hubei

3

4

165

165

90

0.86

77

Hainan

3

3

80

80

54

0.84

45

Zhejiang

3

3

62

62

27

1.02

28

Shandong

3

6

190

190

111

0.84

93

Anhui

3

11

390

390

230

0.79

182

Henan

3

14

584

584

386

0.74

287

Guizhou

3

6

235

235

118

0.81

95

Guangdong

3

8

219

133

76

0.78

60

Hunan

3

5

101

101

44

0.83

37

Guangxi

3

3

160

160

67

0.77

52

Fujian

3

3

55

55

27

0.79

21

Shanghai

3

1

7

7

3

0.99

3

114

3,010

2,924

1,669

0.81

1,358

Subtotal

180

5,474

5,388

3,588

0.76

2,720

US

2

134

134

78

0.50

39

Total of Subsidiaries

182

5,608

5,522

3,666

0.75

2,759

Interim Report 2020 GCL-Poly Energy Holdings Limited 13

Management Discussion and Analysis

Number of

Aggregate

Grid-

Average

Tariff

solar power

Installed

connected

Electricity Sales

Tariff

Subsidiaries by provinces

Zones

plant

Capacity(1)

Capacity(1)

Volume

(Net of Tax)

Revenue

(MW)

(MW)

(million kWh)

(RMB/kWh)

(RMB million)

Joint ventures and

associates(2)

PRC

28

1,435

1,435

802

0.78

622

Total

210

7,043

6,957

4,468

0.76

3,381

Revenue

(RMB million)

Representing:

Electricity sales

1,081

Tariff adjustment - government subsidies received and receivable

1,678

Total of subsidiaries

2,759

Less: effect of discounting tariff adjustment to present value(3)

(28)

Total revenue of the GNE Group

2,731

  1. Aggregate installed capacity represents the maximum capacity that was approved by the local government authorities while grid-connected capacity represents that the actual capacity connected to the State Grid.
  2. Revenue from joint ventures and associates was accounted for under "Share of profits of joint ventures" and "Share of losses of associates" in the consolidated statement of profit and loss and other comprehensive income.
  3. Certain portions of the tariff adjustment (government subsidies) will be recovered after twelve months from the reporting date. The tariff adjustment is discounted at an effective interest rate ranging from 2.45% to 2.98% per annum.

Most of the Solar farms of the GNE Group are located in China and almost all of the revenue is contributed by the subsidiaries of State Grid. The State Grid is a State-owned enterprise in China, which possesses low default risk. Therefore, the Directors of GNE Group considered that the credit risk of trade receivables was minimal.

14 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

Revenue and Gross Profit

During the six months ended 30 June 2020, the revenue of GNE Group comprised sales of electricity and related tariff adjustment (i.e. government subsidies) amounting to approximately RMB2,731 million (2019: RMB3,173 million), net of effect of discounting the tariff adjustment to its present value of approximately RMB28 million (2019: RMB89 million). The decrease in revenue was mainly attributable to the disposal of solar power plants during 2019 and 2020. The grid connected capacity was decreased from 6.6 GW as at 30 June 2019 to 5.5 GW as at 30 June 2020. The average tariff (net of tax) for the PRC was approximately RMB0.76/kWh (2019: RMB0.74/kWh).

In terms of revenue generated by tariff zone from the PRC for the six months ended 30 June 2020, approximately 16%, 34% and 50% of revenue were generated from zone 1, zone 2 and zone 3 respectively (2019: 15%, 34% and 51%). In line with our prevailing strategy, GNE Group focused more on developing solar power plants in well-developed areas with strong domestic power demand (i.e. zone 2 and zone 3) to minimize the grid curtailment risk in zone 1 area.

GNE Group's gross margin for the six months ended 30 June 2020 was 67.3%, as compared to 67.5% for the six months ended 30 June 2019. The cost of sales mainly consisted of depreciation, which accounted for 82.8% (2019: 85.9%) of cost of sales, with the remaining costs being operation and maintenance costs of solar power plants.

Outlook

The Group's outlook and likely future developments of the Group's business, is set out in the Chairman's Statement and CEO Review of Operations and Outlook of this Report.

Financial Review

Revenue

Revenue for the six months ended 30 June 2020 amounted to approximately RMB7,159 million, representing a decrease of 28.4% as compared with approximately RMB10,002 million for the corresponding period in 2019. The decrease was mainly due to the drop in revenue in solar material business as a result of the decrease in sales volume and selling price of wafer (excluding OEM wafer), and decrease in sales of the GNE Group due to disposal of solar power plants during 2019 and 2020.

Interim Report 2020 GCL-Poly Energy Holdings Limited 15

Management Discussion and Analysis

Gross Profit Margin

The Group's overall gross profit margin for the six month ended 30 June 2020 was 25.2%, as compared with 23.5% for the corresponding period in 2019. Gross profit amounted to approximately RMB1,804 million, representing a decrease of 23.4% as compared with the same period in 2019.

Gross profit margin for the Solar Material business changed from 0.9% for the six months ended 30 June 2019 to negative gross profit margin of -4.3% for the six months ended 30 June 2020. The decrease was mainly attributable to the decrease in the average selling price of photovoltaic products.

Solar Farm business has a gross profit margin of 53.6% for the period ended 30 June 2020, 0.5 percentage points lower than the corresponding period in 2019.

The gross profit margin for the New Energy business was 67.3% for the six months ended 30 June 2020 and 67.5% for the corresponding period in 2019.

Other Income

For the six months ended 30 June 2020, other income mainly comprised bank and other interest income and interest arising from contracts containing significant financing components of approximately RMB248 million (six months ended 30 June 2019: RMB128 million), sales of scrap materials of approximately RMB53 million (six months ended 30 June 2019: RMB78 million), government grants of approximately RMB57 million (six months ended 30 June 2019: RMB69 million), management and consultancy fee income of approximately RMB29 million (six months ended 30 June 2019: RMB53 million), compensation income of approximately RMB44 million (six months ended 30 June 2019: Nil).

Distribution and Selling Expenses

Distribution and selling expenses decreased from approximately RMB70 million for the six months ended 30 June 2019 to approximately RMB41 million for the six months ended 30 June 2020.

Administrative Expenses

Administrative expenses amounted to approximately RMB762 million for the six months ended 30 June 2020, representing a decrease of 33% from approximately RMB1,134 million for the corresponding period in 2019. The decrease in administrative expenses was mainly due to cost cutting measures and drop in business scale of GNE Group.

Impairment losses under expected credit loss model, net of reversal

The Group recognised the amount of approximately RMB222 million impairment losses under expected credit loss model for the six months ended 30 June 2020 (six months ended 30 June 2019: RMB13 million). The increase was mainly due to impairment of consideration receivables from disposal of approximately RMB140 million and impairment of amounts due from related companies of approximately RMB60 million.

16 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

Other Expenses, Gains and Losses, Net

The other expenses, gains and losses, net represents net losses of approximately RMB1,469 million for the six months ended 30 June 2020 (six months ended 30 June 2019: RMB458 million). The net losses for the current period mainly comprises of impairment loss on property, plant and equipment of approximately RMB741 million (six months ended 30 June 2019: RMB280 million), research and development costs of approximately RMB232 million (six months ended 30 June 2019: RMB299 million), loss on measurement of assets classified as held for sale to fair value less cost to sell of RMB153 million (six months ended 30 June 2019: Nil), net exchange loss of approximately RMB93 million (six month period ended 30 June 2019: RMB7 million), loss on disposal of subsidiaries with solar farm projects and joint ventures of approximately RMB88 million (six month period ended 30 June 2019: gain of approximately RMB82 million), loss on deemed disposal of an associate of approximately RMB49 million (six month period ended 30 June 2019: Nil), and loss on disposal of subsidiaries of approximately RMB84 million (six month period ended 30 June 2019: Nil).

Finance Costs

Finance costs for the six months ended 30 June 2020 were approximately RMB1,691 million, decreased by 14.7% as compared to approximately RMB1,982 million for the corresponding period in 2019. The decrease was mainly due to the decrease in interest-bearing debts during the period.

Share of Profits of Associates

The Group's share of profits of associates for the six-month period ended 30 June 2020 was approximately RMB121 million, mainly contributed by an associate, Inner Mongolia Zhonghuan - GCL Solar Material Co., Ltd.* ("Mongolia Zhonghuan - GCL") (內蒙古中環協鑫光伏材料有限公司) and share of profits from associates of GNE Group as a result of disposal majority of equity interest of these solar farms in late 2019.

Share of Losses of Joint Ventures

The Group's share of loss of joint ventures for the six-month period ended 30 June 2020 was approximately RMB66 million, mainly due to the share of loss from Jiangsu Xinhua Semiconductor Material Technology Co., Ltd.* ("江蘇 鑫華半導體材料科技有限公司"), partly offset by the contribution of joint venture in South Africa.

Income Tax Expense

Income tax expense for the six-month period ended 30 June 2020 was approximately RMB59 million, representing an increase of 811% as compared with approximately RMB6 million for the corresponding period in 2019. There is an increase in income tax expenses mainly because some of the solar farms in GNE Group had passed the three year's exemption period for the PRC income tax, partially offset by the income tax credit from Solar Material Business recorded during the period.

Loss attributable to Owners of the Company

As a result of the above factors, loss attributable to owners of the Company amounted to approximately RMB1,996 million for the six-month period ended 30 June 2020 as compared with a loss of approximately RMB998 million for the corresponding period in 2019.

Interim Report 2020 GCL-Poly Energy Holdings Limited 17

Management Discussion and Analysis

Property, Plant and Equipment

Property, plant and equipment decreased from approximately RMB52,413 million as at 31 December 2019 to approximately RMB47,460 million as at 30 June 2020. Decrease in property, plant and equipment was mainly attributable to disposal of subsidiaries, depreciation and impairment during the period.

Deposits, Prepayments and Other Non-current Assets

Non-current portion for deposits, prepayments and other non-current assets decreased from approximately RMB2,396 million as at 31 December 2019 to approximately RMB1,939 million as at 30 June 2020. It was due to decrease in refundable value-added tax.

Contract Assets

Contract assets primarily relate to the portion of tariff adjustments for the electricity sold to the local state grid companies in the PRC in which the relevant on-grid solar farms are still pending for registration to the Catalogue. Any amount previously recognized as contract assets is reclassified to trade receivables at the point at which it is registered in the Subsidy Catalogue.

Contract assets decreased from approximately RMB5,640 million as at 31 December 2019 to approximately RMB5,058 million as at 30 June 2020, because some solar power plants entered into the eighth batches of Subsidy Catalogue.

Interests in Associates

Interests in associates mainly represent our interest in Xinjiang GCL, Zhongping GCL and Mongolia Zhonghuan- GCL. The slight increase of balance from approximately RMB7,539 million as at 31 December 2019 to approximately RMB7,608 million as at 30 June 2020 was mainly due to share of profit from Mongolia Zhonghuan- GCL, partly offset by loss on deemed disposal of interest in Mongolia Zhonghuan-GCL.

Trade and Other Receivables

Trade and other receivables decreased from approximately RMB13,857 million as at 31 December 2019 to approximately RMB13,845 million as at 30 June 2020. The decrease was mainly due to decrease in bills received held by the Group for further settlement of trade receivables from Solar Material Business, but partly offset by increase in unbilled trade receivables of GNE Group.

Trade and Other Payables

Trade and other payables decreased from approximately RMB15,019 million as at 31 December 2019 to approximately RMB13,346 million as at 30 June 2020. The decrease was mainly due to decrease in trade payables during the period.

18 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

Loans from Related Companies

Loans from related companies decreased from approximately RMB1,776 million as at 31 December 2019 to approximately RMB1,730 million as at 30 June 2020. The slight decrease was mainly due to repayment of loans during the period.

Liquidity and Financial Resources

As at 30 June 2020, the total assets of the Group were about RMB95.3 billion, of which the aggregate pledged and restricted bank and other deposits and bank balances and cash amounted to approximately RMB7.8 billion (including pledged bank deposits and bank balances and cash classified as assets held for sale).

For the period ended 30 June 2020, the Group's main source of funding was cash generated from operating activities and financing activities.

The Directors have given careful consideration to the going concern status of the Group in light of the fact that the Group's current liabilities exceeded its current assets by approximately RMB16,742 million as at 30 June 2020 and the Group had cash and cash equivalents of approximately RMB1,126 million against the Group's total borrowings (comprising bank and other borrowings, lease liabilities, notes and bonds payables, loans from related companies and indebtedness associated with solar farm projects classified as held for sale) amounted to approximately RMB53,165 million. For the remaining balance of the Group's total borrowings, approximately RMB29,335 million will be due in the coming twelve months.

In order to improve liquidity, the Group continues to pay close attention in managing the Group's cash position and conducts on-going negotiations with banks to ensure that the existing facilities will be successfully renewed and additional banking facilities are obtained when necessary. The Directors are of the opinion that, taking into account undrawn banking, renewal of existing banking facilities, the Group's cash flow projection for the coming year, and the successful implementation of measures of the GNE Group as described in Note 1 "Basis of Preparation" to the unaudited condensed interim consolidated financial statements, the Group will have sufficient working capital to meet its cash flow requirements in the next twelve months. The Directors are satisfied that it is appropriate to prepare these consolidated financial statements on a going concern basis.

For detailed information, please refer to "Basis of Preparation" section of this report.

Interim Report 2020 GCL-Poly Energy Holdings Limited 19

Management Discussion and Analysis

Indebtedness

As at

As at

30 June

31 December

2020

2019

RMB million

RMB million

Current liabilities

Bank and other borrowings - due within one year

24,302

26,977

Lease liabilities - due within one year

414

531

Notes and bonds payables - due within one year

3,954

422

Loans from related parties - due within one year

665

744

29,335

28,674

Non-current liabilities

Bank and other borrowings - due after one year

19,568

20,286

Lease liabilities - due after one year

1,696

1,911

Notes and bonds payables - due after one year

-

3,470

Loans from related parties - due after one year

1,065

1,032

22,329

26,699

Indebtedness associated with assets classified

as held for sale

1,501

-

23,830

26,699

Total indebtedness

53,165

55,373

Less: Pledged and restricted bank and other deposits and

bank balances and cash (including bank

balances and cash classified as held for sale)

(7,841)

(8,515)

Net indebtedness

45,324

46,858

20 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

Below is a table showing the bank and other borrowing structure and maturity profile of the Group:

As at

As at

30 June

31 December

2020

2019

RMB million

RMB million

Secured

39,613

40,668

Unsecured

4,257

6,595

43,870

47,263

As at 30 June 2020, RMB bank and other borrowings carried floating interest rates with reference to the Benchmark Borrowing Rate of The People's Bank of China. USD bank and other borrowings carried interest rates with reference to the London Interbank Offer Rate.

Key Financial Ratios of the Group

As at

As at

30 June

31 December

2020

2019

Current ratio

0.64

0.53

Quick ratio

0.63

0.51

Net debt to equity attributable to owners of

the Company

220.9%

210.6%

Current ratio

Quick ratio

Net debt to total equity attributable to owners of the Company

  • Balance of current assets at the end of the period/balance of current liabilities at the end of the period
  • (Balance of current assets at the end of the period - balance of inventories at the end of the period)/balance of current liabilities at the end of the period
  • (Balance of total indebtedness at the end of the period - balance of bank balances and cash and pledged and restricted bank and other deposits at the end of the period)/balance of equity attributable to owners of the Company at the end of the period

Interim Report 2020 GCL-Poly Energy Holdings Limited 21

Management Discussion and Analysis

Policy Risk

Policies made by the Government have a pivotal role in the solar power industry. Any alternation such as the preferential tax policies, on-grid tariff subsidies, generation dispatch priority, incentives, upcoming issuance of green certificates, laws and regulations would cause substantial impact on the solar power industry. Although the Chinese Government has been supportive in aiding the growth of the renewable industry by carrying out a series of favorable measures, it is possible that these measures will be modified abruptly. In order to minimize risks, the Group will follow rules set out by the government strictly, and will pay close attention to policy makers in order to foresee any disadvantageous movements.

Credit Risk

Each major operating business of the Group has a policy of credit control in place under which credit evaluations of customers are performed on all customers requiring credit.

Credit risk on sales of polysilicon and wafer products is not significant as the major customers are listed entities with good repayment history. In order to minimize the credit risk, the Group reviews the recoverable amount of each individual trade receivables periodically to ensure that adequate expected credit losses are made. Credit risk of sales of electricity is also not significant as most of the revenue is obtained from the subsidiaries of State Grid Corporation of China (the "State Grid"). The State Grid is a state-owned enterprise in China, which possesses low default risk.

Grid Curtailment Risk

With the growth in power generating capacity outpaced electricity consumption growth, it has led to utilization decline for power generating capacity across the country since 2014. Although solar power has a higher dispatch priority over conventional power generation in China, given electricity generated from areas with rich solar energy resources cannot be fully consumed in the provinces, and the excess electricity cannot be transmitted to other regions with higher power demand given limited power transmission capacity, grid curtailment has become an issue with high degree of concern for solar power. In this regard, GNE mainly focuses on developing solar power projects in regions with well-developedinter-province power transmission network or with strong domestic power demand such as zone 2 and 3, hence, minimizing grid curtailment risk.

Risk Associated with Tariff

Power tariff is one of the key earning drivers for GNE. Any adjustment in tariff might have an impact on the profitability of new solar power projects. Given China's National Development and Reform Commission (NDRC) targets to accelerate the technology development for solar power industry in order to bring down development costs, hence, lowering solar power tariff to the level of coal-fired power by near future, the government subsidy for solar power industry will finally be faded out. To minimize this risk, GNE will continue to expedite technology development and implement cost control measures in order to lower development cost for new projects.

22 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

Risk related to High Gearing Ratio

The New Energy business under the Group is a capital intensive industry, which highly relies on external financing in order to fund for the construction of Solar Farm while the recovery of capital investment takes a long period of time. To cope with the gearing risk, GNE Group and the Group will pay close attention to the market dynamics, and to avoid any unfavorable changes to the Company. Additionally, the Company is constantly seeking alternative financing tools and pursing asset-light model to optimize the finance structure and lower its gearing ratio.

Risk related to Interest Rate

Interest risk may result from fluctuations in bank loan rates. Given the Group highly relies on external financing in order to obtain investment capital for new solar power project development, any interest rate changes will have impact on the capital expenditure and finance expenses of the Group, hence, affecting our operating results.

Foreign Currency Risk

Most of the Group's businesses are located in the PRC and the presentation currency of the consolidated financial statements of the Company is RMB. Substantially all of the Group's revenue, cost of sales and operating expenses are denominated in RMB, and the majority of the Group's assets and liabilities are denominated in RMB, while the rest are mainly denominated in US dollar and Hong Kong dollar. Any depreciation/appreciation of RMB against US dollar or any other foreign currencies may result in a change in value of the monetary assets and liabilities that are denominated in foreign currencies and affect the earnings and value of the net assets of the Group.

The Group continues to adopt a conservative approach on foreign exchange exposure management and ensure that its exposure to fluctuations in foreign exchange rates is minimised. The majority of the Group's borrowings are denominated in RMB. Foreign currency forward contracts will be utilised when it is considered as appropriate to hedge against foreign currency risk exposure.

