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at the critical moment when it was about to be "sold" to the photovoltaic leader tongwei co., ltd. (600438.sh), the main domestic battery production base of jiangsu runyang new energy technology co., ltd. (hereinafter referred to as "runyang co., ltd.") came to a standstill.

since july, the runyang yancheng battery factory, which mainly produces perc, has gradually reduced production and announced a holiday in early september. as the last batch of employees, zhang hua and other colleagues are faced with a dilemma: either accept the company's holiday arrangement and wait for news of resumption of work, or negotiate to terminate the labor contract and find another way out.

zhang hua and his colleagues actually had no choice. the management implicitly stated that there were no orders to start work, and no one could guarantee that they would be able to resume work in the future. if they continued to take leave, the employees would only receive 80% of the local minimum wage. negotiating a resignation was also difficult. the employees and the company had not yet reached an agreement on the amount of compensation. due to the poor performance of the factory, the compensation plan given this time was also far different from the previous batches.

it is regrettable that runyang battery has ranked among the top three in the world in battery shipments for three consecutive years, with a net profit of more than 2 billion yuan in 2022. its p-type battery production line was so busy that it did not take a holiday during the chinese new year. however, it has only been two years since it took a "long holiday" due to lack of orders.

runyang's ups and downs in the past two years are due to the combined effect of the decline in cyclical industry value and the replacement of old and new production capacity. in 2023, the photovoltaic industry launched the iteration of n-type technology over the previous generation of p-type technology. institutions expect that n-type products will account for 70% in 2024. n-type batteries are not the end of photovoltaics, but runyang's battery factories in china may no longer keep up with the tide of technological innovation.

compared with the "backward production capacity" in china, runyang's overseas production capacity in thailand and overseas channels in the united states may be more attractive to the acquirer tongwei co., ltd. compared with other integrated leading companies, tongwei's overseas layout has always been relatively weak. "buying" overseas production capacity at the bottom of the industry cycle is a faster way to catch up.

according to public information sorted out by a cailian reporter, in 2022, the total net assets of runyang co., ltd.'s three high-quality overseas assets - subsidiaries runyang thailand, runyang international and hi-tech usa - were 1.5 billion yuan, and that was the rising cycle of photovoltaics.

the compensation for "key employees" has been reduced

on the afternoon of september 5, at the gate of runyang co., ltd.'s battery production factory in yancheng economic development zone, twos and threes of employees were coming in and out from time to time. most of them were employees who came to negotiate with the company about compensation for the termination of their labor contracts, but the negotiation results were not ideal.

september 5, at the gate of runyang century, photographed by cailianshe reporter

a holiday notice they provided showed that the holiday time was from september 2, 2024 to october 8, 2024. based on the actual situation of the company, the company's notification shall prevail in case of early or delayed resumption of work.

holiday notice, provided by the interviewee

the above notice is signed by jiangsu runyang century photovoltaic technology co., ltd. (hereinafter referred to as "runyang century"), the operating entity of runyang co., ltd.'s battery business.

the document notification shows that there is a one-month holiday, so why do people ask for the termination of the labor contract through negotiation?

"since last month, the factory has been giving out longer and longer holidays. at first, we just gave employees notice to take a break, but as employees became increasingly dissatisfied, the company made a formal announcement," zhang hua, an employee at the site, told cailianshe.the battery production line in the factory has basically stopped, and some equipment has been wrapped with protective film., but it is unclear what the next step will be.

"we believe that the company can no longer provide us with the necessary working conditions, so we should be compensated," another employee told cailianshe. according to the employees, the factory currently has more than 600 workers, and all deputy managers and supervisors are on holiday. about 100 to 200 people have signed resignation agreements. more than 300 employees are negotiating with the company and have not signed the agreement.

it is understood that runyang century provides employees with three options. in addition to accepting holiday arrangements and waiting for the notice to resume work, there are two other options: one is to accept a one-time compensation amount of n (years of work) * 50% of the average monthly income, which can be paid in one lump sum; the other option is that the compensation amount is n * average monthly income, but it will be divided into three installments, 20%/30%/50% in the first/third/sixth month after leaving the job respectively.

"i can't accept this." zhang hua told the reporter from cailianshe that not only will the final compensation be paid half a year later, but this plan is also different from the previous employee resignation compensation. in december last year, there were about 1,600 employees in this factory. later, the first batch of employees took a long vacation. if they did not accept it, the resignation compensation could be n+1, and it would be paid in one lump sum.

