Stock Code: 000055, 200055 Stock ID: Fangda Group, Fangda B Announcement No. 2014-33
China Fangda Group Co., Ltd.
Announcement of Setting up Wholly-owned Subsidiary
Shenzhen Fangda New Energy Co., Ltd.
The members of the Board and the Company acknowledge being responsible for the truthfulness, accuracy, and completeness of the announcement. Not any false record, misleading statement or significant omission carried in this announcement.
I. Overview
On the third meeting of the
7th
Board of Directors held on June 21, 2014, the Board of Directors approved the proposal of setting up the wholly-owned subsidiary Shenzhen Fangda New Energy Co, Ltd. with RMB100 million with 7 votes in, 0 against and 0 waived. The newsubsidiary’s business includes solar PV development, PV construction and LED industry.
The investment amount is within the power of the Board of Directors and therefore does not need to be reviewed on ashareholders’ meeting.
The investment is not a related transaction or a material reorganization event defined in Regulations on Material Capital Reorganization by Listed Companies.
II. About the Investment
1. Capital source
The investment is funded by theCompany’s working capital.
2. About the new subsidiary
Company name: Shenzhen Fangda New Energy Co., Ltd. (temporary)
Type: limited liability company
Shareholder:100% ownership by China Fangda Group Co., Ltd.
Registered capital: RMB100 million
Registered address: Fangda Building, No.12 Road, Hi-Tech Zone South, Shenzhen
Scope of business:R&D, production, installation and sales of PV devices; design, production and installation of PV power stations; development, production and sales of solar energy silicon rods, silicon wafers, PV batteries, PV battery packs and related accessories; LED lights, LED displays, LED materials and LED production equipment; import and export of various LED
products and technologies, excluding products and technologies prohibited by China, with the valid business license if any of the fore-mentioned products or technologies are patented.
The above-mentioned information is subjected to the final business administration registration.
3. Project Feasibility Analysis
(1) Market outlook
The Company sets up Shenzhen Fangda New Energy Co., Ltd. to focus on application of solar energy, PV construction and LED industry, and extend theCompany’s existing power saving and environmental protection businesses.
The PV application, PV construction and LED industry are strongly encouraged by the
12th Five-Year Period plan. The central and local governments have implemented a series of policies to encourage and subsidize the development of the industry. It is estimated that PV power generation will play a key role in the energy structure and global power supply in the
21st
century. Renewable energy and solar energy will account for over30% and10% in the aggregate power supply in 2030 respectively. The
12th
Five-Year Period plan raises the targets solar power generation capacity from 20GW to 35GW. In 2014, 14GW will be increased in 2014, including distributed 8GW and centralized 6GW. In 2015, the figure will be 10GW. Assume that 1GW can generate RMB8 billion to 10 billion. The potential value of the PV market ranges between RMB280 billion and RMB350 billion during the
12th
Five-Year Period. These figures show the rosy development outlook and strategic role of the solar energy industry.
LED and PV are emerging new energy industries. Compared to incandescent and fluorescent lamps, LEDlights’ power consumption is80% and50% lower respectively and are free of mercury, which is highly polluting. Many countries and regions have implemented policies to eliminate incandescent lamps. Incandescent lamps were prohibited in Europe and Japan since 2012 and in Canada by 2014. Incandescent lamps will also be prohibited in Chile and Mexico by December 2014. China issued the Incandescent Lamp Elimination Plan in November 2011. It is estimated that ordinary incandescent lamps will be eliminated by 2016. According JamesO’McKinsey, the general light market will reach RMB127.4 billion in 2016. The compound growth rate is about13% between 2010 and 2016. In 2010, LED lights account for7% in 2010.
The market share of LED lights will continue to increase with continued improvement of technology and lower production costs. In 2016, the Chinese LED light market will reach RMB56.4 billion, accounting for about46% of the aggregate. In addition, LED lights can be widely used in different scenarios including landscape lighting, mark and identification lighting, and indoor lighting. Currently, LED lights are widely adopted in media buildings, agriculture, automobile electronics, and optical communication.
(2) Project implementation
Since inception in 1991, Fangda has stuck to the road of independent innovation to improve its innovation capabilities. The Company has post-doctoral work stations, Shenzhen enterprise technology centers and Design Institute and has undertaken the national ELD 863 project, National Torch Program projects and
10th
Five-Year LED projects, as well as the preparation of many national standards.
The Company has continued been engaged inR&D, production and installation of energy-saving curtain walls and related materials. These businesses are closely related to the solar power PV industry. TheCompany’s experience in curtain wall engineering and electronic integration over the past 20 years will pave its way to development PV and LED applications.
The Company is experienced in upper, middle and down-stream industries of PV integration and LED, and has obtained 134 patents in the industry, including 26 invention patents. As the first Chinese company mastering the designing, production and integration technologies of solar PV and photoelectric curtain wall systems, China is a pioneer in the development of photoelectric curtain wall technologies in China. Shenzhen Fangda Building PV curtain wall project is the first solar PV and construction integrated building curtain wall project in China. Fangda developed the first large-power and high-luminance LED chip in China, breaking through overseascompanies’ monopoly on core technologies in semiconductor lighting industry. The LED full-color curtain wall system for Shanghai Citibank is a super-large LED curtain wall system in China.
PV and LED industries have huge market outlooks and comply with the national plan and industry policies. TheCompany’s extensive experience in PV and LED industries also increase the feasibility of developing new energy saving technologies.
III Purpose, Risks and Impacts of the Investment
Establish Shenzhen Fangda New Energy Co., Ltd. will maintain theCompany’s lead in energy-saving curtain wall and materials and railway transport equipment industries. It coincides with the development trend of energy saving industries and will promote the development of emerging new energy technology industries. Moreover, it will help optimize theCompany’s industry structure, increase added value of theCompany’s products, consolidate theCompany’s profitability, and accelerate theCompany’s long-term growth.
The investment is decided after careful consideration based on theCompany’s long-term development despite certain risks in terms of government policies, market and management. The Company will manage the wholly-owned subsidiary using existing business operating, financial and HR management systems and set up a professional management team to handle risks.
The investment coincides with the national plan, industry policies and development trend and complies with the Company overall development strategy. Therefore, it is necessary and feasible and will enjoy a rosy market outlook and bring outstanding economic benefits. It will also help the Company maintain its lead in the domestic energy saving industry, propel theCompany’s long term growth, and bring great returns for shareholders.
The above is for the attention of the shareholders.
Board of Directors of China Fangda Group Co., Ltd.
June 24, 2014