Risk related to Disputes with Joint Venture Partners

Our joint ventures may involve risks associated with the possibility that our joint venture partners may have financial difficulties or have disputes with us as to the scope of their responsibilities and obligations. We may encounter problems with respect to our joint venture partners which may have an adverse effect on our business operations, profitability and prospects.

Interim Report 2020 GCL-Poly Energy Holdings Limited 23

Management Discussion and Analysis

Pledge of or Restrictions on Assets

As at 30 June 2020, the following assets were pledged for certain bank and other borrowings, loans from a related company, lease liabilities or restrictions on assets, issuance of bills, short-term letters of credit for trade and other payables granted to the Group and bank and other borrowings of an associate and a joint venture:

  • Property, plant and equipment of RMB28.1 billion (31 December 2019: RMB29.0 billion)
  • Right-of-useassets of approximately RMB0.8 billion (31 December 2019: RMB0.6 billion)
  • Investment properties of approximately RMB0.06 billion (31 December 2019: RMB0.07 billion)
  • Trade receivables and contract assets of approximately RMB11.2 billion (31 December 2019: RMB7.8 billion)
  • Pledged and restricted bank and other deposits of approximately RMB6.7 billion (31 December 2019: RMB6.9 billion)
  • Deposit paid to a related company of approximately RMB0.06 billion (31 December 2019: RMB0.04 billion)
  • Equity instruments at fair value through other comprehensive income of approximately RMB0.02 billion (31 December 2019: RMB: Nil)

In addition, lease liabilities of approximately RMB2.1 billion are recognised with related right-of-use assets of approximately RMB2.8 billion as at 30 June 2020 (31 December 2019: lease liabilities of approximately RMB2.4 billion are recognised with related right-of-use assets of approximately RMB3.4 billion).

Capital Commitments

As at 30 June 2020, the Group's capital commitments in respect of purchase of property, plant and equipment contracted for but not provided amounted to approximately RMB909 million (31 December 2019: RMB663 million).

24 GCL-Poly Energy Holdings Limited Interim Report 2020

Management Discussion and Analysis

Contingencies

Financial guarantees contracts

As at 30 June 2020 and 31 December 2019, the Company and certain of its subsidiaries guaranteed bank and other borrowings of certain subsidiaries of GNE amounted to RMB2,448 million and RMB2,770 million, respectively.

As at 30 June 2020, the Group provided a total guarantee with maximum amount of approximately RMB4,818 million and RMB900 million (31 December 2019: RMB4,578 million and RMB900 million) to several banks and financial institutions in respect of banking and other facilities of Xinjiang GCL, an associate of the Group and Jiangsu Xinhua, a joint venture of the Group respectively.

As at 30 June 2020, GNE Group provided guarantee to its associates for certain of their bank and other borrowings with maximum amount of RMB5,369 million (31 December 2019: RMB5,369 million), out of which a joint guarantee of RMB520 million (31 December 2019: RMB520 million) was provided by the Group with GNE Group to two associates of GNE Group for their bank borrowings.

In addition to those financial guarantees provided to related parties as above, GNE Group also provided financial guarantees to certain third parties for certain of their bank and other borrowings amounting to approximately RMB110 million (31 December 2019: RMB540 million) as at 30 June 2020.

Contingent liability

As at 30 June 2020 and 31 December 2019, the Group and the Company did not have any significant contingent liabilities.

Interim Report 2020 GCL-Poly Energy Holdings Limited 25

Management Discussion and Analysis

Material Disposals

GNE Group

In January 2020, the GNE Group has entered into share transfer agreements with CNI (Nanjing) Energy Development Company Limited* (中核(南京)能源發展有限公司), for the disposal of 100% equity interest in Fuyang Hengming Solar Power Company Limited* (阜陽衡銘太陽能電力有限公司) and Zhenjiang GCL New Energy Limited* (鎮江協鑫新能源有限公司) for an aggregate consideration of approximately RMB77 million. The two solar power plants have an aggregate installed capacity of approximately 40MW. The disposals were completed in the first half of 2020.

In January 2020, the GNE Group entered into share purchase agreements with Huaneng Gongrong No. 1 (Tianjin) Equity Investment Fund Partnership (Limited Partnership)* (華能工融一號(天津)股權投資基金合夥企業(有限合夥)) and Huaneng Gongrong No. 2 (Tianjin) Equity Investment Fund Partnership (Limited Partnership)* (華能工融二號 (天津)股權投資基金合夥企業(有限合夥)) for the disposal of 7 operational solar power plants in the PRC with an aggregate installed capacity of 294MW. One of the solar power plants with a capacity of 30MW has been completed during the six months ended 30 June 2020. The remaining disposals expected to be completed in the second half of 2020.

In June 2020, the GNE Group entered into a share purchase agreement with China Development Bank New Energy Technology Co., Ltd.* (國開新能源科技有限公司), an independent third party, to sell 75% of the equity interest of Jinhu Zhenghui Photovoltaic Co., Ltd.* (金湖正輝太陽能電力有限公司) ("Jinhu") for a consideration of approximately RMB137 million (the "Divestment"). Jinhu has a solar power plant project with installed capacity of approximately 100MW in operation. The Divestment was completed in July 2020.

Save as disclosed above, there were no other significant investments during the six months ended 30 June 2020, or plans for material investments as at the date of this report, nor were there other material acquisitions and disposals of subsidiaries during the six months ended 30 June 2020.

Events after the Reporting Period

The Group did not have any significant events since the end of the reporting period (i.e. 30 June 2020) and up to the date of this report.

Employees

We consider our employees to be our most important resource. Employees are remunerated with reference to individual performance, working experience, qualification and the prevailing industry practice. Apart from basic remuneration and the statutory retirement benefit scheme, employee benefits including but not limited to discretionary bonuses, with share options granted to eligible employees.

Dividend

The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: nil).

  • English name for identification only.

26 GCL-Poly Energy Holdings Limited Interim Report 2020

Report on Review of Unaudited Condensed Interim Consolidated Financial Statements

TO THE BOARD OF DIRECTORS OF GCL-POLY ENERGY HOLDINGS LIMITED

保利協鑫能源控股有限公司

(incorporated in the Cayman Islands with limited liability)

Introduction

We have reviewed the unaudited condensed interim consolidated financial statements of GCL-Poly Energy Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 29 to 90, which comprise the unaudited condensed consolidated statement of financial position as of 30 June 2020 and the related unaudited condensed consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") issued by the International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of these unaudited condensed interim consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these unaudited condensed interim consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these unaudited condensed interim consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Interim Report 2020 GCL-Poly Energy Holdings Limited 27

Report on Review of Unaudited Condensed Interim Consolidated Financial Statements

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the unaudited condensed interim consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Material Uncertainty Related To Going Concern

We draw attention to note 1 to the unaudited condensed interim consolidated financial statements, which indicates that the Group incurred a net loss of approximately RMB1,925 million during the six-month period ended 30 June 2020, and as of that date, the Group's current liabilities exceeded its current assets by approximately RMB16,742 million, a portion of which is contributed by its non-wholly owned subsidiary, GCL New Energy Holdings Limited, whose shares are listed on The Stock Exchange of Hong Kong Limited, and its subsidiaries, and whose current liabilities exceeded its current assets by approximately RMB6,510 million, and the Group has entered into agreements which will involve capital commitments and provided financial guarantees to several banks and financial institutions in respect of banking and other facilities of a joint venture, associates and third parties. In addition, at 30 June 2020, the Group was not able to meet a financial covenant in respect of a bank borrowing in the amount of approximately RMB212 million as stipulated in the loan agreement. Further, the inability to respect the covenant requirement has triggered the cross default clauses in several other bank borrowings of the Group totalling approximately RMB5,033 million. Subsequent to the end of the reporting period, such bank borrowing amounting to approximately RMB212 million has been fully repaid by the Group. Notwithstanding this, reclassification of long-term borrowings of approximately RMB2,662 million as current liabilities is still required at 30 June 2020 under applicable accounting standard.

The Company is undertaking a number of financing plans and other measures as described in note 1 to the unaudited condensed interim consolidated financial statements in order to ensure it is able to meet its commitments in the next twelve months. The directors of the Company are of the opinion that based on the assumptions that these financing plans and other measures as set forth in note 1 to the unaudited condensed interim consolidated financial statements can be successfully executed, the Group will have sufficient working capital to finance its operations and to pay its financial obligations as and when they fall due in the foreseeable future. However, the likelihood of successful implementation of these financing plans and other measures, including the Group's on-going compliance with its borrowing covenants, and along with other matters as set forth in note 1 to the unaudited condensed interim consolidated financial statements, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our conclusion is not modified in respect of this matter.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

28 August 2020

28 GCL-Poly Energy Holdings Limited Interim Report 2020

Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

NOTES

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Revenue

3

7,159,240

10,001,835

Cost of sales

(5,355,199)

(7,647,662)

Gross profit

1,804,041

2,354,173

Other income

4

459,275

441,325

Distribution and selling expenses

(40,946)

(70,263)

Administrative expenses

(762,379)

(1,133,581)

Finance costs

5

(1,690,543)

(1,982,234)

Impairment losses under expected credit loss model, net of reversal

18

(221,880)

(12,574)

Other expenses, gains and losses, net

6

(1,469,175)

(457,720)

Share of profits of associates

121,327

140,625

Share of losses of joint ventures

(65,773)

(24,665)

Loss before tax

(1,866,053)

(744,914)

Income tax expense

7

(58,760)

(6,448)

Loss for the period

8

(1,924,813)

(751,362)

Other comprehensive income (expense):

Item that will not be reclassified to profit or loss:

Fair value loss on investments in equity instruments at fair value

through other comprehensive income

(12,618)

(17,738)

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations

13,455

(1,242)

Cumulative loss reclassified to profit or loss on sale of investments in

debt instruments measured at fair value through other comprehensive

income upon disposal

-

3,540

13,455

2,298

Other comprehensive income (expense) for the period

837

(15,440)

Total comprehensive expense for the period

(1,923,976)

(766,802)

Interim Report 2020 GCL-Poly Energy Holdings Limited 29

Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

NOTE

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Loss for the period attributable to:

Owners of the Company

(1,995,988)

(997,530)

Non-controlling interests

71,175

246,168

(1,924,813)

(751,362)

Total comprehensive expense for the period attributable to:

Owners of the Company

(1,998,700)

(1,012,953)

Non-controlling interests

74,724

246,151

(1,923,976)

(766,802)

RMB cents

RMB cents

(Unaudited)

(Unaudited)

Loss per share

11

- Basic

(10.20)

(5.51)

- Diluted

(10.20)

(5.51)

30 GCL-Poly Energy Holdings Limited Interim Report 2020

Unaudited Condensed Consolidated Statement of Financial Position

At 30 June 2020

As at

As at

30 June

31 December

2020

2019

NOTES

RMB'000

RMB'000

(Unaudited)

(Audited)

NON-CURRENT ASSETS

Property, plant and equipment

12

47,459,510

52,412,895

Right-of-use assets

12

3,919,071

4,529,359

Investment properties

63,477

65,804

Other intangible assets

230,068

247,723

Interests in associates

13

7,608,403

7,539,323

Interests in joint ventures

14

642,174

706,200

Other financial assets at fair value through profit or loss

15

271,306

357,542

Equity instruments at fair value through other comprehensive income

29,239

41,857

Convertible bonds receivable

16

-

101,097

Deferred tax assets

283,735

291,711

Deposits, prepayments and other non-current assets

17A

1,938,983

2,396,446

Contract assets

17B

735,076

5,639,898

Amounts due from related companies

19

846,951

826,951

Pledged and restricted bank and other deposits

884,844

1,132,156

64,912,837

76,288,962

CURRENT ASSETS

Inventories

20

653,084

751,188

Convertible bonds receivable

16

96,364

-

Trade and other receivables

17A

13,845,091

13,857,141

Contract assets

17B

4,323,281

-

Amounts due from related companies

19

981,481

1,706,133

Other financial assets at fair value through profit or loss

15

781,682

477,256

Held for trading investments

4,265

4,339

Tax recoverable

3,272

6,651

Pledged and restricted bank and other deposits

5,761,663

5,797,270

Bank balances and cash

1,056,665

1,548,019

27,506,848

24,147,997

Assets classified as held for sale

10

2,842,334

-

30,349,182

24,147,997

Interim Report 2020 GCL-Poly Energy Holdings Limited 31

Unaudited Condensed Consolidated Statement of Financial Position

At 30 June 2020

As at

As at

30 June

31 December

2020

2019

NOTES

RMB'000

RMB'000

(Unaudited)

(Audited)

CURRENT LIABILITIES

Trade and other payables

21

13,346,339

15,018,649

Amounts due to related companies

19

2,296,259

1,816,308

Loans from related companies

19

664,734

743,922

Contract liabilities

123,172

224,939

Bank and other borrowings

- due within one year

22

24,302,240

26,976,972

Lease liabilities

- due within one year

413,849

530,655

Notes and bonds payables

- due within one year

23

3,954,175

422,175

Derivative financial instruments

24

162,000

133,400

Deferred income

42,806

41,885

Tax payables

189,107

144,922

45,494,681

46,053,827

Liabilities associated with assets classified as held for sale

10

1,596,622

-

47,091,303

46,053,827

NET CURRENT LIABILITIES

(16,742,121)

(21,905,830)

TOTAL ASSETS LESS CURRENT LIABILITIES

48,170,716

54,383,132

NON-CURRENT LIABILITIES

Contract liabilities

83,703

147,740

Loans from related companies

19

1,065,649

1,031,639

Bank and other borrowings

- due after one year

22

19,567,860

20,285,750

Lease liabilities

- due after one year

1,696,124

1,910,864

Notes and bonds payables

- due after one year

23

-

3,470,542

Deferred income

573,756

628,441

Deferred tax liabilities

123,542

186,748

23,110,634

27,661,724

NET ASSETS

25,060,082

26,721,408

32 GCL-Poly Energy Holdings Limited Interim Report 2020

Unaudited Condensed Consolidated Statement of Financial Position

At 30 June 2020

As at

As at

30 June

31 December

2020

2019

NOTE

RMB'000

RMB'000

(Unaudited)

(Audited)

CAPITAL AND RESERVES

Share capital

25

1,862,437

1,742,850

Reserves

18,655,271

20,507,309

Equity attributable to owners of the Company

20,517,708

22,250,159

Non-controlling interests

4,542,374

4,471,249

TOTAL EQUITY

25,060,082

26,721,408

The unaudited condensed interim consolidated financial statements on pages 29 to 90 were approved and authorised for issue by the board of directors on 28 August 2020 and are signed on its behalf by:

Zhu Gongshan

Yeung Man Chung, Charles

DIRECTOR

DIRECTOR

Interim Report 2020 GCL-Poly Energy Holdings Limited 33

2020 Report Interim Limited Holdings Energy Poly-GCL34

Attributable to owners of the Company

Shares held

for share

Capital

Investments

Statutory

Share

Non-

Share

Share

award

redemption

revaluation

Other

Capital

reserve

Special

options

Translation

Accumulated

controlling

capital

premium

scheme

reserve

reserve

reserve

reserve

funds

reserves

reserve

reserve

profits

Sub-total

interests

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

(Note i)

(Note ii)

At 1 January 2019 (Audited)

1,610,009

9,802,168

(236,629)

22,202

(38,212)

(619,157)

67,251

3,328,374

(2,074,777)

171,642

(24,007)

9,856,692

21,865,556

4,966,951

26,832,507

Exchange differences arising from

translation of financial statements

-

-

-

-

-

-

-

-

-

-

-

of foreign operations

(1,225)

(1,225)

(17)

(1,242)

Cumulative loss reclassified to profit or

loss on sales of investments in debt

instruments measured at fair value

through other comprehensive

-

-

-

-

-

-

-

-

-

-

-

-

income ("FVTOCI") upon disposal

3,540

3,540

3,540

Fair value loss on investments in equity

-

-

-

-

-

-

-

-

-

-

-

-

instruments at FVTOCI

(17,738)

(17,738)

(17,738)

(Loss) profit for the period

-

-

-

-

-

-

-

-

-

-

-

(997,530)

(997,530)

246,168

(751,362)

Total comprehensive (expense) income

-

-

-

-

-

-

-

-

-

for the period

(14,198)

(1,225)

(997,530)

(1,012,953)

246,151

(766,802)

Recognition of share-based payment

expenses in respect of share

-

-

-

-

-

-

-

-

-

-

-

options (note 27)

1,045

1,045

1,593

2,638

Exercise of share options

9

60

-

-

-

-

-

-

-

(18)

-

-

51

-

51

Forfeitures of share options

-

-

-

-

-

-

-

-

-

(1,892)

-

3,384

1,492

(1,492)

-

Issues of new shares (note 25)

132,832

464,912

-

-

-

-

-

-

-

-

-

-

597,744

-

597,744

Transaction costs attributable to the

-

-

-

-

-

-

-

-

-

-

-

-

issue of new shares

(9,953)

(9,953)

(9,953)

Contribution from non-controlling

-

-

-

-

-

-

-

-

-

-

-

-

-

interests

66,000

66,000

Dividend declared to non-controlling

-

-

-

-

-

-

-

-

-

-

-

-

-

interests

(84,557)

(84,557)

Transfer to reserves

-

-

-

-

-

-

-

205,363

-

-

-

(205,363)

-

-

-

At 30 June 2019 (Unaudited)

1,742,850

10,257,187

(236,629)

22,202

(52,410)

(619,157)

67,251

3,533,737

(2,074,777)

170,777

(25,232)

8,657,183

21,442,982

5,194,646

26,637,628

2020 June 30 ended months six the For

Condensed Unaudited Equity in Changes

of Statement Consolidated

Attributable to owners of the Company

Shares held

for share

Capital

Investments

Statutory

Share

Non-

Share

Share

award

redemption

revaluation

Other

Capital

reserve

Special

options

Translation

Accumulated

controlling

capital

premium

scheme

reserve

reserve

reserve

reserve

funds

reserves

reserve

reserve

profits

Sub-total

interests

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

(Note i)

(Note ii)

At 1 January 2020 (Audited)

1,742,850

10,257,187

(236,629)

22,202

(84,363)

(619,157)

67,251

3,967,760

(2,075,257)

158,965

5,837

9,043,513

22,250,159

4,471,249

26,721,408

Exchange differences arising from

translation of financial statements

-

-

-

-

-

-

-

-

-

-

-

of foreign operations

9,906

9,906

3,549

13,455

Fair value loss on investments in equity

-

-

-

-

-

-

-

-

-

-

-

-

instruments at FVTOCI

(12,618)

(12,618)

(12,618)

(Loss) profit for the period

-

-

-

-

-

-

-

-

-

-

-

(1,995,988)

(1,995,988)

71,175

(1,924,813)

Total comprehensive (expense) income

-

-

-

-

-

-

-

-

-

for the period

(12,618)

9,906

(1,995,988)

(1,998,700)

74,724

(1,923,976)

Forfeitures of share options

-

-

-

-

-

-

-

-

-

(10,889)

-

20,671

9,782

(9,782)

-

Issues of new shares (note 25)

119,587

123,174

-

-

-

-

-

-

-

-

-

-

242,761

-

242,761

Transaction costs attributable to the

-

-

-

-

-

-

-

-

-

-

-

-

issue of new shares

(3,954)

(3,954)

(3,954)

Contribution from non-controlling

-

-

-

-

-

-

-

-

-

-

-

interests

5,817

5,817

6,183

12,000

Disposal of subsidiaries (note 29)

-

-

-

-

-

-

-

(5,779)

11,843

-

-

5,779

11,843

-

11,843

Transfer to reserves

-

-

-

-

-

-

-

11,091

-

-

-

(11,091)

-

-

-

At 30 June 2020 (Unaudited)

1,862,437

10,376,407

(236,629)

22,202

(96,981)

(619,157)

67,251

3,973,072

(2,057,597)

148,076

15,743

7,062,884

20,517,708

4,542,374

25,060,082

Limited Holdings Energy Poly-GCL2020 Report Interim

2020 June 30 ended months six the For

Equity in Changes of Statement Consolidated Condensed Unaudited

35

Unaudited Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2020

Notes:

  1. In 2018, the Company paid in total of RMB66,532,000 to a trustee ("Trustee") to purchase 100,000,000 shares of the Company in the market pursuant to the Share Award Scheme (the "Scheme") established on 16 January 2017 by the board of directors of the Company (the "Directors"). As at 30 June 2020, all the shares were held by the Trustee.
  2. Special reserves represent (i) the difference between the consideration to acquire additional interests in subsidiaries and the respective share of the carrying amounts of the net assets acquired; (ii) the difference by which the non-controlling interests were adjusted and the fair value of consideration received in relation to the disposal of partial interest of a subsidiary and (iii) change of interests in existing subsidiaries arising from restructuring.