"later, there was a second round of optimization, and the same treatment was applied. we were the third or fourth round (not sure), but we were the last round of employees." zhang hua said that when the first round of employees left, everyone was confused. but the company said that those who stayed were key employees, and the company could develop better after overcoming difficulties.

regarding the base's production plan and employee resignation compensation negotiations, a cailian reporter sent an interview letter to runyang group's public email address, but no reply was received as of press time.

without orders, it is difficult for domestic production capacity to resume work

according to feedback from many employees on site, the deadline for signing the agreement given by the factory is 5 p.m. on friday (september 6). failure to sign will mean accepting the factory's holiday arrangement and no further negotiation on compensation plans.

on september 7, employees continued to come to the company for negotiations. photo provided by the interviewee, edited

since it is difficult to say how much compensation will be paid for leaving the company, why not accept the holiday arrangement? the on-site employees directly stated the tacit reason among them: it will be very difficult to return to work later. an employee of the equipment line on site said frankly that the possibility of the shutdown here is not 90% but 100%.

more than one employee told cailianshe reporters that during negotiations with the company, the management implicitly stated that there were no orders to start work and no one could guarantee that work would resume in the future. therefore, they had to find another way out.

in fact, the factory's poor performance and difficulty in receiving orders have long been felt by employees. zhang hua and her colleagues revealed that since july this year, the factory's orders have significantly decreased, and in august, the working hours have become more unstable, with shifts significantly reduced, and some colleagues even had more than ten days off.

this is completely different from the past. zhang hua said that the battery factory started recruiting workers in june 2021, and she joined the battery testing line in september. the factory implements 12-hour shifts, with two days off a month, and it is even harder when changing shifts. in the two years when the market was good, there was no holiday during the chinese new year, and it was difficult to take a day off to go home.

at present, the workers in the factory have to face a huge gap. since 2023, the photovoltaic industry has launched the iteration of n-type technology over the previous generation of p-type technology. according to statistics from institutions, by 2024, the proportion of n-type products in the market has reached 70%.

this also led to runyang's p-type battery sales starting to run into difficulties. from public information, runyang shares have also had a bright past: according to a report released by the agency infolink consulting, from 2020 to 2022, runyang's battery shipments ranked among the top three in the world for three consecutive years. by the end of 2023, runyang has a global high-efficiency battery production capacity of 63gw and a planned module capacity of 23gw.

but these past glories have nothing to do with the last few hundred employees of runyang century. in the prospectus of runyang shares, it is mentioned that at the end of the reporting period (2022), the book value of the company's machinery and equipment accounted for 62.07% of fixed assets. if the aforementioned machinery and equipment cannot be effectively utilized through technological upgrades in the context of rapid changes in mainstream technology routes, they may be idle or eliminated and a substantial impairment may be recorded.

some p-type manufacturers have chosen to carry out technical transformation of their large-scale old perc production capacity. in march this year, the first cell of tongwei co., ltd.'s topcon technical transformation project rolled off the production line successfully; shortly thereafter, aixu co., ltd. announced plans to upgrade the existing 25gw perc cell production capacity of its yiwu base to topcon cell production capacity.

but the cost is huge. according to the announcement of aixu co., ltd., the total investment of the project is expected to be 2.715 billion yuan, and the investment cost per gw is about 108 million yuan. technical transformation and upgrading is more of a strength that only leading manufacturers have.

faced with the trend of technological iteration, runyang century has also tried to save itself. an employee told cailianshe reporters that there was a plan to upgrade the technology to an n-type technology production line, but due to funding problems, the cost of the transformation was too high and it was eventually abandoned.

as technical transformation cannot be advanced, runyang co., ltd.'s domestic p-type battery factory may have reached the end of its life cycle.

is tongwei spending 5 billion to expand its overseas production capacity?

at the bottom of the cycle, along with the clearing of production capacity, there are often mergers and acquisitions in the industry.

in august, tongwei co., ltd. announced as a "white knight" that it planned to spend no more than 5 billion yuan to acquire runyang co., ltd., which failed to go public. this scale is the largest m&a plan in the photovoltaic industry and even in the new energy field in recent years.

compared with the domestic production capacity that has been suspended, runyang's overseas production capacity is more attractive to tongwei. several sources told cailianshe reporters that tongwei co., ltd. acquired runyang only because it was optimistic about its overseas production capacity, and its core asset was the battery cell factory in thailand.

this view was also recognized by many runyang century employees at the scene. they put forward their own views: tongwei's battery products overlap with runyang's battery products, and the other party values ​​runyang's sales channels in thailand and the united states. regardless of whether tongwei takes over runyang in the end, the (runyang century) factory will definitely be closed.

according to the official website of runyang shares, in may 2022, the third phase of runyang thailand was put into production. the prospectus disclosed that runyang's overseas large-size battery production capacity has exceeded 5gw, and 2gw of large-size module production capacity has been built. the company's total perc battery cell production capacity is 25gw (as of 2022), so the overseas share is less than one-tenth.

tongwei co., ltd., as a leading enterprise in multiple links such as polysilicon, batteries, and components, is a veritable integrated leader in the photovoltaic sector. however, it is embarrassing that compared with longi green energy, ja solar, trina solar, and jinkosolar, its overseas expansion progress is obviously slower than the other four, and it has not set up photovoltaic product production plants overseas.

however, is it worthwhile to spend 5 billion to acquire runyang? the prospectus of runyang shares disclosed that its important subsidiaries include runyang yueda, runyang jianhu, runyang international, runyang century, runyang thailand and runyang silicon materials. except for runyang silicon materials, which is engaged in the high-purity polysilicon business, the rest are engaged in high-efficiency solar cell and component business.

