Xinjiang-based solar panel material maker Daqo aims to raise US$773 million in Shanghai IPO, defying US import ban
Daqo New Energy, a maker of a key solar panel material based in China's Xinjiang Uygur autonomous region, plans to raise 5 billion yuan (US$772.5 million) from listing a subsidiary in Shanghai.
The announcement came as the US government blacklisted companies from Xinjiang province, including Xinjiang Daqo New Energy, over forced labour allegations.
New York-listed Daqo has applied for an initial public offering of Xinjiang Daqo New Energy on the Shanghai Stock Exchange's Star Market, it said in a filing to the US bourse on Wednesday.
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"Xinjiang Daqo has completed its IPO registration process with the China Securities Regulatory Commission and will soon enter the issuance process for its IPO on the [Star] board," it said. "The process is estimated to be completed within four weeks."
Daqo New Energy's polysilicon plant in Shihezi, Xinjiang province. Polysilicon is the key building block for solar panels. Photo: Bloomberg alt=Daqo New Energy's polysilicon plant in Shihezi, Xinjiang province. Polysilicon is the key building block for solar panels. Photo: Bloomberg
The Shanghai IPO will strengthen Xinjiang Daqo's position in the polysilicon industry, support its research and development and help its expansion into high-end markets, such as semiconductor-grade polysilicon, Daqo New Energy's chief executive officer Zhang Longgen said in the filing.
The Biden administration on Wednesday banned imports of certain solar panel materials from Xinjiang over allegations of human rights abuses against China's ethnic Uygur Muslim minority, Reuters reported, quoting sources. Separately, the US Commerce Department blacklisted five Chinese solar sector firms, including Xinjiang Daqo, restricting exports.
The company has "zero tolerance" towards forced labour, and that it does not sell directly to US companies, or purchase from the United States and there would not be "a significant impact on the company's business," Xinjiang Daqo said in response to a query by Reuters.
On Tuesday, China's Foreign Ministry spokesman Zhao Lijian, commenting on the impending ban, dismissed the accusations of genocide and forced labour in Xinjiang as "nothing but rumours with ulterior motives and downright lies" aimed at restricting the development of certain industries and companies in China.
Sales of US polysilicon makers was estimated to be worth US$1.8 billion last year, according to market research firm ReportLinker.
The exact potential impact on the Chinese solar materials industry is not clear because of uncertainty about the ban's implementation, analysts said.
"China's polysilicon isn't directly exported to the US; it is the end-product - solar modules - that are exported there," said Dennis Ip, Daiwa Capital Market's head of Asia utilities and renewable energy research. "So the key is whether the module manufacturers need to prove that they don't source the polysilicon and raw silicon from these five Xinjiang-based producers."
Xinjiang Daqo, one of China's largest polysilicon makers with an annual capacity of 77,300 tonnes, accounting for a fifth of the national total, had filed a listing application last September, according to the Shanghai exchange. It planned to issue up to 300 million new shares.
China's polysilicon output grew 14.6 per cent last year to 392,000 tonnes, while output of downstream products such as solar wafers, cells and modules growth between 19.7 per cent and 26.4 per cent, according to its preliminary listing prospectus.
Exports of solar products jumped 29 per cent to US$20.8 billion in 2019, exceeding US$20 billion for the first time since anti-dumping and countervailing duties were slapped on them in 2011. Exports fell slightly to US$19.8 billion last year due to the coronavirus pandemic.
The company has forecast that its net profit would soar more than sixfold to around 1.9 billion yuan in the year's first six months from the same period last year, while revenue would almost double to around 4.15 billion yuan. Net profit surged more than fourfold last year to 1.04 billion yuan.
The company plans to use 70 per cent of the listing proceeds to build a 35,000 tonnes a year polysilicon production line, and 8 per cent on a 1,000 tonnes a year semiconductor-grade high-purity polysilicon project.
David Chao, global market strategist for Asia-Pacific excluding Japan at asset management firm Invesco, expects China's dominance in global solar panels and materials production, with around 80 per cent market share, to continue.
"Even with these measures [the US ban on Xinjiang polysilicon], I don't think it will impact the Chinese makers' funding capability," he said. "Domestic investors will step up to supplement the funding gap, and would replace US investors' capital."
Additional reporting by Georgina Lee
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