36 GCL-Poly Energy Holdings Limited Interim Report 2020

Unaudited Condensed Consolidated

Statement of Cash Flows

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

NET CASH FROM OPERATING ACTIVITIES

1,492,543

4,253,587

NET CASH USED IN INVESTING ACTIVITIES

Interest received

77,523

82,730

Proceeds from disposal of property, plant and equipment

85,746

-

Payments for construction and purchase of property, plant and equipment

(1,128,820)

(2,843,115)

Payments for right-of-use assets

(1,917)

(12,967)

Investments in associates

-

(5,000)

Investments in joint ventures

-

(89,222)

Dividend received from a joint venture

-

9,689

Proceeds from disposal of joint ventures

-

53,780

Addition of other financial assets at fair value through profit or loss

("FVTPL")

(310,597)

(15,000)

Proceeds from disposal of debt instruments at FVTOCI

-

68,142

Withdrawal of pledged and restricted bank and other deposits

6,110,004

4,423,945

Placement of pledged and restricted bank and other deposits

(5,838,691)

(6,110,108)

Advances to related companies

(72,564)

(38,268)

Repayment from related companies

453,859

180,741

Repayment from third parties

26,530

4,540

Settlement of consideration payables for acquisition of subsidiaries with solar

farms

-

(110,299)

Settlement of consideration receivables from disposal of subsidiaries with

solar farm projects

28,700

5,192

Net cash inflow from acquisition of subsidiaries

-

29,669

Net cash inflow from disposal of subsidiaries

30,484

242,990

(539,743)

(4,122,561)

Interim Report 2020 GCL-Poly Energy Holdings Limited 37

Unaudited Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

NET CASH USED IN FINANCING ACTIVITIES

Interest paid

(1,193,385)

(1,729,612)

New bank and other borrowings raised

6,779,418

7,171,138

Repayment of bank and other borrowings

(7,328,371)

(6,835,448)

Repayment of lease liabilities

(359,661)

(248,007)

Proceeds from re-sell of notes and bonds issued

-

299,900

Repayment of notes and bonds payables

-

(188,832)

Repurchase of notes and bonds issued

-

(280,493)

Proceeds of loans from related companies

246,719

896,392

Repayment to loans from related companies

(201,646)

(400,553)

Advances from related companies

480,374

58,339

Repayment to related companies

(11,637)

(42,261)

Contribution from non-controlling interests

12,000

66,000

Dividends paid to non-controlling interests

(45,385)

(79,523)

Proceeds from exercise of share options

-

51

Proceeds from issue of new shares

242,761

597,744

Transaction costs attributable to issue of new shares

(3,954)

(9,953)

(1,382,767)

(725,118)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(429,967)

(594,092)

CASH AND CASH EQUIVALENTS AT 1 JANUARY, represented by

Bank balances and cash

1,548,019

4,075,791

Bank balances and cash classified as held for sale

-

44,873

1,548,019

4,120,664

Effect of exchange rate changes on the balance of bank balances and cash

held in foreign currencies

8,122

12,706

CASH AND CASH EQUIVALENTS AT 30 JUNE, represented by

Bank balances and cash

1,056,665

3,539,278

Bank balances and cash classified as held for sale

69,509

-

1,126,174

3,539,278

38 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

1. Basis of Preparation

The unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board (the "IASB") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the "Stock Exchange") (the "Listing Rules"). The unaudited condensed interim consolidated financial statements do not include all the information required for a complete set of financial statements and should be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2019.

The Directors have given careful consideration to the going concern status of the Group in light of the fact that the Group's current liabilities exceeded its current assets by approximately RMB16,742 million as at 30 June 2020 and it has incurred a net loss of approximately RMB1,925 million for the six-month period then ended. The Group had cash and cash equivalents of approximately RMB1,126 million (including bank balances and cash classified as held for sale of approximately RMB70 million) against the Group's total borrowings (comprising loans from related companies, bank and other borrowings, lease liabilities and notes and bonds payables) amounted to approximately RMB53,165 million. The amounts included loans from a related company, bank and other borrowings and lease liabilities classified as liabilities associated with assets held for sale totalling approximately RMB1,501 million. For the remaining balance of the Group's total borrowings, approximately RMB29,335 million will be due in the coming twelve months from the end of the reporting period. In addition, the Group has entered into agreements which will involve capital commitments and provided financial guarantees to several banks and financial institutions in respect of banking and other facilities of a joint venture, associates and third parties as at 30 June 2020.

Included in the Group's bank borrowings is a loan of approximately RMB212 million that the Group has not been able to meet a financial covenant as stipulated in the relevant loan agreement. The relevant bank borrowing is due within one year in accordance with the original repayment term. In addition, the inability to respect the covenant requirement has triggered the cross default clauses in several other bank borrowings of approximately RMB5,033 million. Among this, approximately RMB2,662 million of the bank borrowings are repayable after one year in accordance with the original repayment terms. Subsequent to the end of the reporting period, such bank borrowing amounting to approximately RMB212 million has been fully repaid by the Group. In light of this, reclassification of long-term borrowings of approximately RMB2,662 million as current liabilities is still required at 30 June 2020 under applicable accounting standard. As a result, in the Group's unaudited condensed consolidated statement of financial position as at 30 June 2020, net current liabilities of approximately RMB16,742 million were recorded.

GCL New Energy Holdings Limited ("GNE"), whose shares are listed on the Stock Exchange, is a subsidiary of the Company. As at 30 June 2020, the Company and certain subsidiaries of the Company guaranteed bank and other borrowings of GNE and its subsidiaries (collectively referred to as "GNE Group") amounted to approximately RMB2,448 million. The Directors have noted the going concern status of GNE Group in preparing these unaudited condensed interim consolidated financial statements, in light of the fact that, GNE Group's current liabilities exceeded its current assets by approximately RMB6,510 million. In addition, as at 30 June 2020, GNE Group has entered into agreements which will involve capital commitments of approximately RMB669 million to construct solar farms and provided financial guarantees to its associates and third parties for their bank and other borrowings.

Interim Report 2020 GCL-Poly Energy Holdings Limited 39

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

1. Basis of Preparation (continued)

As at 30 June 2020, GNE Group's total borrowings comprising bank and other borrowings, lease liabilities, bonds and notes payables, loans from the Company and related companies amounted to approximately RMB36,485 million. The amounts included bank and other borrowings, loans from a related company and lease liabilities classified as liabilities associated with assets classified as held for sale totalling of approximately RMB1,501 million. For the remaining balance of GNE Group's total borrowings, approximately RMB14,774 million will be due in the coming twelve months from the end of the reporting period, including bank and other borrowings of approximately RMB1,345 million, which will be due after twelve months from the end of the reporting period in accordance with the scheduled repayment dates as set out in the respective loan agreements but are reclassified to current liabilities as a result of the inability to respect the covenant requirement by the Company, the guarantor of certain bank borrowings of GNE Group and thereby triggered the cross default clauses of these bank borrowings. GNE Group's pledged bank and other deposits and bank balances and cash amounted to approximately RMB1,161 million (including pledged deposit of approximately RMB5 million placed at an associate of the Company for its loans advanced to GNE Group, in which RMB2 million are classified as assets held for sale, and pledged deposits classified as assets held for sale of approximately RMB8 million) and RMB737 million (including bank balances and cash classified as assets held for sale of approximately RMB70 million) as at 30 June 2020, respectively. The financial resources available to GNE Group as at 30 June 2020 and up to the date of approval of these unaudited condensed interim consolidated financial statements for issuance may not be sufficient to satisfy the above capital expenditure requirements. GNE Group is actively pursuing additional financing including, but not limited to, debt financing and bank borrowings.

The above conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern and therefore, the Directors have reviewed the Group's cash flow projections which cover a period of not less than twelve months from 30 June 2020. They are of the opinion that the Group will have sufficient working capital to meet its financial obligations, including committed capital expenditures and other commitments, that will be due in the coming twelve months from 30 June 2020.

In addition, the Directors have evaluated the Group's current undrawn banking facilities and renewable bank borrowings. In order to improve liquidity, the Group continues to pay close attention in managing the Group's cash position and conducts on-going negotiations with banks to ensure that the existing facilities will be successfully renewed and additional banking facilities are obtained when necessary. The Directors believe that the Group will be able to renew the banking facilities upon maturity dates and raise additional banking facilities as and when required by the Group's operating cash needs.

40 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

1. Basis of Preparation (continued)

The Directors have also noted the measures being undertaken by GNE Group to improve their liquidity position, which include:

  1. GNE Group is implementing business strategies, among others, to transform its heavy-asset business model to a light-asset model by (i) divesting certain of its existing wholly-owned solar farm projects in exchange for cash proceeds and to improve GNE Group's indebtedness position; and (ii) striving for providing solar farm operation and maintenance services to those divested solar farms for additional operating cash flow to GNE Group.
    On 18 November 2019, GNE and 中國華能集團有限公司 China Huaneng Group Co., Ltd* ("China Huaneng") entered into a cooperation framework agreement (the "Cooperation Framework Agreement") regarding the disposal of (i) certain solar farms of GNE Group in the People's Republic of China (the "PRC") (the"Power Plants") or (ii) certain project companies of GNE Group which operate the Power Plants (the "Framework Disposal").
    On 21 January 2020, GNE Group entered into a series of six share transfer agreements with 華能工融 一號(天津)股權投資基金合夥企業(有限合夥) Huaneng Gongrong No. 1 (Tianjin) Equity Investment Fund Partnership (Limited Partnership)* ("Hua Neng No. 1 Fund") and 華能工融二號(天津)股權投資基金合夥 企業(有限合夥) Huaneng Gongrong No. 2 (Tianjin) Equity Investment Fund Partnership (Limited Partnership)* ("Hua Neng No. 2 Fund"), pursuant to which GNE Group agreed to sell 60% and 40% of the equity interest in six wholly-owned subsidiaries of GNE Group to Hua Neng No. 1 Fund and Hua Neng No. 2 Fund, respectively, of which these subsidiaries own 7 solar farms in the PRC with aggregate installed capacity of approximately 294MW, for a consideration in aggregate of RMB850,500,000 (the "Disposal"). Further details of the Disposal are set out in the announcement of the Company published on 21 January 2020. Pursuant to the Listing Rules, this transaction is considered as a major transaction of GNE, the Disposal has been approved by the shareholders of GNE in the special general meeting as well as the shareholders of the Company in an extraordinary general meeting on 21 May 2020.
    GNE Group and China Huaneng are actively working together under the Cooperation Framework Agreement to explore other solar farm assets for the Framework Disposal and will enter into other definitive agreements in respect of and in compliance with the Measures for the Supervision and Administration of State-Owned Assets (國有資產監督管理辦法) in the PRC, the relevant laws and regulations and the Listing Rules, in due course. As at 30 June 2020, the disposal of one of the six wholly-owned subsidiaries has been completed, four of them have been completed by the date of approval of these unaudited condensed interim consolidated financial statements, and the remaining one is expected to be completed in the second half of 2020.

On 29 June 2020, GNE Group also entered into a share transfer agreement with 國開新能源科技有限公

  • CDB New Energy Technology Co., Ltd.* ("CDB New Energy"), an independent third party, to sell its 75% equity interest in 金湖正輝太陽能電力有限公司 Jinhu Zhenghui Photovoltaic Co., Ltd.* ("Jinhu") for a consideration in aggregate of RMB136,624,000 (the "Divestment"). Jinhu has a solar farm project with installed capacity of approximately 100MW in operation. The Divestment is completed in July 2020; and

  • English name for identification only

Interim Report 2020 GCL-Poly Energy Holdings Limited 41

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

1. Basis of Preparation (continued)

  1. GNE Group still owns 175 solar farms with an aggregate grid connected capacity of approximately 5.3GW upon completion of the Disposal and Divestment. Those operational solar farms are expected to generate operating cash inflows to GNE Group within the coming twelve months from the date of these unaudited condensed interim consolidated financial statements.

Taking into account the undrawn banking facilities, renewal of existing banking facilities, the Group's cash flow projections for the coming twelve months, and the successful implementation of measures of GNE Group as described above, the Directors are of the opinion that the Group will have sufficient working capital to meet its cashflow requirements in the next twelve months. The Directors are satisfied that it is appropriate to prepare these unaudited condensed interim consolidated financial statements on a going concern basis.

Notwithstanding the above, significant uncertainties exist as to whether the Group and GNE Group can achieve the plans and measures described above to generate adequate cash inflow as scheduled. The sufficiency of the Group's working capital to satisfy its present requirements for at least the next twelve months from the date of approval of these unaudited condensed interim consolidated financial statements for issuance is dependent on the Group's ability to generate adequate operating cash flows and financing cash flows through successful renewal of its bank borrowings upon expiries, compliance with the covenants under the borrowing agreements or obtaining waiver from the relevant banks if the Group is not able to satisfy any of the covenant requirements or obtaining waiver from the relevant banks if the Group is not able to satisfy any of the covenant requirements, successful securing of the financing from banks with repayment terms beyond twelve months from the date of approval of these unaudited condensed interim consolidated financial statements for issuance, and other short-term or long-term financing, as well as the successful implementation of measures of GNE Group as described above. Should the Group be unable to operate as a going concern, adjustments would have to be made to reduce the carrying values of the Group's assets to their realisable values, to provide for financial liabilities which might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities, respectively. The effects of these adjustments have not been reflected in these unaudited condensed interim consolidated financial statements.

The functional currency of the Company and the presentation currency of the Group's unaudited condensed interim consolidated financial statements are Renminbi ("RMB").

42 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

1A. Significant Events and Transactions in the Current Interim Period

The outbreak of COVID-19 and the subsequent quarantine measures as well as the travel restrictions imposed by many countries have had negative impacts to the global economy, business environment and directly or indirectly affect the operations of the Group. With the economic downturn induced by the outbreak of COVID-19, demand of solar materials is affected due to the delay in solar project commissioning and the uncertainty faced by the customers. On the other hand, the PRC government has announced some financial measures and supports for corporates to overcome the negative impact arising from the pandemic. As such, the financial positions and performance of the Group were affected in different aspects, including reduction in revenue, impairment loss on property, plant and equipment and government grants in respect of COVID-19-related subsidies as disclosed in the relevant notes.

During the current interim period, the Group made certain disposals with net losses of approximately RMB172 million and the details are set out in note 29. Besides, GNE Group entered into several share transfer agreements for disposing of six subsidiaries, of which one of the six wholly-owned subsidiaries has been completed, and loss on measurement of assets classified as held for sale of approximately RMB153 million was recognised during the current interim period and the details are set out in note 10.

In addition, the Group recognised impairment loss on property, plant and equipment of approximately RMB741 million (note 12) and impairment losses under expected credit loss ("ECL") model, net of reversal of approximately RMB222 million (note 18) during the current interim period.

2. Principal Accounting Policies

The unaudited condensed interim consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values, as appropriate.

Other than additional accounting policies resulting from application of amendments to International Financial Reporting Standards ("IFRS Standards") and application of certain accounting policies which became relevant to the Group, the accounting policies and methods of computation used in the unaudited condensed interim consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual consolidated financial statements for the year ended 31 December 2019.

Interim Report 2020 GCL-Poly Energy Holdings Limited 43

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

2. Principal Accounting Policies (continued)

Application of amendments to IFRS Standards

In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in IFRS Standards and the following amendments to IFRS Standards issued by the IASB, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's unaudited condensed interim consolidated financial statements:

Amendments to International

Definition of Material

Accounting Standard ("IAS") 1 and IAS 8

Amendments to IFRS 3

Definition of a Business

Amendments to IFRS 9, IAS 39 and IFRS 7

Interest Rate Benchmark Reform

Except as described below, the application of the Amendments to References to the Conceptual Framework in IFRS Standards and the amendments to IFRS Standards in the current period has had no material impact on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these unaudited condensed interim consolidated financial statements.

2.1 Impacts of application on Amendments to IAS 1 and IAS 8 "Definition of Material "

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

The application of the amendments in the current period had no impact on the unaudited condensed interim consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020.

44 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

2. Principal Accounting Policies (continued)

  1. Impacts and accounting policies on application of Amendments to IFRS 3 "Definition of a Business "
    1. Accounting policies
      Business combinations or asset acquisitions Optional concentration test
      Effective from 1 January 2020, the Group can elect to apply an optional concentration test, on a transaction-by-transaction basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed.
    2. Transition and summary of effects
      The amendments had no impact on the unaudited condensed interim consolidated financial statements of the Group.
  2. Accounting policies newly applied by the Group

In addition, the Group has applied the following accounting policy which became relevant to the Group in the current interim period.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate.

Government grants relate to income that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Such grants are presented under "other income", except for grants relating to compensation of expenses which are deducted from the related expenses.

Interim Report 2020 GCL-Poly Energy Holdings Limited 45

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

3. Revenue and Segment Information

The Group's reportable and operating segments under IFRS 8 Operating Segments are as follows:

  1. Solar material business - mainly manufactures and sales of polysilicon and wafer to companies operating in the solar industry.
  2. Solar farm business - manages and operates 371 MW solar farms, of which 18MW is located in the United States of America (the "USA") and 353MW is located in the PRC. These solar farms were constructed or acquired by the Group prior to obtaining a controlling stake in GNE.
  3. New energy business - represents the business operations of GNE, which is principally engaged in the development, construction, operation and management of solar farms.