among them, runyang thailand and runyang international are the production and sales entities of overseas battery business respectively. the construction project of monocrystalline perc battery and modules of runyang thailand will be completed and put into production in 2022. in that year, runyang thailand's net assets were 1.177 billion yuan, with revenue of 1.598 billion yuan and net profit of 168 million yuan; runyang international's net assets were 435 million yuan, with revenue and net profit of 1.829 billion yuan and 268 million yuan respectively.

in addition, haiborui usa was established in june 2021 and is the main sales entity of runyang shares' overseas component business segment. its net assets in 2022 were -43.4 million yuan, and its operating income and net profit were 33.74 million yuan and -45.42 million yuan respectively. according to public information, "runergy" has become one of the top five brands of photovoltaic components in the united states. the company is also planning other key overseas markets. it is expected that the company's overseas component shipment target for the whole year of 2024 will be around 6.5gw.

in 2022, the above three assets are considered to be the high-quality part of runyang co., ltd.'s asset structure, with a net asset of only 1.5 billion yuan.

who will benefit from the acquisition?

in addition to the highly overlapping business lines, after the last round of capacity expansion, runyang shares have a high debt ratio. according to the ipo prospectus updated by runyang shares in 2023, from 2020 to 2022, the company's total liabilities reached 5.142 billion yuan, 9.539 billion yuan and 17.132 billion yuan, respectively. among them, current liabilities are the main component of the company's liabilities, which are 4.043 billion yuan, 7.936 billion yuan and 12.507 billion yuan, respectively, accounting for 78.61%, 83.20% and 73.01% of the total liabilities at the end of each period.

at present, the acquisition plan has not been finalized. at the semi-annual performance briefing held by tongwei co., ltd. earlier this month, the company's management said in response to investors' questions that the company's plan to acquire no less than 51% of runyang co., ltd.'s equity is still in the stage of forming preliminary principled intentions by the relevant parties, and the specific situation of the transaction target is still under further audit and evaluation. the company will subsequently fulfill the corresponding decision-making approval procedures and information disclosure obligations in a timely manner based on the progress of the transaction.

the company and management further stated that the company and jiangsu runyang have not yet signed a final formal agreement on this transaction, and the transaction details are still subject to further negotiation. the company will actively perform due diligence procedures, consider necessary risk control measures, disclose transaction-related progress in a timely manner, and safeguard the interests of all shareholders.

a noteworthy detail is that the letter of intent between the two parties mentioned that before tongwei co., ltd. determines the capital increase plan, jiangsu yueda group will first increase its capital by 1 billion yuan to acquire the corresponding equity of runyang co., ltd. after the capital increase plan is determined, tongwei co., ltd. will acquire the capital increase investment of yueda group.

runyang co., ltd. settled in yancheng economic and technological development zone in 2017 and moved its headquarters from kunshan to yancheng in may 2020. according to the latest disclosure, founder tao longzhong holds 40.28% of runyang co., ltd. the second largest shareholder, yueda new industry, holds 19.48% of the shares. it and yueda group, which first increased its capital in runyang co., ltd. in this transaction, are both controlled by the yancheng municipal government of jiangsu province.

at the same time, the third largest shareholder yancheng yuanrun directly holds 11.13% of the company's shares, and jianhu hongchuang directly holds 1.68% of the company's shares. yancheng yuanrun and jianhu hongchuang are both private equity funds managed by jiangsu yueda jintai fund management co., ltd. as executive partners. the two constitute concerted action persons and hold a total of 12.81% of the company's shares.

when the acquisition plan was first disclosed, some market analysts pointed out that yueda group’s funds will be used to solve runyang’s current main pressure, thereby promoting the "marriage" between tongwei and runyang.

for tongwei, yancheng is an important manufacturing base for its downstream components. in september 2022, tongwei co., ltd. announced that it would invest in a 25gw high-efficiency photovoltaic component manufacturing base project in yancheng, with an estimated fixed asset investment of approximately rmb 4 billion. the project will be put into production in 2023, with a cumulative investment of rmb 5.683 billion, making it the largest single base for tongwei's components.

the 2023 financial report shows that the project suffered losses due to being in the debugging and ramp-up stage and falling product prices. the yancheng component base realized a profit of -487 million yuan that year.

tongwei did not respond to questions such as the latest progress of the acquisition and whether the production suspension of the target company would affect the transaction decision. it only told a reporter from cailianshe that it is still conducting preliminary due diligence, auditing, and evaluation work.

a person close to tongwei told a reporter from cailianshe that the above situation is unlikely to affect the acquisition. another industry analyst pointed out that runyang was almost one of the last batch of p-type battery factories to be shut down, and it was already a relatively "long-lived" production capacity. it should have been expected before tongwei planned the acquisition. in the battery segment, there is already a structural mismatch between supply and demand, and the accelerated elimination of p-type batteries is a market trend.

before the yancheng battery factory of runyang co., ltd. was completely shut down, hundreds of employees were still waiting for the final compensation plan. a migrant worker told cailianshe reporters that she didn't know how long she could persist (in negotiations) and how much compensation she would get. if her colleagues around her accepted the minimum compensation, she might also be shaken because finding the next job was more important.

(zhang hua is a pseudonym in this article)