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It took more than a year from the filing of the lawsuit to the first-instance judgment. The first-instance judgment of the lawsuit between Daquan Energy (SH688303, stock price 18.47 yuan, market value 39.6 billion yuan) and two suppliers has come out. The amount of compensation that the suppliers originally requested Daquan Energy to pay for the losses is far different from the compensation amount of the first-instance judgment.

On July 17, Daquan Energy disclosed that the first-instance judgment of the lawsuit between it and Xinjiang Xian'an New Materials Co., Ltd. and Xinjiang Dengbo New Energy Co., Ltd. (hereinafter referred to as Xian'an New Materials and Dengbo New Energy, collectively referred to as the plaintiffs) was announced. The court finally ordered Daquan Energy to pay the plaintiffs 3.1581 million yuan.

In June last year, the plaintiff filed the lawsuit for the first time, and at that time the plaintiff demanded compensation of 388 million yuan; in September last year, the plaintiff changed the lawsuit request and demanded that the compensation amount be adjusted to nearly 2 billion yuan; in May this year, Daquan Energy disclosed that the plaintiff changed and withdrew part of the lawsuit request, and the amount involved was adjusted to 1.85 billion yuan. Judging from the final first-instance judgment, the reason for the smaller amount of the judgment was that a profit loss compensation lawsuit of up to 1.826 billion yuan was rejected by the court.

The amount of compensation requested by the plaintiff increased from nearly 400 million yuan to nearly 2 billion yuan

According to previous disclosure by Daquan Energy, Xian'an New Materials and Dengbo New Energy are affiliated companies, both of which provide silicon core processing services to Daquan Energy. Daquan Energy provides polysilicon materials, Xian'an New Materials is responsible for silicon rod pulling, and Dengbo New Energy is responsible for silicon core cutting.

This tripartite cooperation started in 2022. In January 2022, Daquan Energy first signed a "Business Cooperation Agreement" with Xian'an New Materials, stipulating that Daquan Energy would lease the factory to Xian'an New Materials for use as a crystal pulling production plant, and Xian'an New Materials and its affiliates would provide silicon core processing services.

In July 2022, Daquan Energy signed an "annual contract" with Dengbo New Energy, agreeing to entrust Dengbo New Energy to cut silicon cores and arrange silicon rod crystal pulling, and the specific silicon rod crystal pulling work was carried out by Xian'an New Materials. However, after the expiration of the "annual contract" (April 30, 2023), the two parties did not renew the new contract, and since April 19, 2023, Daquan Energy has not issued a purchase order to Dengbo New Energy.

Therefore, the plaintiff believed that Daquan Energy and its affiliates had turned to cooperation with other suppliers on their own, which constituted a fundamental breach of the "Business Cooperation Agreement". In June 2023, the plaintiff filed a lawsuit with the court, requesting the termination of the "Business Cooperation Agreement" between Daquan Energy and Xian'an New Materials, and requiring Daquan Energy to compensate for economic losses of 388 million yuan.

In September last year, the plaintiff applied to change the lawsuit request again, and this time the amount of compensation required was greatly increased to 1.959 billion yuan. Because it exceeded the scope, the case was transferred to the Intermediate People's Court of the Eighth Division of the Xinjiang Production and Construction Corps for trial.

In May of this year, Daquan Energy disclosed again that the plaintiff changed and withdrew some of the claims, and the amount involved in the case was reduced to about 1.85 billion yuan.

Daquan Energy’s announcement in May this year. Image source: Screenshot of the announcement

The first instance court ordered Daquan Energy to pay the plaintiff more than 3 million yuan

It is reported that in the face of the plaintiff's huge compensation amount, a staff member of Daquan Energy's securities department once said: "We are a listed company and have the obligation to disclose information. We cannot rule out the possibility that the other party deliberately raised the amount to force the company to disclose the litigation situation and force the company to compromise."

Judging from the final first-instance judgment, the amount that Daquan Energy was ordered to pay was far from 1.85 billion yuan.

From the plaintiff's claims, there are mainly two points. On the one hand, the plaintiff requested to terminate the "Business Cooperation Agreement". This lawsuit request was supported by the court, confirming that the rights and obligations of both parties will terminate on December 31, 2023.

Second, due to Daquan Energy's violation of the Business Cooperation Agreement, a series of claims for compensation for losses were filed, including a joint profit loss of 1.826 billion yuan for Xian'an New Materials and Dengbo New Energy, and related project investment losses, plant rental and media fee losses, and personnel salary losses totaling 20.1735 million yuan. In the first-instance judgment, the claim for compensation for loss of profits was not supported by the court, and only 3.0581 million yuan of other related loss compensation was supported.

A reporter from the "Daily Economic News" noticed that in Daquan Energy's previous disclosure, it was believed that in the lawsuit request for compensation for lost profits, Dengbo New Energy was not a signatory to the "Business Cooperation Agreement". At the same time, the amount of the lawsuit was unilaterally estimated by the plaintiff based on the combined expected profits of Xian'an New Materials and Dengbo New Energy during the longest duration of the "Business Cooperation Agreement", and did not represent the amount agreed in the "Business Cooperation Agreement" or its actual losses.

According to the first-instance judgment, Daquan Energy needs to pay the plaintiff a total of 3.1581 million yuan, and pay it within 10 days after the judgment takes effect. Daquan Energy also stated that according to the first-instance judgment, the amount that the company needs to bear in this judgment will not have an adverse impact on the company's daily production and operations, and will not have a significant adverse impact on the company's current and future profits and losses. In addition, since this judgment is a first-instance judgment, it is still within the appeal period as of the 17th, and the final result is still uncertain. The specific impact on the company needs to be based on the actual implementation of the effective judgment.