The following is an analysis of the Group's revenue and results by reportable and operating segments:

Segment revenue and results

Six months ended 30 June 2020

Solar

Solar

New

material

farm

energy

business

business

business

Total

RMB'000

RMB'000

RMB'000

RMB'000

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Note)

Segment revenue

4,189,055

239,045

2,731,140

7,159,240

Segment (loss) profit

(2,023,124)

41,070

172,133

(1,809,921)

Elimination of inter-segment profit

(81,900)

Unallocated income

5,144

Unallocated expenses

(50,157)

Loss on fair value change of convertible

bonds receivable (note 16)

(403)

Gain on fair value change of financial

assets at FVTPL

1,756

Loss on fair value change of held for

trading investments (note 6)

(148)

Share of profit of an associate

10,191

Share of profits of joint ventures

625

Loss for the period

(1,924,813)

46 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

3. Revenue and Segment Information (continued)

Segment revenue and results (continued)

Six months ended 30 June 2019

Solar

Solar

New

material

farm

energy

business

business

business

Total

RMB'000

RMB'000

RMB'000

RMB'000

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Note)

Segment revenue

6,580,334

248,517

3,172,984

10,001,835

Segment (loss) profit

(1,311,006)

63,551

554,096

(693,359)

Elimination of inter-segment profit

(81,450)

Unallocated income

26,164

Unallocated expenses

(22,369)

Gain on fair value change of convertible

bonds receivable (note 16)

9,599

Gain on fair value change of financial

assets at FVTPL (note 6)

14,292

Loss on fair value change of held for

trading investments (note 6)

(17,197)

Share of profit of an associate

10,536

Share of profits of joint ventures

2,422

Loss for the period

(751,362)

Note: The operating results of new energy business included allocated corporate expenses.

The accounting policies of the operating segments are the same as the Group's accounting policies. Segment (loss) profit represents the (loss) profit of each respective segment excluding unallocated income, unallocated expenses (including certain exchange losses and unallocated tax expense), change in fair value of convertible bonds receivable, change in fair value of certain financial assets at FVTPL, change in fair value of held for trading investments, share of profits of certain interests in associates and joint ventures. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and performance assessment.

Interim Report 2020 GCL-Poly Energy Holdings Limited 47

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

3. Revenue and Segment Information (continued)

Segment assets and liabilities

The following is an analysis of the Group's assets and liabilities by reportable and operating segments:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Segment assets

Solar material business

37,569,766

41,155,374

Solar farm business

3,491,717

3,541,357

New energy business

52,767,501

54,343,458

Total segment assets

93,828,984

99,040,189

Other financial assets at FVTPL

456,666

427,543

Equity instrument at FVTOCI

29,239

41,857

Held for trading investments

4,265

4,339

Convertible bonds receivable

96,364

101,097

Interests in associates

393,302

384,611

Interests in joint ventures

199,220

198,594

Unallocated bank balances and cash

114,941

138,275

Unallocated corporate assets

139,038

100,454

Consolidated assets

95,262,019

100,436,959

Segment liabilities

Solar material business

25,693,755

27,477,455

Solar farm business

1,927,473

1,915,576

New energy business

42,316,491

44,094,269

Total segment liabilities

69,937,719

73,487,300

Unallocated corporate liabilities

264,218

228,251

Consolidated liabilities

70,201,937

73,715,551

For the purpose of monitoring segment performance and allocating resources between segments:

  • All assets are allocated to operating segments, other than unallocated corporate assets, corporate bank balances and cash and other assets (including certain other financial assets at FVTPL, equity instruments at FVTOCI, held for trading investments, convertible bonds receivable and certain interests in associates and joint ventures) of the management companies and investment holding companies; and
  • All liabilities are allocated to operating segments, other than unallocated corporate liabilities of the management companies and investment holding companies.

48 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

3. Revenue and Segment Information (continued)

Disaggregation of revenue

Six months ended 30 June 2020

Solar

Solar

New

material

farm

energy

business

business

business

Total

Segments

RMB'000

RMB'000

RMB'000

RMB'000

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Types of goods or services

Sales of wafer

2,572,834

-

-

2,572,834

Sales of electricity (Note)

-

239,045

2,731,140

2,970,185

Sales of polysilicon

1,015,188

-

-

1,015,188

Processing fees

357,390

-

-

357,390

Others (comprising the sales of ingots)

243,643

-

-

243,643

Total

4,189,055

239,045

2,731,140

7,159,240

Geographic markets

The PRC

3,741,375

219,491

2,691,744

6,652,610

Others

447,680

19,554

39,396

506,630

Total

4,189,055

239,045

2,731,140

7,159,240

Timing of revenue recognition

A point in time

3,831,665

239,045

2,731,140

6,801,850

Over time

357,390

-

-

357,390

Total

4,189,055

239,045

2,731,140

7,159,240

Interim Report 2020 GCL-Poly Energy Holdings Limited 49

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

3. Revenue and Segment Information (continued)

Disaggregation of revenue (continued)

Six months ended 30 June 2019

Solar

Solar

New

material

farm

energy

Segments

business

business

business

Total

RMB'000

RMB'000

RMB'000

RMB'000

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Types of goods or services

Sales of wafer

4,535,386

-

-

4,535,386

Sales of electricity (Note)

-

248,517

3,172,984

3,421,501

Sales of polysilicon

1,289,009

-

-

1,289,009

Processing fees

310,133

-

-

310,133

Others (comprising the sales of silicon

rods and ingots)

445,806

-

-

445,806

Total

6,580,334

248,517

3,172,984

10,001,835

Geographic markets

The PRC

6,008,040

229,439

3,129,553

9,367,032

Others

572,294

19,078

43,431

634,803

Total

6,580,334

248,517

3,172,984

10,001,835

Timing of revenue recognition

A point in time

6,270,201

248,517

3,172,984

9,691,702

Over time

310,133

-

-

310,133

Total

6,580,334

248,517

3,172,984

10,001,835

Note: Sales of electricity included approximately RMB1,814,474,000 (six months ended 30 June 2019: RMB2,081,860,000) tariff adjustments received and receivable from the local grid companies in the PRC based on the prevailing nationwide government policies on renewable energy for solar farms. Details of settlement arrangement of tariff are disclosed in note 17B.

50 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

4. Other Income

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Interest income

- bank and other interest income

87,253

46,120

- debt instruments at FVTOCI

-

393

Interest arising from contracts containing significant financing

component (Note a)

160,840

81,492

Government grants (Note b)

57,210

68,868

Sales of scrap materials

52,529

77,977

Compensation income (Note c)

44,050

-

Management and consultancy fee income

28,878

52,561

Rental income

16,539

24,968

Forfeitures of deposits from customers

2,880

72,613

Others

9,096

16,333

459,275

441,325

Notes:

  1. Since certain of the tariff adjustments are yet to obtain approval for registration in the Renewable Energy Tariff Subsidy List (可再生 能源發電補助項目清單) (the "List") (2019: Renewable Energy Tariff Subsidy Catalogue (the "Catalogue")) by the PRC government, the management considers that it contains a significant financing component over the relevant portion of tariff adjustment until approval was obtained. For the six months ended 30 June 2020, the respective tariff adjustment was adjusted for this financing component based on an effective interest rate ranged from 2.45% to 2.98% (six months ended 30 June 2019: 2.48% to 2.98%) per annum and the adjustment in relation to the revision of expected timing of tariff collection. As such, the Group's revenue was adjusted by approximately RMB28 million (six months ended 30 June 2019: RMB89.3 million) and interest income amounting to approximately RMB161 million (six months ended 30 June 2019: RMB81.5 million) was recognised.
  2. Government grants include (i) subsidies received from the relevant PRC government for improvement of working capital and incentive subsidies received in relation to activities carried out by the Group. There were no specific conditions/assets attached to the grants and therefore, the Group recognised the grants upon receipt. The subsidies were granted on a discretionary basis to the Group during the periods. Government grants related to depreciable assets have been deferred and released over the estimated useful lives of the relevant assets; and (ii) investment tax credit ("ITC") recognised in relation to an inverted lease arrangement or other financing arrangement for its qualified solar farm projects in the USA and details are set out in notes to the Group's consolidated financial statements for the year ended 31 December 2019. Approximately RMB7.2 million (six months ended 30 June 2019: RMB7.0 million) of the ITC benefit was recognised in profit or loss for the six months ended 30 June 2020 as a government grant income and included in other income.
  3. Amount mainly represents the insurance claim received during the six months ended 30 June 2020 for the compensation on the suspension of operation in a production plant of the solar material business segment from power outage. The relevant production plant has resumed its operation subsequent to the power outage. The Group has insurance policies in place to cover the damage incidental to power outage and the related compensation will be recognised only when the compensation becomes receivable. The Group received approximately RMB42,596,000 from insurance claim as of 30 June 2020 which was recognised as compensation income.

Interim Report 2020 GCL-Poly Energy Holdings Limited 51

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

5. Finance Costs

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Interest on financial liabilities at amortised cost

- bank and other borrowings

1,415,272

1,610,661

- notes and bonds payables and senior notes

152,409

182,925

- loans from related companies

76,643

135,100

Interest on lease liabilities

61,734

85,420

Total borrowing costs

1,706,058

2,014,106

Less: interest capitalised

(15,515)

(31,872)

1,690,543

1,982,234

There is no borrowing costs capitalised during the current interim period arose on general borrowing pool. Borrowing costs capitalised during the six months ended 30 June 2019 arose on the general borrowing pool are calculated by applying a capitalisation rate of 7.39% per annum to expenditure on qualifying assets.

6. Other Expenses, Gains and Losses, Net

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Research and development costs

231,780

298,878

Exchange losses, net

92,654

6,997

Loss (gain) on fair value change of convertible bonds receivable

(note 16)

403

(9,599)

Gain on fair value change of other financial assets at FVTPL

(14,783)

(14,292)

Loss on fair value change of held for trading investments

148

17,197

Loss on fair value change of derivative financial instruments (note 24)

28,600

6,457

Loss on measurement of assets classified as held for sale to

-

fair value less cost to sell (note 10)

153,339

Impairment loss on property, plant and equipment (note 12)

740,596

280,000

Loss on disposal of property, plant and equipment

15,074

27,466

Bargaining purchase from business combination

-

(73,858)

Loss on disposal of subsidiaries (note 29)

84,225

-

Loss (gain) on disposal of subsidiaries with solar

farm projects (note 29)

87,738

(46,263)

Gain on disposal of joint ventures

-

(35,263)

Loss on deemed disposal of an associate (note 13)

49,408

-

Gain on early termination of a lease

(7)

-

1,469,175

457,720

52 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

7. Income Tax Expense

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

PRC Enterprise Income Tax ("EIT")

Current tax

95,397

80,005

Under(over) provision in prior periods

1,107

(39,642)

PRC dividend withholding tax

7,158

4,150

103,662

44,513

USA Federal and State Income Tax

Current tax

27

20

Underprovision in prior periods

5

2

32

22

Deferred tax

(44,934)

(38,087)

58,760

6,448

The PRC EIT for the period represents income tax in the PRC which is calculated at the prevailing tax rate on the taxable income of subsidiaries in the PRC.

Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of PRC subsidiaries is 25%, except for those subsidiaries described below. The under(over)provision of EIT in prior periods arose mainly as a result of completion of tax clearance procedures by certain PRC subsidiaries with the respective tax authorities.

Certain subsidiaries operating in the PRC have been accredited as a "High and New Technology Enterprise" for a term of three years, and have been registered with the local tax authorities for enjoying the reduced 15% EIT rate. Accordingly, the profits derived by these subsidiaries are subject to 15% EIT rate for both periods. The qualification as a High and New Technology Enterprise will be subject to annual review by the relevant tax authorities in the PRC.

Certain subsidiaries of GNE Group, being enterprises engaged in solar photovoltaic projects, under the EIT Law, are entitled to tax holidays of 3-year full exemption followed by 3-year 50% exemption commencing from their respective years in which their first operating incomes were derived. For the six months ended 30 June 2020 and 30 June 2019, certain subsidiaries of GNE engaged in the solar photovoltaic projects are in the 3-year 50% exemption period. Certain of such subsidiaries of GNE Group have completed the 3-year full exemption period or 3-year 50% exemption period in current period.

Interim Report 2020 GCL-Poly Energy Holdings Limited 53

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

7. Income Tax Expense (continued)

Federal and State tax rate in the USA are calculated at 21% and 8.84%, respectively, for both periods.

Under the two-tiered profits tax rates regime introduced by The Inland Revenue (Amendment) (No. 7) Bill 2017, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both periods. No provision for Hong Kong Profits Tax was made as there was no assessable profit for both periods.

The Group's subsidiaries, associates and joint ventures that are tax residents in the PRC are subject to the PRC dividend withholding tax of 5% or 10% for those non-PRC resident immediate holding companies registered in Hong Kong and the British Virgin Islands, respectively, when and if undistributed earnings are declared to be paid as dividends out of profits that arose on or after 1 January 2008. Net reversal for deferred taxation of approximately RMB47,617,000 (six months ended 30 June 2019: RMB58,785,000) in respect of withholding tax on undistributed profits has been credited to profit or loss during the current interim period.

8. Loss for the Period

Six months ended 30 June

20202019

RMB'000 RMB'000

(Unaudited) (Unaudited)

Loss for the period has been arrived at after charging the

following items:

Depreciation of property, plant and equipment

1,702,885

2,186,081

Depreciation of right-of-use assets

163,318

149,105

Depreciation of investment properties

2,327

2,327

Amortisation of other intangible assets

16,745

50,751

Total depreciation and amortisation

1,885,275

2,388,264

Less: amounts absorbed in opening and closing inventories, net

(5,082)

(44,496)

1,880,193

2,343,768

Less: amounts absorbed in inventories sold, including

opening inventories

(708,707)

(1,016,681)

1,171,486

1,327,087

54 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

9. Dividends

The Directors do not recommend the payment of interim dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: nil).

10. Assets Classified as Held for Sale/Liabilities Associated with Assets Classified as Held for Sale

Disposal of solar farms

  1. Five wholly-owned subsidiaries of GNE Group in Ningxia, Xinjiang and Jiangxi, the PRC
    As mentioned in note 1, GNE Group entered into six share transfer agreements on 21 January 2020 with China Huaneng to dispose of 100% equity interest in six wholly-owned subsidiaries, of which the disposals of five out of these six wholly-owned subsidiaries have not yet been completed as at 30 June 2020, to Hua Neng No. 1 Fund and Hua Neng No. 2 Fund at consideration in aggregate of RMB732,800,000 and the repayment of corresponding interest in shareholder's loan as at the date of completion of disposals (the "Disposal Date"). The subsidiaries operate solar farm projects with in aggregate capacity of 220MW in Ningxia, Xinjiang and Jiangxi, the PRC (the "Projects").
    GNE Group has granted a put option to Hua Neng No. 1 Fund and Hua Neng No. 2 Fund, pursuant to which GNE Group has agreed that if the Projects fail to fully receive the balance of the tariff adjustment receivables ("Tariff Adjustment Receivables") as at the Disposal Date during the four-year period after the Disposal Date, or the operation of the Projects are disrupted for more than six months due to the reasons stipulated in the share transfer agreements, GNE Group shall repurchase the 100% equity interest in the Projects from Hua Neng No. 1 Fund and Hua Neng No. 2 Fund at a repurchase price which is the higher of (1) equity value of the Projects assessed by The State-owned Assets Supervision and Administration Commission of the State Council or (2) a repurchase price calculated in accordance with terms specified in the share transfer agreements, together with any outstanding shareholder's loan advanced to the relevant Projects by Hua Neng No. 1 Fund and Hua Neng No. 2 Fund. As the Projects have already registered in the Catalogue/List and receipt of tariff adjustment receivables are stable, in the opinion of the directors of GNE, it is highly likely that the balance of the Tariff Adjustment Receivables will be collected within four years after the Disposal Date.
  2. Jinhu
    On 29 June 2020, GNE Group entered into share transfer agreements with CDB New Energy, an independent third party, pursuant to which GNE Group agreed to sell and CDB New Energy agreed to purchase 75% equity interest of Jinhu at consideration of RMB136,624,000 and the repayment of corresponding interest in shareholder's loan as at the date of completion of disposal. Jinhu operates a solar farm project with capacity of 100MW in Jiangsu, the PRC.

As at 30 June 2020, the assets and liabilities attributable to these solar farm projects have been classified as a disposal group held for sale and are presented separately in the unaudited condensed consolidated statement of financial position.

Interim Report 2020 GCL-Poly Energy Holdings Limited 55

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

10. Assets Classified as Held for Sale/Liabilities Associated with Assets Classified as Held for Sale (continued)

Disposal of solar farms (continued)

As at 30 June 2020, the major classes of assets and liabilities of the disposal group are as follows:

RMB'000

Property, plant and equipment

2,196,567

Right-of-use assets

23,537

Other non-current assets

70,649

Trade and other receivables (Note a)

625,403

Amount due from a related company

1,520

Pledged bank deposits

8,488

Bank balances and cash

69,509

2,995,673

Less: Loss on measurement of assets classified as held for sale to

fair value less cost to sale (note 6)

(153,339)

Total assets classified as held for sale

2,842,334

Other payables

(84,402)

Loan from a related company - due within one year (Note c)

(12,139)

Bank and other borrowings - due within one year (Note b)

(742,800)

Loan from a related company - due after one year (Note c)

(74,549)

Bank and other borrowings - due after one year (Note b)

(649,150)

Lease liabilities

(22,096)

Deferred tax liabilities

(11,486)

Total liabilities associated with assets classified as held for sale

(1,596,622)

Net assets of solar farm projects classified as held for sale

1,245,712

Intragroup balances

(349,651)

Net assets of solar farm projects

896,061

Remaining net assets of Jinhu held by GNE Group

(45,541)

Net assets to be disposed of

850,520

56 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

10. Assets Classified as Held for Sale/Liabilities Associated with Assets Classified as Held for Sale (continued)

Disposal of solar farms (continued)

Notes:

  1. The following is an aged analysis of trade receivables presented based on the invoice date at 30 June 2020, which approximated the respective revenue recognition date:

RMB'000

Unbilled (Note)

599,129

0-90 days

780

91-180 days

-

Over 180 days

11,766

611,675

Note: The aged analysis of the unbilled trade receivables, which is based on revenue recognition date, are as follows:

RMB'000

0-90 days

106,548

91-180 days

41,828

181-365 days

146,220

Over 365 days

304,533

599,129

For the electricity sale business, GNE Group generally granted credit period of approximately one month to local power grid companies in the PRC from the date of invoice in accordance with the relevant electricity sales contract between GNE Group and the respective local grid companies.

Interim Report 2020 GCL-Poly Energy Holdings Limited 57

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

10. Assets Classified as Held for Sale/Liabilities Associated with Assets Classified as Held for Sale (continued)

Disposal of solar farms (continued)

Notes: (continued)

  1. The carrying amounts of the above bank and other borrowings are repayable#:

RMB'000

Within one year

742,800

More than one year, but not exceeding two years

99,150

More than two years, but not exceeding five years

318,620

More than five years

231,380

1,391,950

Less: Bank and other borrowings - due within one year

(742,800)

Bank and other borrowings - due after one year

649,150

    • The repayable amounts of bank and other borrowings are based on scheduled repayment dates set out in the respective loan agreements.
  1. Loan from a related company represents the loan from 芯鑫融資租賃有限責任公司 Xinxin Finance Leasing Company Limited* ("Xinxin"), an associate of the Company, amounted to approximately RMB86,688,000 which is secured by a pledged deposit of RMB1,520,000, and certain property, plant and equipment held by GNE Group, interest bearing at 8.58% per annum and repayable from 2020 through 2026. Approximately RMB12,139,000 of the outstanding loans are repayable within twelve months from the end of the reporting period, with the remainder of approximately RMB74,549,000 having a repayment term of six years.
  • English name for identification only

58 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

11. Loss per Share

The calculation of basic and diluted loss per share attributable to the owners of the Company is based on the following data:

Six months ended 30 June

20202019

RMB'000 RMB'000

(Unaudited) (Unaudited)

Loss

Loss for the purpose of basic and diluted loss per share

(loss for the period attributable to owners of the Company)

(1,995,988)

(997,530)

Six months ended 30 June

20202019

'000'000

(Unaudited) (Unaudited)

Number of shares

Weighted average number of ordinary shares for the purpose

of basic and diluted loss per share

19,568,050

18,115,551

For the six months ended 30 June 2020 and 2019, the weighted average number of ordinary shares for the purpose of calculation of basic and diluted loss per share has been adjusted for the effect of the 322,998,888 ordinary shares purchased by the Trustee from the market pursuant to the Scheme.

