COMTEC SOLAR Systems Group Ltd (HK: 712), a major producer of monocrystalline solar wafers, has won a strategic investment with total potential value of 1.2 bln hkd from private equity firm TPG Capital.
Both sides said at a press conference in Hong Kong yesterday that the deal resulted from continued strong global demand for high-end wafer products and expectations of sustained interest in the development of green energy resources going forward.
The TPG strategic investment involves 780 mln hkd in unsecured convertible bonds due 2016, which carry a zero interest rate and will be convertible into Comtec’s new ordinary shares at an initial conversion price of 3.90 hkd per ordinary share, to be converted at par if not converted after five years.
In addition, TPG will receive 95 mln warrants with the right to subscribe for one ordinary share each, with an initial exercise price of 4.10 hkd per warrant.
The warrants have a maturity of five years.
If the warrants are exercised in full, TPG will invest an additional 390 mln hkd and receive 95 mln new ordinary shares in Comtec.
In total, TPG -- which has 48 bln usd under management -- will invest 1.2 bln hkd and hold 295 mln ordinary shares, equivalent to around 21% of the total enlarged issued share capital of Comtec, assuming the bonds are fully converted and the warrants are fully exercised.
Upon closing, Comtec will receive the 780 mln hkd of gross proceeds from the issuance of the convertible bonds, which will be used for further expansion of production capacity.
In addition, Comtec expects to raise a further 390 mln hkd upon the full exercise of the warrants.
“We welcome the investment from TPG Capital and see significant upside from TPG’s financial and operational value-add. With TPG’s proven track record of helping companies to achieve dramatic success, we see a bright future for the continued profitable growth of Comtec Solar and believe a partnership with TPG is highly complementary to our existing strategy,” Comtec Chairman Mr. John Zhang told a roomful of reporters in Hong Kong.
He said the proceeds from the TPG deal would be used by Comtec Solar to increase wafer production to 1,400 megawatts this year from the originally-targeted 1,000 megawatts.
He added that the strategic investment deal will also help boost the name recognition of the solar wafer producer.
“I believe this agreement will significantly enhance our financial and professional standing in the industry,” Mr. Zhang said.
Comtec CFO Mr. Keith Chau said he had “great confidence” in the growth potential of the solar industry worldwide, adding that the strategic investment comes just at the right time.
“With this long-term partnership with TPG, it not only further strengthens our financial situation but also enhances our competitive position in the market.”
He added that one of the most important uses of the new capital
infusion will be wafer production capacity expansion, and also told NextInsight on the sidelines of the conference that the ongoing nuclear crisis in Japan may result in a silver lining for other alternative energy resources.
“Of course our hearts go out to the people of Japan as they endure the ongoing uncertainty following the radiation leaks at the nuclear power plant there.
“While we so far have seen no concrete shift in global energy infrastructure plans away from nuclear and toward solar or other non-polluting energies, we have seen growing concern about the long-term safety of nuclear power and have witnessed enhanced inspections of both existing facilities worldwide as well as reviews of projects still under construction. As for what this means in terms of a possible shift to more solar energy equipment orders, it is still too early to determine.”
Managing Partner of TPG Asia Mr. Stephen Peel said the strategic investment will allow TPG to have two seats on Comtec’s board.
“This investment in Comtec is consistent with TPG’s strategy of collaborating with high quality companies in China. Comtec is our first China-based solar investment, and we are confident in Comtec’s ability to expand successfully.
“We believe the strengths of both parties will contribute to an effective partnership,” he said.
TGP was surely attracted by Comtec’s spectacular financial results in 2010.
The Shanghai-based firm’s top line more than doubled to 1.02 bln yuan, while its net profit surged to nearly 223 mln from 24.9 mln the year prior due to higher-margin sales of quality solar wafers.
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