Diluted loss per share for the six months ended 30 June 2020 and 2019 did not assume the exercise of share options granted by the Company since the exercise would decrease the loss per share for the respective period.

Diluted loss per share for the six months ended 30 June 2020 and 2019 did not assume the exercise of share options granted by GNE since the exercise price of the relevant share options is higher than the share price of the respective entities for the respective period.

Interim Report 2020 GCL-Poly Energy Holdings Limited 59

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

12. Movements in Property, Plant and Equipment and Right-of-use Assets

During the six months ended 30 June 2020, the Group spent approximately RMB15 million (six months ended 30 June 2019: RMB346 million) on construction of solar farms and related facilities in the PRC in order to enlarge its power generation capacities. Furthermore, the Group spent approximately RMB73 million (six months ended 30 June 2019: RMB37 million) on technological improvement and other production facilities to enhance the wafer and polysilicon production efficiency. As at 30 June 2020, the constructions are still in progress.

In addition, during the current interim period, the Group disposed of certain property, plant and equipment with an aggregate carrying amount of approximately RMB149 million (six months ended 30 June 2019: RMB36 million) for proceeds received and receivable of approximately RMB86 million and RMB48 million (six months ended 30 June 2019: nil and RMB9 million), respectively, resulting in a loss of approximately RMB15 million (six months ended 30 June 2019: RMB27 million).

Leases are negotiated and rentals are fixed for terms ranging from 1 to 34 years (31 December 2019: 1 to 34

years) for parcels of land and ranging from 1 to 10 years (31 December 2019: 1 to 5 years) for the office premises and staff quarters. Certain lease agreements entered into between the landlords and the Group include renewal options at the discretion of the respective group entities for further 5 to 15 years (31 December 2019: 5 to 10 years) from the end of the leases with fixed rental.

During the current interim period, the Group entered into several new lease agreements with lease terms ranged from 2 to 20 years. The Group is required to make fixed annually payments, except for full payment of approximately RMB1,917,000 was paid for certain leases. On lease commencement, the Group recognised right-of-use assets of approximately RMB41,809,000 (six months ended 30 June 2019: RMB32,753,000) and lease liabilities of approximately RMB39,892,000 (six months ended 30 June 2019: RMB19,786,000).

Sale and leaseback transactions - seller-lessee

To better manage the Group's capital structure and financing needs, the Group sometimes enters into sale and leaseback arrangements in relation to machinery leases. These legal transfer does not satisfy the requirements of IFRS 15 Revenue from Contracts with Customers to be accounted for as a sale of the solar farms. During the six months ended 30 June 2020, the Group has raised borrowing of approximately RMB192,610,000 (year ended 31 December 2019: RMB2,389,424,000) in respect of such arrangements which are accounted as collateralised borrowings.

Impairment loss on CGUs in solar material business segment

Due to the continuing unfavourable market conditions and poor economic condition induced by the outbreak of COVID-19 during the current interim period, the polysilicon and wafer faced a stronger than expected price pressure with decrease in demand, and the solar material business segment recognised a segment loss of approximately RMB2,023 million during the six months ended 30 June 2020. With the impairment indicators identified, the Directors conducted a review of the recoverable amounts of several cash-generating units ("CGUs") in the solar material business segment to which the property, plant and equipment and intangible assets belonged to as at 30 June 2020.

60 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

12. Movements in Property, Plant and Equipment and Right-of-use Assets (continued)

Impairment loss on CGUs in solar material business segment (continued)

The recoverable amounts of the relevant CGUs are determined based on a value in use calculations by the Directors on the production plants in relation to the production of polysilicon and wafer of the CGUs in the solar material business segment as at 30 June 2020. The calculation uses cash flow projections covering the useful lives of those property, plant and equipment and intangible assets in relation to the production of polysilicon and wafer based on financial budgets approved by management including replacement of assets with shorter useful lives within the relevant CGUs. Key assumptions for the value in use calculations relate to the estimation of cash inflows/outflows include discount rate, budgeted sales and gross margin. Such estimation is based on past performance and management's expectations for the market. The fair value less costs to sell of the CGUs is lower than the value in use. The impairment amount has been allocated to each category of property, plant and equipment. Such that the carrying amount of each category of asset is not reduced below the highest of its fair value less cost of disposal, its value in use and zero. As a result, an impairment loss of approximately RMB698,000,000 is recognised on property, plant and equipment during the six months ended 30 June 2020. During the six months ended 30 June 2019, an impairment loss of approximately RMB280,000,000 was recognised on property, plant and equipment in relation to the production of polysilicon.

Impairment loss on CGUs in new energy business segment

There is an impairment loss of approximately RMB42,596,000 arose from the termination of constructing certain in-progress solar farm projects during the six months ended 30 June 2020. In current period, having considered the financial resources of GNE Group, and considered that the equipment costs related to certain solar farms, which are still in preliminary stage, will not generate future economic returns to GNE Group, and therefore the management determined to suspend these projects and the relevant equipment costs in these projects are fully impaired.

13. Interests in Associates

Same as disclosed in the Company's 2019 annual report, there is no material change for the six months ended 30 June 2020, except for:

In March 2020, one of the existing shareholders of 內蒙古中環協鑫光伏材料有限公司 Inner Mongolia Zhonghuan-GCL Solar Material Co., Ltd* ("Mongolia Zhonghuan-GCL") has further injected RMB480,000,000 in total into Mongolia Zhonghuan-GCL for the increase of its registered capital, which resulted in diluting the Group's equity interest in Mongolia Zhonghuan-GCL diluted by approximately 1%. Since the Group is given the right to appoint two out of seven directors on the board of Mongolia Zhonghuan-GCL, the Directors considered that the Group can exercise significant influence over Mongolia Zhonghuan-GCL and it is therefore continued to be classified as an associate of the Group. This deemed disposal has resulted in the Group recognising a loss of approximately RMB49,408,000 in profit or loss during the current interim period.

  • English name for identification only

Interim Report 2020 GCL-Poly Energy Holdings Limited 61

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

14. Interests in Joint Ventures

Same as disclosed in the Company's 2019 annual report, there is no material change for the six months ended 30 June 2020.

15. Other Financial Assets at Fair Value through Profit or Loss

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Current assets

Other financial assets at FVTPL:

Unlisted investments (Note a)

781,682

477,256

Non-current assets

Other financial assets at FVTPL:

Unlisted investments (Note b)

226,985

213,221

Asset management plans (Note c)

-

100,000

Unlisted equity investments (Note d)

44,321

44,321

271,306

357,542

Notes:

  1. The unlisted investments represent the financial products issued by financial institutions and banks in Hong Kong and the PRC. The Directors consider the fair values of the unlisted investments, which are based on the prices provided by the financial institutions and banks, i.e. the prices they would pay to redeem the financial products at the end of the reporting period, approximate to their carrying value.
  2. The Group invested in the form of interests as limited partners, which hold a portfolio of unlisted investments. The primary objective of the investments is to earn income and capital gain. Pursuant to investment agreements, the beneficial interests held by the Group in these unlisted investments are in the form of participating shares or interests which primarily provide the Group with the share of returns from the unlisted investments but not any decision making power nor any voting right to involve in and control the daily operation. The unlisted investments mainly made up of private entities incorporated in the PRC and liquid financial assets (including cash and cash equivalents).
  3. GNE Group invested RMB100,000,000 into an asset management plan managed by a financial institution in the PRC with maturity on 31 March 2021. The principal is not guaranteed by the financial institution and the expected return rate as stated in the contract is 7.5%. During the current interim period, GNE Group entered into an asset transfer agreement with the financial institution to offset such investment with the other borrowings from it with a gain of approximately RMB13,027,000 recognised in profit or loss.
  4. The amount mainly represents the investments in unlisted equity instruments issued by private entities established in the PRC, Hong Kong and the USA.

62 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

16. Convertible Bonds Receivable

In 2018, the Group subscribed for the convertible bonds issued by Asia Energy Logistics Group Limited, whose shares are listed on the Stock Exchange, with principal amount of HK$100,000,000 (equivalent to approximately RMB80,334,000). The convertible bonds carry interest at 5.5% per annum payable semi-annually and mature on 2 March 2021. The convertible bonds have been subsequently fully redeemed on 14 July 2020 and therefore, the fair value of the convertible bonds receivable as at 30 June 2020 was determined with reference to the redemption value as the fair value of the option is deeply out of money. There is a loss on fair value change of approximately RMB403,000 (six months ended 30 June 2019: gain on fair value change of approximately RMB9,599,000) recognised in profit or loss in the current interim period.

17A. Deposits, Prepayments and Other Non-current Assets/Trade and Other Receivables

Deposits, prepayments and other non-current assets

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Deposits for acquisitions of property, plant and equipment

536,576

530,525

Consideration receivable (note 29(ii))

56,000

92,795

Refundable value-added tax

1,288,220

1,716,249

Others

58,187

56,877

1,938,983

2,396,446

Trade and other receivables

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Trade receivables (Note a)

10,945,672

10,891,170

Other receivables

955,048

738,958

Refundable value-added tax

754,222

860,714

Consideration receivables (note 29(ii))

546,920

532,909

Receivables for modules procurement

229,284

287,044

Other loan receivables (Note b)

1,250

14,250

Advance to Borrowers (as defined in Note b )

-

13,530

Prepayments

412,695

518,566

13,845,091

13,857,141

Interim Report 2020 GCL-Poly Energy Holdings Limited 63

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

17A. Deposits, Prepayments and Other Non-current Assets/Trade and Other Receivables

(continued)

Trade and other receivables (continued)

Notes:

  1. The Group allows a credit period of approximately one month from the invoice date for trade receivables (excluding sales of electricity) and may further extend 3 to 6 months for settlement through bills issued by banks and financial institutions obtained from trade customers.
    The following is an aged analysis of trade receivables (excluding sales of electricity and bills held by the Group for future settlement), net of allowances for credit losses, presented based on the invoice date at the end of the reporting period:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Within 3 months

344,738

559,711

3 to 6 months

95,427

29,048

Over 6 months

163,894

76,740

604,059

665,499

For sales of electricity, the Group generally grants credit period of approximately one month to power grid companies in the PRC from the date of invoice in accordance with the relevant electricity sales contracts between the Group and the respective grid companies.

The following is an aged analysis of trade receivables arising from sales of electricity (excluding bills held by the Group for future settlement), presented based on the invoice date at the end of the reporting period:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Unbilled (Note)

4,156,250

2,524,359

Within 3 months

271,506

280,503

3 to 6 months

68,346

147,892

Over 6 months

706,981

504,380

5,203,083

3,457,134

64 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

17A. Deposits, Prepayments and Other Non-current Assets/Trade and Other Receivables

(continued)

Trade and other receivables (continued)

Notes: (continued)

  1. (continued)

Note: Amount represents unbilled basic tariff receivables for solar farms operated by the Group, and tariff adjustment receivables of those solar farms already registered in the Catalogue/List. The Directors expect the unbilled tariff adjustments would be generally billed and settled within one year from the end of the reporting period.

The aged analysis of the unbilled trade receivables, which is based on revenue recognition date, are as follows:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

0-90 days

670,006

504,582

91-180 days

336,485

401,488

181-365 days

791,537

677,679

over 365 days

2,358,222

940,610

4,156,250

2,524,359

As at 30 June 2020, trade receivables include bills received amounting to approximately RMB5,138,530,000 (31 December 2019: RMB6,768,537,000) held by the Group for future settlement of trade receivables, of which certain bills issued by third parties of approximately RMB2,355,082,000 and RMB1,763,529,000 (31 December 2019: RMB3,210,854,000 and RMB2,743,769,000) are further endorsed by the Group with recourse for settlement of payables for purchase of plant and machinery, construction costs and trade payables and discounted to banks for financing with recourse, respectively. The Group continues to recognise their full carrying amount at the end of the reporting periods and details are disclosed in notes 21 and 22. All bills received by the Group are with a maturity period of less than one year.

The Directors closely monitor the credit quality of trade and other receivables and consider the trade and other receivables, which are neither past due nor impaired, are of a good credit quality in view of the good historical repayment record.

  1. GNE Group, as lender, entered into loan agreements with independent third parties (the "Borrowers") to provide credit facilities to finance their development and operation of certain solar farm projects in the PRC. As at 30 June 2020, the outstanding balance is approximately RMB1,250,000 (31 December 2019: RMB14,250,000). The loans are repayable within twelve months from 31 December 2019 and carry interest at 6% (31 December 2019: 6%) per annum.
    Advance to Borrowers is non-trade in nature, unsecured, non-interest bearing and repayable on demand.

Interim Report 2020 GCL-Poly Energy Holdings Limited 65

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

17B. Contract Assets

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Sales of electricity

5,058,357

5,639,898

Current

4,323,281

-

Non-current

735,076

5,639,898

5,058,357

5,639,898

In January 2020, the Several Opinions on Promoting the Healthy Development of Non-HydroRenewable Energy Power Generation (Caijian [2020] No. 4)*( 關於促進非水可再生能源發電健康發展的若干意見》) (財建 [2020]4) and the Measures for Administration of Subsidy Funds for Tariff Premium of Renewable Energy (Caijian [2020] No. 5)*( 財政部國家發展改革委國家能源局關於印發〈可再生能源電價附加資金管理辦法〉的通 知》) (財建[2020]5) (the "2020 Measures") were jointly announced by the Ministry of Finance, National Development and Reform Commission and National Energy Administration. In accordance with the new government policy as stipulated in the 2020 Measures, the PRC government will not announce new additions to the existing Catalogue and has further simplified the application and approval process regarding the registration of tariff adjustments for non-hydrorenewable energy power plant projects into the List. The state grid companies will regularly announce the List based on the project type, time of grid connection and technical level of the solar farms. All solar farms already registered in the Catalogue will be enlisted in the List automatically. For those on-gridsolar farm projects which have already started operation but yet to register into the previous Catalogue and now, the List, these on-gridsolar farm projects are entitled to enlist into the List once they have met the conditions as stipulated on the Administration of Subsidy Funds for Tariff Premium of Renewable Energy (可再生能源電價附加資金管理辦法) and completed the submission and application in the National Renewable Energy Information Management Platform (the "Platform").

  • English name for identification only

66 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

17B. Contract Assets (continued)

The contract assets primarily relate to the portion of tariff adjustments for the electricity sold to the grid companies in the PRC in which the relevant on-grid solar farms are still pending for registration to the List (2019: Catalogue) at the end of the reporting date, and tariff adjustment is recognised as revenue upon electricity is generated. Pursuant to the 2020 Measures, for those on-grid solar farms yet to be registered on the List (2019: Catalogue), they are required to meet the relevant requirements and conditions for tariff subsidy as stipulated and to complete the submission and application on the Platform. Local grid companies will observe the principles set out in the 2020 Measures to determine eligibility and regularly announce the on-grid solar farms that are enlisted in the List. The contract assets are transferred to trade receivables when the Group's respective on-grid solar farms are enlisted in the List. The Group considers the settlement terms contain significant financing component, and has adjusted the respective tariff adjustment for the financing component based on estimated timing of collection. Accordingly the amount of consideration is adjusted for the effects of the time value of money taking into consideration the credit characteristics of the relevant counterparties. The revenue of the Group was adjusted by approximately RMB28 million for the six months ended 30 June 2020 (six months ended 30 June 2019: RMB151 million) for this financing component and in relation to revision of expected timing of tariff adjustment in the contract assets.

Contract assets are reclassified to trade receivables at the point the respective on-grid solar farm projects are enlisted on the List. During the six months ended 30 June 2020, there are 22 solar farms being admitted to the List and according to the related contract assets amounting to approximately RMB1,684,786,000 are reclassified to trade receivables. Besides, 43 solar farms are eligible to the List and expected to admit to the List in the second half of 2020. Balances of approximately RMB4,323,281,000 are classified as current assets as they are expected to be received with twelve months from the end of reporting period. The remaining balances as at 30 June 2020 are classified as non-current as they are expected to be received after twelve months from the reporting date.

Interim Report 2020 GCL-Poly Energy Holdings Limited 67

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

18. Impairment Assessment on Financial Assets and Other Items subject to Expected Credit Loss ("ECL") Model

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Impairment losses recognised (reversed), net in respect of

- trade receivables - goods and services

16,482

(25,184)

- contract assets

5,398

-

- consideration receivables

140,000

-

- amounts due from related companies

60,000

37,758

221,880

12,574

The basis of determining the inputs and assumptions and the estimation techniques used in the unaudited condensed interim consolidated financial statements for the six months ended 30 June 2020 for assessment of ECL are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019.

The Group reversed the impairment allowance for trade receivables of approximately RMB2,524,000 (six months ended 30 June 2019: RMB27,720,000) resulting from subsequent settlement during the current interim period.

The Directors considered the consideration receivables from the disposal of 蘇州客准光伏科技有限公司 Suzhou Kezhun Photovoltaic Technology Co. Ltd.* with gross carrying amount of approximately RMB506,308,000 as at 30 June 2020 were credit-impaired because there were defaults of payments from the counterparty since 2019. Such consideration receivables were assessed for ECL individually. A further impairment loss of approximately RMB140,000,000 was recognised in the current interim period and which was mainly attributable to the increase in loss given default of the counterparty.

For amounts due from related companies (trade related), receivables with gross carrying amounts of approximately RMB403,692,000 from a related company as at 30 June 2020 were credit-impaired because there were defaults of payments from the counterparty since 2019. Such balance was assessed for ECL individually. A further impairment loss of approximately RMB60,000,000 was recognised in the current interim period and which was mainly attributable to the increase in loss given default of the counterparty.

During the current interim period, the Directors are of the opinion that the ECL on other financial assets and other items subject to ECL is insignificant.

  • English name for identification only

68 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

19. Balances with Related Companies

The related companies included associates and joint ventures of the Group and companies controlled by Mr. Zhu Gongshan, the chairman of the Group, and his family members which hold in aggregate approximately 30% (31 December 2019: 32%) of the Company's share capital as at 30 June 2020 and exercises significant influence over the Company.

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Amounts due from related companies

- Trade related (Note a)

62,100

129,563

- Non-trade related (Note b)

35,022

19,686

97,122

149,249

Amounts due from associates

- Trade related (Note a)

52,720

101,719

- Non-trade related (Note c)

1,640,887

2,273,114

1,693,607

2,374,833

Amounts due from joint ventures

- Trade related (Note a)

29,183

705

- Non-trade related (Note b)

8,520

8,297

37,703

9,002

1,828,432

2,533,084

Analysed for reporting purposes as:

- Current assets

981,481

1,706,133

- Non-current assets

846,951

826,951

1,828,432

2,533,084

Interim Report 2020 GCL-Poly Energy Holdings Limited 69

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

19. Balances with Related Companies (continued)

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Amounts due to related companies

- Trade related (Note d)

6,327

7,638

- Non-trade related (Note e)

175,236

137,824

181,563

145,462

Amounts due to associates

- Trade related (Note d)

1,226,154

1,174,645

- Non-trade related (Note e)

830,602

417,103

2,056,756

1,591,748

Amount due to a joint venture

- Trade related (Note d)

57,940

79,098

Current liabilities

2,296,259

1,816,308

Loans from:

- an associate (Note f)

722,936

601,918

- companies controlled by Mr. Zhu Gongshan and his family

(Note g)

1,007,447

1,173,643

1,730,383

1,775,561

Analysed for reporting purposes as:

- Current liabilities

664,734

743,922

- Non-current liabilities

1,065,649

1,031,639

1,730,383

1,775,561

70 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

19. Balances with Related Companies (continued)

Notes:

  1. The amounts are unsecured, non-interest bearing and the credit period is normally within 30 days (31 December 2019: 30 days).
    The following is an aged analysis of amounts due from related companies, associates and joint ventures (trade related), net of allowance for credit losses, at the end of the reporting period, presented based on the invoice date which approximated the respective revenue recognition dates:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Within 3 months

61,444

103,108

3 to 6 months

19,873

17,306

More than 6 months

62,686

111,573

144,003

231,987

  1. The amounts are unsecured, non-interest bearing and with no fixed repayment term.
  2. The amounts are unsecured, non-interest bearing and with no fixed repayment term, except for (i) a deposit of approximately RMB58,000,000 (31 December 2019: RMB38,000,000) pledged for the loans from Xinxin, an associate of the Group, with repayment terms of 3 to 8 years (31 December 2019: 3 to 8 years) and are therefore classified as non-current assets; (ii) loans to 新疆協鑫新能 源材料科技有限公司 Xinjiang GCL New Energy Materials Technology Co., Limited* ("Xinjiang GCL") of approximately RMB790,833,000
    (31 December 2019: RMB1,243,469,000) which are unsecured, interest bearing at fixed rates of 5.22% to 5.655% (31 December 2019:
    5.22% to 5.655%) per annum, in which an amount of RMB700,000,000 (31 December 2019: RMB700,000,000) is agreed to be repaid after one year and are therefore classified as non-current assets. The remaining balance of the loans to Xinjiang GCL are repayable

within twelve months and are therefore classified as current assets; and (iii) an amount of approximately RMB88,951,000 (31 December 2019: RMB88,951,000) which, in the opinion of the directors of GNE, is expected to be received after twelve months from the end of the reporting period and is classified as non-current assets.

  1. The amounts are unsecured, non-interest bearing and the credit period is normally within 30 days (31 December 2019: 30 days).
    The following is an aged analysis of amounts due to related companies, associates and a joint venture (trade related) at the end of the reporting period, presented based on the invoice date:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Within 3 months

36,848

1,151,455

3 to 6 months

593,571

38,711

More than 6 months

660,002

71,215

1,290,421

1,261,381

  1. The amounts are unsecured, non-interest bearing and repayable on demand.

Interim Report 2020 GCL-Poly Energy Holdings Limited 71

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

19. Balances with Related Companies (continued)

Notes: (continued)

  1. The amounts represent the advances from Xinxin arising from several financing arrangements. Advances of approximately RMB279,894,000 (31 December 2019: RMB146,679,000) are secured, interest bearing and repayable within one year, and are therefore classified as current liabilities. The remaining advances of approximately RMB443,042,000 (31 December 2019: RMB455,239,000) are secured and interest bearing with repayment terms of 3 to 8 years (31 December 2019: 3 to 8 years), and are therefore classified as non-current liabilities. Balance of approximately RMB515,912,000 (31 December 2019: RMB392,507,000) is secured by cash deposits of approximately RMB58,000,000 (31 December 2019: RMB38,000,000) and certain property, plant and equipment and carries interest ranging from 6% to 8.58% (31 December 2019: 6% to 8.58%) per annum. The remaining balance of approximately RMB207,024,000 (31 December 2019: RMB209,411,000) is secured by certain property, plant and equipment held by the Group and carries interest at 7.81% (31 December 2019: 7.81%) per annum.
  2. As at 30 June 2020, loans from 協鑫集團有限公司 GCL Group Limited*, 南京鑫能陽光產業投資基金企業(有限合夥) Nanjing Xinneng Solar Property Investment Fund Enterprise (Limited Partnership)*, 江蘇協鑫建設管理有限公司 Jiangsu GCL Construction Management Co., Ltd.* and 江蘇協鑫房地產有限公司 Jiangsu GCL Real Estate Limited* in total amounted to approximately RMB1,007,447,000
    (31 December 2019: RMB1,173,643,000). These loans are unsecured, interest bearing ranged from 8% to 12% (31 December 2019:
    8%) per annum and repayable from 2020 through 2021. Approximately RMB384,840,000 (31 December 2019: RMB597,243,000) of the outstanding loans are repayable within twelve months from the end of the reporting period.
  • English name for identification only

20. Inventories

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Raw materials

205,170

185,036

Work in progress

77,907

111,605

Semi-finished goods (Note)

146,521

206,114

Finished goods

222,671

247,631

Solar modules

815

802

653,084

751,188

Note: Semi-finished goods mainly represented polysilicon.

During the six months ended 30 June 2020, cost of inventories of approximately RMB4,368,578,000 (six months ended 30 June 2019: RMB6,519,046,000) recognised as cost of sales included write-down of inventories of approximately RMB19,573,000 (six months ended 30 June 2019: RMB19,711,000) because the cost of certain inventories were higher than their net realisable values.

72 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

21. Trade and Other Payables

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Trade payables (Note a)

6,305,246

6,856,052

Construction payables (Note a)

4,564,809

5,631,628

Payables to vendors of solar farms

92,673

92,873

Other payables

944,000

949,779

Salaries and bonus payable

137,632

281,052

Dividend payables to non-controlling shareholders of subsidiaries

191,068

236,453

Other tax payables

70,632

139,441

Interest payables

754,386

395,339

Advance from engineering, procurement and construction

("EPC") contractors (Note b)

63,923

123,030

Accruals

221,970

313,002

13,346,339

15,018,649

Notes:

  1. Included in the trade payables and construction payables are approximately RMB3,023,845,000 (31 December 2019: RMB2,596,413,000)
    and RMB250,117,000 (31 December 2019: RMB780,505,000), respectively, in which the Group issued bills to relevant creditors for settlement and remained outstanding at the end of the reporting period, and endorsed bills with recourse with an aggregate amount of approximately RMB2,355,082,000 (31 December 2019: RMB3,210,854,000). All these bills are with a maturity period of less than one year.
  2. The advance presents the amounts received from EPC contractors for modules procurement, in which the modules will be used in the construction of GNE Group's solar farms.

The credit period for trade payables is within 3 to 6 months (31 December 2019: 3 to 6 months).

The following is an aged analysis of trade payables (excluding bills presented by the Group for settlement and endorsed to bank with recourse) presented based on the invoice date at the end of the reporting period:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Within 3 months

1,152,360

2,005,385

3 to 6 months

1,850,386

2,046,535

More than 6 months

278,655

207,719

3,281,401

4,259,639

Interim Report 2020 GCL-Poly Energy Holdings Limited 73

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

22. Bank and Other Borrowings

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Bank loans

25,679,732

29,622,759

Other loans

18,190,368

17,639,963

43,870,100

47,262,722

Representing:

Secured

39,612,511

40,668,330

Unsecured

4,257,589

6,594,392

43,870,100

47,262,722

The carrying amount of bank loans that are payable on demand

due to inability to respect loan covenants (Note)

5,245,491

5,729,457

The carrying amount of remaining bank loans and other loans

38,624,609

41,533,265

43,870,100

47,262,722

Less: amounts due within one year or repayable on demand due to

inability to respect loan covenants (shown under current

liabilities)

(24,302,240)

(26,976,972)

Amounts due after one year

19,567,860

20,285,750

The Group is required to comply with certain restrictive financial covenants and undertaking requirements.

74 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

22. Bank and Other Borrowings (continued)

As at 30 June 2020, in respect of a bank borrowing with carrying amount of approximately RMB212 million, the Group was not able to meet a financial covenant requirement, and thereby triggered the cross default clauses in several other bank borrowings of approximately RMB5,033 million. Such bank borrowing of approximately RMB212 million has been fully repaid subsequent to the end of the reporting period. Notwithstanding this, the bank borrowings have been classified as current liabilities as at 30 June 2020 as required by applicable accounting standard, and in which approximately RMB2,662 million of the bank borrowings will be due and repayable after June 2021 in accordance with the original repayment terms.

As at 31 December 2019, in respect of a bank borrowing with carrying amount of approximately RMB557 million, the Group was not able to meet a covenant requirement related to the financial ratio of the Group, and thereby triggered the cross default clauses in several other bank borrowings of approximately RMB5,172 million, and in which approximately RMB2,896 million of the bank borrowings will be due and repayable after 2020 in accordance with the original repayment terms. In respect of the relevant borrowing which breached the financial covenant requirement, approximately RMB488.3 million and RMB68.7 million was required to be repaid in February 2020 and August 2020, respectively, in accordance with the original repayment term. On discovery of the breach, the Directors informed the lenders and commenced renegotiation of the terms of the bank borrowing with the relevant bankers which waiver on strict compliance on the financial ratio have been obtained subsequent to the end of the reporting period. As at 31 December 2019, negotiation had not been concluded. Since the lenders have not agreed to waive their right to demand immediate payment as at the end of the reporting period, the bank borrowings have been classified as current liabilities as at 31 December 2019 as required by applicable accounting standard, despite the fact that waiver has been granted by the relevant banks and revised the repayment of approximately RMB348.8 million out of RMB488.3 million from February 2020 to June 2020. The Company has repaid approximately RMB139.5 million on 28 February 2020 as agreed with the banks. Subsequent to the end of the reporting period, the remaining balance of the bank borrowing has been fully repaid.

Note: Scheduled repayment terms for the bank loans that are repayable on demand due to the inability to respect loan covenants are as follow:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Within one year

2,583,034

2,832,945

More than one year, but not exceeding two years

695,118

660,861

More than two years, but not exceeding five years

1,630,024

2,151,750

More than five years

337,315

83,901

5,245,491

5,729,457

Interim Report 2020 GCL-Poly Energy Holdings Limited 75

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

23. Notes and Bonds Payables

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Principal amount of notes and bonds payables

424,629

424,425

Less: unamortised issuance costs

(750)

(2,250)

Net carrying amount

423,879

422,175

Senior notes

3,530,296

3,470,542

3,954,175

3,892,717

Less: amount due within one year shown under current liabilities

(3,954,175)

(422,175)

Amount due for settlement after one year shown under

non-current liabilities

-

3,470,542

Senior notes are classified as current liabilities as at 30 June 2020 as it will be matured on 30 January 2021. As at 30 June 2020, the notes and non-public green bonds issued by GNE Group amounting to approximately RMB286,195,000 and RMB350,000,000 (31 December 2019: RMB286,399,000 and RMB350,000,000), respectively, are repurchased and held by the group entities. In July 2020, the first tranche of the non-public green bonds of RMB100,000,000 was matured.

24. Derivative Financial Instruments

In April 2016, the Group entered into a joint venture investment agreement with an independent investor ("JV Partner") of Jiangsu Xinhua Semiconductor Material Technology Co. Ltd. ("Jiangsu Xinhua"), a joint venture which is 50.98% held by the Group, pursuant to which the JV Partner is given a right to request the Group to repurchase its 49.02% equity interest in Jiangsu Xinhua at a premium under certain circumstances and details are set out in notes to the Group's consolidated financial statements for the year ended 31 December 2019.

The Directors had recognised the put option of interests in Jiangsu Xinhua as derivative financial instruments and initially recognised at fair value with subsequent changes in fair value recognised in profit or loss. During the six months ended 30 June 2020, the Company remeasured the fair value with a loss on fair value change of the derivative financial instruments of approximately RMB28,600,000 (six months ended 30 June 2019: RMB6,457,000) recognised to profit or loss.

Details of the inputs and assumption adopted in the valuation are described in note 30.

76 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

25. Share Capital

Number of

shares

Amount

'000

HK$'000

Ordinary shares of HK$0.1 each

Authorised

At 1 January 2019 (Audited), 30 June 2019 (Unaudited),

1 January 2020 (Audited) and 30 June 2020 (Unaudited)

30,000,000

3,000,000

Issued and fully paid

At 1 January 2019 (Audited)

18,329,949

1,832,995

Exercise of share options (Note a)

100

10

Issue of shares on placement (Note b)

1,511,000

151,100

At 1 January 2020 (Audited)

19,841,049

1,984,105

Issue of shares on placement (Note c)

1,300,000

130,000

At 30 June 2020 (Unaudited)

21,141,049

2,114,105

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Shown in the financial statements as

1,862,437

1,742,850

Notes:

  1. During the year ended 31 December 2019, share option holders exercised their rights to subscribe for 100,000 ordinary shares in the Company at HK$0.586 per share with the net proceeds of approximately RMB51,000.
  2. On 10 June 2019, the Company entered in a placing agreement with UBS AG Hong Kong Branch as placing agent, which is independent and not connected to the Company. Pursuant to the placing agreement, the placing agent agreed to place up to 1,511,000,000 placing shares to third parties independent of the Company and connected persons of the Company at HK$0.45 per placing share. The placing was completed on 18 June 2019, with net proceeds of approximately HK$669,104,000 (equivalent to approximately RMB587,791,000).
  3. On 16 June 2020, the Company entered in a placing agreement with CCB International Capital Limited as placing agent, which is independent and not connected to the Company. Pursuant to the placing agreement, the placing agent agreed to place up to 1,300,000,000 placing shares to third parties independent of the Company and connected persons of the Company at HK$0.203 per placing share. The placing was completed on 24 June 2020, with net proceeds of approximately HK$260,000,000 (equivalent to approximately RMB238,807,000).

All shares issued rank pari passu in all respects with the then existing shares of the Company.

Interim Report 2020 GCL-Poly Energy Holdings Limited 77

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

26. Pledge of or Restrictions on Assets

Pledge of assets

At the end of the reporting period, the Group has pledged the following assets to secure credit facilities of the Group:

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Bank and other borrowings secured by:

Pledged and restricted bank and other deposits

1,361,513

1,894,370

Right-of-use assets

645,050

468,804

Investment properties

63,477

65,804

Property, plant and equipment

26,887,020

27,870,791

Trade receivables and contract assets

10,637,403

7,275,637

Equity instruments at FVTOCI

19,697

-

39,614,160

37,575,406

Lease liabilities secured by:

Pledged and restricted bank and other deposits

80,120

240,402

Total

39,694,280

37,815,808

Certain subsidiaries pledged their fee collection rights

in relation to the sales of electricity, and as at

30 June 2020, trade receivables and contract assets in respect of such fee collection rights pledged amounted to approximately RMB8,881,856,000 (31 December 2019: RMB4,722,846,000).

As at 30 June 2020, the Group has pledged property, plant and equipment and right-of-use assets of approximately RMB154,500,000 and RMB148,828,000 (31 December 2019: RMB160,588,000 and RMB150,781,000), respectively, to secure bank and other borrowings of an associate and a joint venture of the Group.

As at 30 June 2020, the Group has pledged property, plant and equipment and right-of-use assets of approximately RMB53,225,000 and nil (31 December 2019: RMB101,056,000 and RMB14,134,000), respectively, to secure issuance of bills and short-term letters of credit for trade and other payables.

78 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

26. Pledge of or Restrictions on Assets (continued)

Restriction on assets

In addition, lease liabilities of approximately RMB2,109,973,000 (31 December 2019: RMB2,441,519,000) are recognised with related right-of-use assets of approximately RMB2,815,520,000 (31 December 2019: RMB3,416,173,000) as at 30 June 2020. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

In addition to the pledged assets above, there are restricted bank deposits of approximately RMB5,213,362,000 (31 December 2019: RMB4,794,654,000) and trade receivables of approximately RMB591,304,000 (31 December 2019: RMB499,672,000) which have been restricted to secure issuance of bills and short-term letters of credit for trade and other payables. As at 30 June 2020, the loans from a related company were secured by property, plant and equipment amounted to approximately RMB981,309,000 (31 December 2019: RMB912,365,000) and pledged other deposits amounted to approximately RMB59,520,000 (31 December 2019: RMB38,000,000).

27. Share-based Payment Transactions

There is no material change relating to the share-based payment transactions for the six months ended

30 June 2020, except for the following:

  1. Equity-settledshare option scheme
    1. Share option scheme of the Company
      Movements of share options granted during the period are as follows:

Number of share options

Outstanding at

Forfeited during

Outstanding at

Exercise price

Date of grant

Exercise period

1 January 2020

the period

30 June 2020

Directors

HK$1.16

19.02.2016

15.03.2016 to 18.02.2026

5,942,302

-

5,942,302

HK$1.324

29.03.2016

18.04.2016 to 28.03.2026

7,944,454

-

7,944,454

Employees and others

HK$3.296

12.01.2011

01.03.2011 to 11.01.2021

5,035,850

-

5,035,850

HK$4.071

15.07.2011

01.09.2011 to 14.07.2021

4,834,415

-

4,834,415

HK$1.630

05.07.2013

16.09.2013 to 04.07.2023

15,354,308

(1,122,995)

14,231,313

HK$2.867

24.03.2014

26.05.2014 to 23.03.2024

21,352,004

-

21,352,004

HK$1.16

19.02.2016

15.03.2016 to 18.02.2026

73,054,277

(7,201,265)

65,853,012

HK$1.324

29.03.2016

18.04.2016 to 28.03.2026

4,028,680

-

4,028,680

137,546,290

(8,324,260)

129,222,030

Interim Report 2020 GCL-Poly Energy Holdings Limited 79

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

27. Share-based Payment Transactions (continued)

  1. Equity-settledshare option scheme (continued)
    1. Share option scheme of GNE

Number of share options

Outstanding at

Forfeited during

Outstanding at

Exercise price

Date of grant

Exercise period

1 January 2020

the period

30 June 2020

Directors

HK$1.1798

23.10.2014

24.11.2014 to 22.10.2024

58,382,800

-

58,382,800

HK$0.606

24.07.2015

24.07.2015 to 23.07.2025

40,565,980

(16,105,600)

24,460,380

Employees and others providing

similar services

HK$1.1798

23.10.2014

24.11.2014 to 22.10.2024

214,929,232

(16,105,600)

198,823,632

HK$0.606

24.07.2015

24.07.2015 to 23.07.2025

194,183,206

(10,871,280)

183,311,926

508,061,218

(43,082,480)

464,978,738

During the six months ended 30 June 2020, share-based payment expenses of nil (six months ended 30 June 2019: RMB2,638,000) have been recognised in profit or loss in respect of equity-settled share option scheme. In addition, certain share options granted have been forfeited after the vesting period, and respective share options reserve of approximately RMB20,671,000 (six months ended 30 June 2019: RMB3,384,000) are transferred to the Group's accumulated profits from share options reserve and non-controlling interests.

(II) Cash-settled share award scheme

US Equity Incentive Plan granted by GCL Solar Materials US II, LLC ("GCL US II")

On 31 March 2017 ("Plan Date"), GCL US II issued Class B Units ("Class B Units") to the grantees of the US Equity Incentive Plan (the "Grantees") which will be vested in full in three years with one-third to be vested on each of the first, the second and the third anniversary of the Plan Date, respectively.

Movement of Class B Units granted during the period is as follows:

Number of

Class B Units

Outstanding at 1 January 2020 (Audited)

3,118,513

Exercised during the period

(3,074,265)

Forfeited during the period

(44,248)

Outstanding at 30 June 2020 (Unaudited)

-

80 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

27. Share-based Payment Transactions (continued)

(II) Cash-settled share award scheme (continued)

US Equity Incentive Plan granted by GCL Solar Materials US II, LLC ("GCL US II") (continued)

The Group has recorded liabilities of nil (31 December 2019: RMB23,593,000) in its unaudited condensed consolidated statement of financial position as at 30 June 2020 in respect of the cash-settled share award. During the current interim period, certain US Grantees exercised their rights to sell the Class B units to GCL US II at US$1 per unit, resulting a payment of RMB21,412,000 (six months ended 30 June 2019: RMB11,011,000).

28. Commitments and Contingent Liabilities

(i) Commitments

As at

As at

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Capital commitments

Capital expenditure in respect of acquisitions of property, plant

and equipment contracted for but not provided

908,502

662,725

Other commitments

Commitment to contribute share capital to investments in joint

ventures, associates and/or other investments contracted for

but not provided

1,710,000

2,190,000

Commitment to contribute share capital to financial assets at

FVTPL contracted for but not provided

60,000

80,000

2,678,502

2,932,725

  1. Financial guarantees provided to third parties

In addition to those financial guarantees provided to related parties as set out in note 31, GNE Group also provided financial guarantees to certain third parties, former wholly-owned subsidiaries, for certain of their bank and other borrowings amounting to approximately RMB110,000,000 (31 December 2019: RMB540,000,000) as at 30 June 2020. Since these bank and other borrowings are secured by the borrowers' (i) property, plant and equipment, (ii) trade receivables, contract assets and fee collection rights in relation to sales of electricity, in the opinion of the directors of GNE, the fair value of the guarantees is considered insignificant at initial recognition, and the ECL as at 30 June 2020 and 31 December 2019 is insignificant.

Interim Report 2020 GCL-Poly Energy Holdings Limited 81

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

29. Disposal of Subsidiaries

  1. Disposal of subsidiaries by GNE Group
    1. 阜陽衡銘太陽能電力有限公司 Fuyang Hengming Solar Power Company Limited* ("Fuyang Hengming") and 鎮江協鑫新能源有限公司 Zhenjiang GCL New Energy Limited* ("Zhenjiang GCL")
      On 21 January 2020, GNE Group has entered into share transfer agreements with 中核(南京)能源 發展有限公司 CNI (Nanjing) Energy Development Company Limited*, for the disposal of 100% equity interest in Fuyang Hengming and Zhenjiang GCL for consideration in aggregate of approximately RMB77 million. Fuyang Hengming and Zhenjiang GCL operate two solar farms with approximately 40MW installed capacity in aggregate in the PRC. The disposals are completed in March and June 2020, respectively.
    2. 哈密耀輝光伏電力有限公司 Hami Yaohui Photovoltaic Company Limited* ("Hami Yaohui")
      On 21 January 2020, GNE Group announced that it has entered into share transfer agreements with Hua Neng No. 1 Fund and Hua Neng No. 2 Fund, for the disposal of 60% and 40% equity interest in Hami Yaohui, respectively, for a consideration of approximately RMB117.7 million. Hami Yaohui operates a solar farm with approximately 30MW installed capacity (the "Hami Project") in the PRC. The disposal is completed in June 2020.
      GNE Group has granted a put option to Hua Neng No. 1 Fund and Hua Neng No. 2 Fund, pursuant to which GNE Group has agreed that if the Hami Project fail to fully receive the balance of the tariff adjustment receivables (the "Tariff Adjustment Receivables") as at the Disposal Date during the four-year period after the Disposal Date, or the operation of the Hami Project is disrupted for more than six months due to the reasons stipulated in the share transfer agreements, GNE Group shall repurchase the 100% equity interest in the Hami Project from Hua Neng No. 1 Fund and Hua Neng No. 2 Fund at a repurchase price which is the higher of (1) equity value of the Hami Project assessed by The State-owned Assets Supervision and Administration Commission of the State Council or (2) a repurchase price calculated in accordance with terms specified in the share transfer agreements, together with any outstanding shareholder's loan advanced to the relevant Hami Project by Hua Neng No. 1 Fund and Hua Neng No. 2 Fund. As the Hami Project has already registered in the Catalogue/List and receipt of tariff adjustment receivables are stable, in the opinion of the directors of GNE Group, it is highly likely that the balance of the Tariff Adjustment Receivables will be collected within four years after the Disposal Date. As such, the fair value of the option is considered insignificant at the Disposal Date and 30 June 2020.

82 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

29. Disposal of Subsidiaries (continued)

  1. Disposal of subsidiaries by GNE Group (continued)

Fuyang

Zhenjiang

Hengming

GCL

Hami Yaohui

Total

RMB'000

RMB'000

RMB'000

RMB'000

Consideration:

Consideration received

25,000

-

-

25,000

Consideration receivable

9,966

42,510

117,700

170,176

34,966

42,510

117,700

195,176

Analysis of assets and liabilities

over which control was lost:

Property, plant and equipment

113,118

113,531

415,902

642,551

Right-of-use assets

9,108

10,383

973

20,464

Other non-current assets

132

429

3,364

3,925

Contract assets

-

22,577

-

22,577

Trade and other receivables

32,666

9,925

156,328

198,919

Pledged other deposits

5,500

-

-

5,500

Bank balances and cash

778

4,723

1,830

7,331

Other payables

(51,174)

(81,085)

(2,838)

(135,097)

Bank and other borrowings

(68,235)

-

(270,000)

(338,235)

Lease liabilities

(7,416)

(11,113)

(2,051)

(20,580)

Deferred tax liabilities

-

(914)

-

(914)

Intragroup payables

(7,003)

(19,462)

(97,062)

(123,527)

Net assets disposed of

27,474

48,994

206,446

282,914

Gain (loss) on disposal

7,492

(6,484)

(88,746)

(87,738)

Net cash inflow arising on disposal:

Cash consideration received

25,000

-

-

25,000

Less: bank balances and cash

disposed of

(778)

(4,723)

(1,830)

(7,331)

24,222

(4,723)

(1,830)

17,669

Interim Report 2020 GCL-Poly Energy Holdings Limited 83

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

29. Disposal of Subsidiaries (continued)

  1. In May 2020, the Group has entered into an agreement with an independent third party to dispose of its 100% equity interest in 四川協鑫硅業科技有限公司 Sichuan GCL Silicon Technology Co., Ltd.* and the intragroup payable to the Group for a consideration of RMB90,000,000. The disposal was completed in May 2020 and a loss on disposal of approximately RMB85,025,000 was recognised in profit or loss during the current interim period.
    Pursuant to the sale and purchase agreement, the cash consideration of RMB20,000,000 has been settled during the current interim period and the outstanding consideration receivables of RMB70,000,000 will be settled in ten instalments by November 2024 and carry interest at 8% per annum. Such consideration receivables are recorded on the unaudited condensed consolidated statement of financial position of the Group at 30 June 2020 as follows:

RMB'000

Consideration receivables (note 17A) :

- Current

14,000

- Non-current

56,000

70,000

  • English name for identification only

30. Fair Value Measurements of Financial Instruments

Fair value measurements and valuation processes

In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group performed discounted cash flow to derive the present value of other investments or engages third party qualified valuers to perform the valuation of convertible bonds receivable, the put option of interests in Jiangsu Xinhua classified as derivative financial instruments, unlisted investments measured at financial assets at FVTPL, unlisted equity investments measured at financial assets at FVTPL and asset management plans investments held by GNE measured at financial assets at FVTPL. The Directors work closely with the qualified valuers to establish the appropriate valuation techniques and inputs to the model. The management of the Group reports the findings to the Directors every half year to explain the cause of fluctuations in the fair value of the assets and liabilities.

The fair values of these financial assets and financial liabilities are determined (in particular, the valuation techniques and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable.

  • Level 1 fair value measurements are based on quoted prices (unadjusted) in active market for identical assets or liabilities;

84 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

30. Fair Value Measurements of Financial Instruments (continued)

Fair value measurements and valuation processes (continued)

  • Level 2 fair value measurements are those derived from inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
  • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value of the Group's financial assets and financial liabilities that are measured at fair value on a recurring basis

Financial assets/ financial liabilities

Fair value as at

Fair value

Valuation techniques

Significant unobservable

Relationship of unobservable

30.06.2020

31.12.2019

hierarchy

and key inputs

inputs

inputs to fair value

RMB'000

RMB'000

(Unaudited)

(Audited)

1) Convertible bonds receivable

96,364

101,097 Level 2 (31

Redemption value (31

(Note a)

December

December 2019: Binomial

2019: Level 3)

Option Pricing Model, the key

inputs are: underlying share

price, exercise price, risk free

interest rate, share price

volatility and dividend yield.)

N/A (31 December 2019: Share price volatility of 36.40% and discount rate of 28.40%.)

N/A (31 December 2019: Dividend yield of 0%, taking into account management's experience and knowledge of the dividend to be paid.)

N/A (31 December 2019: The higher the volatility, the higher the fair value.)

N/A (31 December 2019: The higher the discount rate, the lower the fair value.)

N/A (31 December 2019: The higher the dividend yield, the lower the fair value.)

2) Put option of interest in

162,000

133,400 Level 3

Income approach - in this

Jiangsu Xinhua classified

approach, the discounted cash

as derivative financial

flow method was used to

instruments (Note b)

capture the present value of

future expected cash flows to

be derived from Jiangsu

Xinhua.

Scenario analysis, the key inputs are: estimated probability of success or failure in IPO, risk-free rate and credit spread.

3) Asset management plans

-

100,000 Level 3

N/A (31 December 2019:

investments held by GNE

Income approach - in this

classified as financial

approach, the discounted cash

assets at FVTPL (Note c)

flow method was used to

capture the present value of

future expected cash flows to

be derived from the underlying

assets.)

Revenue growth rate, taking into account management's experience and knowledge of market conditions of the specific industries.

Discount rate of 16% (31 December 2019: 16%).

Estimated probability of success in IPO, failure in IPO due to external factors and unsatisfactory performance of Jiangsu Xinhua of 70%, 10% and 20%, respectively (31 December 2019: 70%, 10% and 20%, respectively), taking into account the best estimate of the Directors.

N/A (31 December 2019: discount rate of 7.5%.)

The higher the revenue growth rate, the lower the fair value.

The higher the discount rate, the higher the fair value.

The higher the estimated probability of failure in IPO, the higher the fair value.

N/A (31 December 2019: The higher the estimated discount rate, the lower the fair value.)

Interim Report 2020 GCL-Poly Energy Holdings Limited 85

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

30. Fair Value Measurements of Financial Instruments (continued)

Fair value of the Group's financial assets and financial liabilities that are measured at fair value on a recurring basis (continued)

Financial assets/ financial liabilities

Fair value as at

Fair value

Valuation techniques

Significant unobservable

Relationship of unobservable

30.06.2020

31.12.2019

hierarchy

and key inputs

inputs

inputs to fair value

RMB'000

RMB'000

(Unaudited)

(Audited)

4) Listed equity securities

4,265

4,339 Level 1

Quoted bid price in an active

N/A

N/A

classified as held for

market.

trading investments

5) Unlisted equity investments

44,321

44,321 Level 3

Market comparison approach -

measured at financial

in this approach, fair value was

assets at FVTPL

determined with reference to

recent transaction price.

Adjusted market price between comparables and the underlying property held by the unlisted equity investments.

An increase in the price per square meter used would result in an increase in fair value measurement of the property, and vice versa.

6) Listed equity investments

29,239

41,857

Level 1

Quoted bid price in an active

N/A

N/A

measured at equity

market.

instruments at FVTOCI

7) Unlisted investments

226,985

213,221

Level 3

Market comparison approach -

P/S ratio of 2.3x - 22.07x (31

The higher the P/S or P/E ratio,

measured at financial

in this approach, fair value was

December 2019: 2.3x -

the higher the fair value.

assets at FVTPL

determined with reference to

22.07x) or P/E ratio of 72.73x

P/S ratio or P/E ratio or recent

(31 December 2019: 72.73x).

transaction price.

781,682

477,256

Level 2

Quoted price from third party

N/A

N/A

financial institutions and banks

which determined with

reference to the value of

underlying investments which

mainly comprised of listed

share.

Notes:

  1. If the share price volatility of the underlying shares was 5% higher/lower while all the other variables were held constant, the gain on change in fair value of the convertible bonds receivable would increase by approximately RMB753,000/decrease by approximately RMB753,000 for the year ended 31 December 2019.
    If the discount rate used was multiplied by 95% or 105% while all the other variables were held constant, the gain on change in fair value of the convertible bonds receivable would increase by approximately RMB83,000/decrease by approximately RMB82,000 for the year ended 31 December 2019.
  2. If the discount rate was multiplied by 95% or 105% while all the other variables were held constant, the change in fair value of the derivative financial instruments would decrease by approximately RMB10,600,000 (31 December 2019: RMB11,300,000)/increase by approximately RMB9,400,000 (31 December 2019: RMB10,100,000).
  3. If the estimated discount rate was multiplied by 95% or 105% while all the other variables were held constant, the fair value of the investments would increase by approximately RMB507,000/decrease by approximately RMB503,000 for the year ended 31 December 2019.

86 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

30. Fair Value Measurements of Financial Instruments (continued)

Fair value of the Group's financial assets and financial liabilities that are measured at fair value on a recurring basis (continued)

There is no transfer among the different levels of the fair value hierarchy for both periods, except for the convertible bonds receivable. The fair value of the convertible bonds receivable as at 30 June 2020 amounted to RMB96,364,000 (31 December 2019: RMB101,097,000). The fair value of the convertible bonds receivable as at 31 December 2019 was measured using a valuation technique with significant unobservable inputs and hence was classified as Level 3 of the fair value hierarchy. On 14 July 2020, the bond issuer redeemed the convertible bonds in full with a cash settlement amounted to HK$107,544,000 (equivalent to approximately RMB96,364,000). The fair value of the convertible bonds receivable as at 30 June 2020 was determined with reference to the redemption value only and was classified as Level 2 of the fair value hierarchy.

Reconciliation of Level 3 fair value measurements

30 June 2020

Asset

Put option of

management

Unlisted

interest in

plans

investments/

Jiangsu

investments

equity

Xinhua

held by GNE

investments

classified as

measured at

measured at

Convertible

derivative

financial

financial

bonds

financial

assets at

assets at

receivable

instruments

FVTPL

FVTPL

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

At 1 January 2020 (Audited)

101,097

(133,400)

100,000

257,542

325,239

Transfer out of Level 3

(96,767)

-

-

-

(96,767)

Capital contribution

-

-

-

20,000

20,000

Disposal

-

-

(113,027)

-

(113,027)

(Loss) gain in profit or loss

-

(28,600)

13,027

(6,236)

(21,809)

Receipt of interests

(4,330)

-

-

-

(4,330)

At 30 June 2020 (Unaudited)

-

(162,000)

-

271,306

109,306

Interim Report 2020 GCL-Poly Energy Holdings Limited 87

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

30. Fair Value Measurements of Financial Instruments (continued)

Reconciliation of Level 3 fair value measurements (continued)

31 December 2019

Asset

Put option of

management

Unlisted

interest in

plans

investments/

Jiangsu

investments

equity

Xinhua

held by GNE

investments

classified as

measured at

measured at

Convertible

derivative

financial

financial

bonds

financial

assets at

assets at

receivable

instruments

FVTPL

FVTPL

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

At 1 January 2019 (Audited)

76,001

(26,011)

100,000

215,918

365,908

Capital contribution

-

-

-

15,000

15,000

Gain (loss) in profit or loss

29,820

(107,389)

-

26,624

(50,945)

Receipt of interests

(4,724)

-

-

-

(4,724)

At 31 December 2019 (Audited)

101,097

(133,400)

100,000

257,542

325,239

Fair value measurements and valuation processes

Of the total losses for the period included in profit or loss, RMB21,809,000 (31 December 2019: RMB50,945,000) related to put option of interest in Jiangsu Xinhua, convertible bonds receivable, unlisted investments/equity instruments measured at financial assets at FVTPL and asset management plans investments measured at financial assets at FVTPL held by GNE at the end of the reporting period and those fair value gains or losses are included in other expenses, gains and losses, net.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed above.

The Directors consider that the carrying amounts of financial assets and financial liabilities and the associated interest receivables and interest payables recorded at amortised cost in the unaudited condensed interim consolidated financial statements approximate their fair values.

88 GCL-Poly Energy Holdings Limited Interim Report 2020

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

31. Related Party Transactions

Other than those disclosed elsewhere in the unaudited condensed interim consolidated financial statements, the Group has also entered into the following material transactions with related parties during the period:

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Transactions with companies in which Mr. Zhu Gongshan and

his family have control:

Interest expense

(55,392)

(85,082)

Consulting service fee expense

-

(2,608)

Management fee income

4,654

666

Management fee expense

-

(7,759)

Purchase of steam

(2,844)

(37,386)

Purchase of coal

-

(13,662)

Purchase of raw water and desalted water

-

(924)

Purchase of energy service

(709)

(16,631)

Rental income

12,997

14,975

Transactions with joint ventures and associates:

Interest expense

(21,251)

(50,018)

Management fee income

36,896

2,583

Purchase of silicon rods

(1,074,880)

(1,079,421)

Purchase of polysilicon

(169,509)

(1,601)

Sales of raw materials

102,701

5,059

As at 30 June 2020, the Group provided a total guarantee with maximum amount of approximately RMB4,817,603,000 and RMB900,000,000 (31 December 2019: RMB4,578,397,000 and RMB900,000,000) to several banks and financial institutions in respect of banking and other facilities of Xinjiang GCL and Jiangsu Xinhua, respectively. The Directors consider that the fair value of the guarantee at the date of inception, and the ECL as at 30 June 2020 and 31 December 2019 is insignificant.

As at 30 June 2020, GNE Group provided guarantee to its associates for certain of their bank and other borrowings with maximum amount of approximately RMB5,369,119,000 (31 December 2019: RMB5,369,119,000), out of which a joint guarantee of RMB520,000,000 (31 December 2019: RMB520,000,000) was provided by the Group with GNE Group to two associates of GNE Group (31 December 2019: two associates of GNE Group) for their bank borrowings. Since these bank and other borrowings are secured by the borrowers' (i) property, plant and equipment, (ii) trade receivables, contract assets and fee collection rights in relation to sales of electricity, in the opinion of the directors of GNE, the fair value of the guarantee is considered insignificant at initial recognition and the ECL as at 30 June 2020 and 31 December 2019 is insignificant.

Interim Report 2020 GCL-Poly Energy Holdings Limited 89

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the six months ended 30 June 2020

32. Major Non-cash Transactions

During the six months ended 30 June 2020, GNE Group entered into a offsetting agreement with its associates and 上海榕耀新能源有限公司 Shanghai Rongyao New Energy Co., Ltd* ("Shanghai Rongyao"), the controlling shareholder of those associates. They agreed to offset part of GNE Group's amounts due from those associates of RMB214,817,000 and consideration receivables from Shanghai Rongyao of RMB111,980,000 with amounts due to associates amounted to RMB326,797,000.

  • English name for identification only

33. Events after the End of the Interim Period

Other than those disclosed elsewhere in the unaudited condensed interim consolidated financial statements, the Group has no significant event after the end of the reporting period.

90 GCL-Poly Energy Holdings Limited Interim Report 2020

Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures

As at 30 June 2020, the Directors and chief executive of the Company had the following interests and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")), which were required (a) to be notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or (b) to be and were entered into in the register required to be kept by the Company pursuant to Section 352 of the SFO, or (c) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules") adopted by the Company:

  1. Long Position in the Shares and Underlying Shares of the Company

Number of ordinary shares held

Approximate

percentage

Number of

of issued

Name of director/

Beneficiary

Corporate

Personal

underlying

share capital

chief executive

of a trust

interests

interests

shares

Total

(note 3)

Zhu Gongshan

6,370,388,156

-

-

-

6,370,388,156

30.13%

(note 1)

Zhu Zhanjun

-

-

3,400,000

2,719,359

6,119,359

0.03%

-

-

(note 2)

Zhu Yufeng

6,370,388,156

1,510,755

6,371,898,911

30.14%

(note 1)

(note 2)

Sun Wei

-

-

5,723,000

1,712,189

7,435,189

0.04%

-

-

-

(note 2)

Yeung Man Chung,

1,700,000

1,700,000

0.01%

Charles

-

-

(note 2)

Jiang Wenwu

9,600,000

1,712,189

11,312,189

0.05%

-

-

(note 2)

Zheng Xiongjiu

250,000

2,517,924

2,767,924

0.01%

-

-

-

(note 2)

Ho Chung Tai, Raymond

1,007,170

1,007,170

0.01%

-

-

-

(note 2)

Yip Tai Him

1,007,170

1,007,170

0.01%

(note 2)

Interim Report 2020 GCL-Poly Energy Holdings Limited 91

Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures

Notes:

    1. An aggregate of 6,370,388,156 shares of the Company are collectively held by Highexcel Investments Limited, Happy Genius Holdings Limited and Get Famous Investments Limited, which are wholly-owned by Golden Concord Group Limited, which in turn is wholly- owned by Asia Pacific Energy Holdings Limited. Asia Pacific Energy Holdings Limited is in turn wholly-owned by Asia Pacific Energy Fund Limited. Asia Pacific Energy Fund Limited is ultimately held under a discretionary trust with Credit Suisse Trust Limited as trustee and Mr. Zhu Gongshan and his family (including Mr. Zhu Yufeng, a Director and the son of Mr. Zhu Gongshan) as beneficiaries.
    2. These are share options granted by the Company to the Directors, pursuant to the share option scheme, adopted by the shareholders of the Company on 22 October 2007. Such granted share options can be exercised by the Directors at various intervals during the period from 15 March 2016 to 28 March 2026 at an exercise price of HK$1.160 or HK$1.324 per share.
    3. The total number of ordinary shares of the Company in issue as at 30 June 2020 is 21,141,049,207.
  1. Long Position in the Shares and Underlying Shares of the Associated Corporation of the Company

GCL New Energy Holdings Limited ("GNE"), a company incorporated in Bermuda with limited liability and the shares of which are listed on the Main Board of the Stock Exchange (stock code: 451), in which the Company indirectly owned 62.28% issued shares as at 30 June 2020, is a subsidiary of the Company.

Number of ordinary shares of GNE held

Approximate

percentage of

Number of

issued share

Name of director/

Beneficiary

Corporate

Personal

underlying

capital of GNE

chief executive

of a trust

interests

interests

shares

Total

(note 3)

Zhu Gongshan

1,905,978,301

-

-

-

1,905,978,301

9.99%

(note 1)

Zhu Yufeng

1,905,978,301

-

-

3,523,100

1,909,501,401

10.01%

(note 1)

(note 2)

Sun Wei

-

-

-

27,178,200

27,178,200

0.14%

(note 2)

Yeung Man Chung,

-

-

-

15,099,000

15,099,000

0.08%

Charles

(note 2)

92 GCL-Poly Energy Holdings Limited Interim Report 2020

Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures

Notes:

  1. 1,905,978,301 shares in GNE are beneficially owned by Dongsheng Photovoltaic Technology (Hong Kong) Limited ("Dongsheng PV"). Dongsheng PV is indirectly wholly-owned by GCL System Integration Technology Co., Ltd. and an aggregate of over 40% of the issued shares in GCL System Integration, is indirectly held by the Zhu Family Trust and Mr. Zhu Yufeng, an executive director of the Company and GNE and son of Mr. Zhu Gongshan.
  2. These are share options granted by GNE. Such granted share options can be exercised by Mr. Zhu Yufeng at the interval between 24 July 2015 and 23 July 2025 at an exercise price of HK$0.606 per share and by Ms. Sun Wei and Mr. Yeung Man Chung, Charles at the interval between 24 November 2014 and 23 July 2025 at an exercise price of HK$1.1798 or HK$0.606 per share.
  3. The total number of ordinary shares of GNE in issue as at 30 June 2020 is 19,073,715,441.

Save as disclosed above, as at 30 June 2020, none of the Directors and chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or (b) to be and were entered into in the register that was required to be kept under Section 352 of the SFO, or (c) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

Interim Report 2020 GCL-Poly Energy Holdings Limited 93

Option Schemes

  1. Share Option Scheme of the Company

The Company adopted a share option scheme (the "Share Option Scheme") on 22 October 2007 which became effective on 13 November 2007. The purpose of the Share Option Scheme is to motivate personnel to optimize their future contributions to the Group and/or to reward them for their past contributions, to attract and retain or otherwise maintain on-going relationships with such personnel who are significant to and/or whose contributions are or will be beneficial to the performance, growth or success of the Group, and additionally in the case of executives of the Company, to enable the Group to attract and retain individuals with experience and ability and/or to reward them for their past contributions. The Share Option Scheme shall be valid and effective for a period of 10 years from 22 October 2007, after which no further options will be granted or offered but the provisions of the Share Option Scheme shall remain in full force and effect to the extent necessary to give effect to the exercise of any subsisting options granted prior to the expiry of the 10-year period or otherwise as may be required in accordance with the provisions of the Share Option Scheme.

At an extraordinary general meeting of the Company held on 26 November 2015, the shareholders of the Company approved the refreshment of the existing limit to an aggregate number of shares of the Company which may be allotted and issued pursuant to the exercise of options granted under the Share Option Scheme and any other share option scheme of the Company not exceeding 200,000,000 shares of the Company.

During the Period, a total of 8,324,260 option shares were lapsed and there were 129,222,030 option shares outstanding as at 30 June 2020.

94 GCL-Poly Energy Holdings Limited Interim Report 2020

Option Schemes

Details of the share options outstanding and movements under the Share Option Scheme of the Company during the period from 1 January 2020 to 30 June 2020 (the "Period") are as follows:

Lapsed or

Granted

forfeited

Cancelled

Exercised

Outstanding

during the

during the

during the

during the

during the

Exercise

Outstanding

period from

period from

period from

period

period from

Price per

as at

1.1.2020 to

1.1.2020 to

1.1.2020 to

1.1.2020 to

1.1.2020 to

Name or category of participant

Date of grant

Exercise period

share

1.1.2020

30.6.2020

30.6.2020

30.6.2020

30.6.2020

30.6.2020

(note)

(HK$)

Directors/chief executive and

their associates

Zhu Yufeng

29.3.2016

18.4.2016 to 28.3.2026

1.324

1,510,755

-

-

-

-

1,510,755

Sun Wei

19.2.2016

15.3.2016 to 18.2.2026

1.16

1,712,189

-

-

-

-

1,712,189

Zhu Zhanjun

29.3.2016

18.4.2016 to 28.3.2026

1.324

2,719,359

-

-

-

-

2,719,359

Yeung Man Chung, Charles

29.3.2016

18.4.2016 to 28.3.2026

1.324

1,700,000

-

-

-

-

1,700,000

Jiang Wenwu

19.2.2016

15.3.2016 to 18.2.2026

1.16

1,712,189

-

-

-

-

1.712,189

Zheng Xiongjiu

19.2.2016

15.3.2016 to 18.2.2026

1.16

2,517,924

-

-

-

-

2,517,924

Yip Tai Him

29.3.2016

18.4.2016 to 28.3.2026

1.324

1,007,170

-

-

-

-

1,007,170

Ho Chung Tai, Raymond

29.3.2016

18.4.2016 to 28.3.2026

1.324

1,007,170

-

-

-

-

1,007,170

Zhu Qingsong (associate of Mr. Zhu

29.3.2016

18.4.2016 to 28.3.2026

1.324

1,007,170

-

-

-

-

1,007,170

Gongshan and an employee

of the Group)

Non-director employees (in aggregate)

12.1.2011

1.3.2011 to 11.1.2021

3.296

5,035,850

-

-

-

-

5,035,850

15.7.2011

1.9.2011 to 14.7.2021

4.071

4,834,415

-

-

-

-

4,834,415

5.7.2013

16.9.2013 to 4.7.2023

1.630

15,354,308

-

(1,122,995)

-

-

14,231,313

24.3.2014

26.5.2014 to 23.3.2024

2.867

21,352,004

-

-

-

-

21,352,004

19.2.2016

15.3.2016 to 18.2.2026

1.16

73,054,277

-

(7,201,265)

-

-

65,853,012

29.3.2016

18.4.2016 to 28.3.2026

1.324

3,021,510

-

-

-

-

3,021,510

Total

137,546,290

(8,324,260)

129,222,030

Note:

The vesting period of all share options granted under the Share Option Scheme which is 20% of the share options granted will be vested on the year of grant, the first, second, third and fourth anniversary of the date of grant, respectively, such that the share options granted are fully vested on the fourth anniversary of the date of grant.

Interim Report 2020 GCL-Poly Energy Holdings Limited 95

Option Schemes

  1. Share Option Scheme of a Subsidiary

GCL New Energy Holdings Limited ("GNE"), a company incorporated in Bermuda with limited liability and the shares of which are listed on the Main Board of the Stock Exchange (stock code: 451), in which the Company indirectly owned 62.28% issued shares as at 30 June 2020, is a subsidiary of the Company.

GNE adopted a share option scheme on 15 October 2014 (the"GNE 2014 Share Option Scheme").

During the Period, no option was granted, exercised nor cancelled. 43,082,480 option shares were lapsed during the Period.

Lapsed or

Exercised

Granted during

forfeited during

during the

the period from

the period from

period from

Exercise Price

Outstanding as

1.1.2020 to

1.1.2020 to

1.1.2020 to

Outstanding as

Name or category of participant

Date of grant

Exercise period

per share

at 1.1.2020

30.6.2020

30.6.2020

30.6.2020

at 30.6.2020

(HK$)

Directors/chief executive

Zhu Yufeng

24.7.2015

24.7.2015 to 23.7.2025

0.606

3,523,100

-

-

-

3,523,100

Sun Wei

23.10.2014

24.11.2014 to 22.10.2024

1.1798

24,158,400

-

-

-

24,158,400

24.7.2015

24.7.2015 to 23.7.2025

0.606

3,019,800

-

-

-

3,019,800

Yeung Man Chung, Charles

23.10.2014

24.11.2014 to 22.10.2024

1.1798

12,079,200

-

-

-

12,079,200

24.7.2015

24.7.2015 to 23.7.2025

0.606

3,019,800

-

-

-

3,019,800

Directors and eligible persons of GNE

23.10.2014

24.11.2014 to 22.10.2024

1.1798

237,074,432

-

(16,105,600)

-

220,968,832

24.7.2015

24.7.2015 to 23.7.2025

0.606

225,186,486

-

(26,976,880)

-

198,209,606

Total

508,061,218

(43,082,480)

464,978,738

Please refer to the section "Share Option Scheme" of the 2020 interim report of GNE for the details of the GNE 2014 Share Option Scheme and the movements of options during the Period.

Save as disclosed above, during the Period, neither the Company nor any of its subsidiaries is a party to any arrangement to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debt securities of, the Company or any associated corporation and none of the Directors had any right to subscribe for the securities of the Company, or had exercised any such right during the Period.

96 GCL-Poly Energy Holdings Limited Interim Report 2020

Interests and Short Positions of

Substantial Shareholders

As at 30 June 2020, so far as is known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had an interest or short position in the shares or underlying shares of the Company as record in the register kept pursuant to Section 336 of the SFO:

Long Position in the Shares and Underlying Shares of the Company

Approximate

Number of

percentage of

shares/

issued share

underlying

capital of

Name

Capacity/nature of interest

shares

the Company

Asia Pacific Energy Fund Limited

Interest in a controlled corporation

6,370,388,156

30.13%

(note 1)

(note 2)

Notes:

  1. An aggregate of 6,370,388,156 Shares are collectively held by Highexcel Investments Limited, Happy Genius Holdings Limited and Get Famous Investments Limited, which are wholly-owned by Golden Concord Group Limited, which in turn is wholly-owned by Asia Pacific Energy Holdings Limited. Asia Pacific Energy Holdings Limited is in turn wholly-owned by Asia Pacific Energy Fund Limited. Asia Pacific Energy Fund Limited is ultimately held under a discretionary trust with Credit Suisse Trust Limited as trustee for Mr. Zhu Gongshan and his family (including Mr. Zhu Yufeng, a Director and the son of Mr. Zhu Gongshan) as beneficiaries.
  2. The total number of ordinary shares of the Company in issue as at 30 June 2020 is 21,141,049,207.

Save as disclosed aforesaid, so far as is known to any Directors or chief executive of the Company, as at 30 June 2020, no other persons (other than a Director or chief executive of the Company) who had an interest or short position in the shares or underlying shares of the Company as recorded in the register kept pursuant to Section 336 of the SFO.

Interim Report 2020 GCL-Poly Energy Holdings Limited 97

Corporate Governance and Other Information

Corporate Governance Code

The corporate governance report of the Company has been set out in the Company's 2019 Annual Report. During the six months ended 30 June 2020, the Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules with the exception of the following area:

Code provision E.1.2

Code provision E.1.2 stipulates that the chairman of the board should attend the annual general meeting. Mr. Zhu Gongshan, the Chairman of the Board, was unable to attend the annual general meeting of the Company held on 17 June 2020 due to the novel coronavirus ("COVID-19") pandemic. Mr. Zhu had invited Mr. Yeung Man Chung, Charles, an executive Director, Chief Financial Officer and Company Secretary of the Company to attend and act as the chairman of such meeting.

Risk Management and Internal Control

Assisted by the Corporate Governance Committee and the Audit Committee, the Board monitors the risk management and internal control systems of the Company and its subsidiaries on an ongoing basis. The risk management and internal control systems (the "Systems") implemented by the Board, management and relevant parties aim to manage rather than eliminate the risk of failure to achieve the following objectives, and to only provide reasonable, but not absolute, assurance against material misstatement or loss:

  • Efficiency and effectiveness of operation
  • Reliability of financial reporting
  • Compliance with applicable laws and regulations
  • Effectiveness of risk management

Members of the Board and the management of the Company actively engage in the risks assessment of the Company and the review of its response measures and conduct discussion with respect to major issues.

The Company has established an internal control department which is responsible for the implementation of risk management and internal control policies. In performing its responsibilities, the internal control department must organize and assist the management to identify and assess the Company's risk exposures for the Board's consideration and procure the design, implementation and supervision of a suitable internal control and risk management system by the management to facilitate execution of policies adopted by the Board. In addition to the internal control department, all employees are responsible for risk management and internal control within their respective scopes of responsibilities.

The Audit Committee held one meeting during the first half of the year, at which matters relating primarily to the risk control reports, tracking of corporate governance and external audit were discussed, and the internal control reports in relation to corporate governance and scope of risk management were reviewed.

98 GCL-Poly Energy Holdings Limited Interim Report 2020

Corporate Governance and Other Information

It is the responsibility of the management of the Company to implement risk management and internal control systems on an ongoing basis and report the status of implementation at least semi-annually to the Audit Committee and the Board. Major initiatives implemented by the management in relation to risk management and internal control during the first half of the year are set out as follows:

  • The Company has established a unified risk framework and a comprehensive risk pool, and has carried out internal risk examination and risk assessments on a regular basis;
  • The Company has launched initiatives to counter material risks, such as analyses and responses to the recent changes in the policies of the PV industry in mainland China from strategic, operational, financial, and technical perspectives;
  • The Company has carried out quantitative risk management regularly with the aim of optimising quantitative risk measurement indicators to support the risk assessment and risk monitoring procedures;
  • The Company has commenced internal control assessment through the combination of quantitative self-inspection by business units and qualitative evaluation by the internal control department in ongoing supervision of the operation of the internal control system;
  • The Company has established risk-oriented internal audit, whereby the interim audit was effectively performed in accordance with the annual audit plan, and regular communication with and reporting to the management and the Audit Committee was conducted in respect of material audit findings.

The Company identified risk updates and performed an overall risk assessment at mid-year to review risk changes and highlight material risks requiring ongoing attention. Selected measures adopted by the Company against material risks during the first half of the year are set forth below:

  • To cope with the risk of product competition in the photovoltaic market, the Company was engaged in an ongoing effort of strategic transformation to adjust its industry mix and operational strategy;
  • To cope with the outbreak of COVID-19 in China and elsewhere, sales risks arising from fluctuations in market demand and product prices, the Company adjusted its sales strategy in a timely manner underpinned by continuous enhancements in marketing and technical upgrades in relation to core products and the full introduction of contract-based operations aimed at providing positive motivation for the teams; and
  • To cope with international risks in relation to issues such as the foreign trade landscape for the photovoltaic industry and policies on customs and tariffs, the Company continued to carry out transformation and upgrade of backward production capacity and procure steady development with an asset-light approach through strategic cooperation, with a view to enhancing its cost reduction measures and facilitating competition by differentiation.

In view of the efforts of the Group, external reviews conducted by the external advisor and the auditor's report furnished by Deloitte, the Audit Committee and the management have concluded that there are no irregularities or areas requiring special concern that would have a material adverse impact on the Company's financial position or results of operations, and that the risk management and internal control systems are adequate and effective and the Company's allocation of manpower and resources to the accounting, internal audit and financial reporting functions is adequate. The above conclusion has been reported and confirmed to the Board, and the Board is of the view that the risk management and internal control systems of the Group are effective.

Interim Report 2020 GCL-Poly Energy Holdings Limited 99

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Financials
Sales 2020 15 323 M 2 329 M 2 329 M
Net income 2020 -1 220 M -185 M -185 M
Net Debt 2020 50 333 M 7 652 M 7 652 M
P/E ratio 2020 -5,97x
Yield 2020 -
Capitalization 10 579 M 1 609 M 1 608 M
EV / Sales 2020 3,98x
EV / Sales 2021 3,56x
Nbr of Employees 10 730
Free-Float 69,8%
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Mean consensus HOLD
Number of Analysts 8
Average target price 0,42 CNY
Last Close Price 0,50 CNY
Spread / Highest target 198%
Spread / Average Target -16,8%
Spread / Lowest Target -69,4%
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NameTitle
Zhan Jun Zhu CEO, Executive Director & Executive President
Gong Shan Zhu Chairman
Man Chung Yeung CFO, Secretary & Executive Director
Yu Feng Zhu Executive Director
Tai Him Yip Independent Non-Executive Director
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