SFSY ENERGY (00750) announced on October 21, 2025, that the company, the seller, and the target company (Guizhou Xingye Green Energy Technology Co., Ltd.) have entered into an equity transfer agreement. Under this agreement, the company will acquire 100% of the equity of the target company for a cash consideration of RMB 216 million, and the company has agreed to assume and repay the debts owed by the target company to the seller, totaling RMB 384 million. Therefore, the total price for the acquisition amounts to RMB 600 million.
The target company is a limited liability company established in China, primarily engaged in the maintenance and management of photovoltaic power stations and electricity sales. The equity transfer agreement aims to resolve an ongoing legal dispute. The seller A (Beijing JYUT Technology Co., Ltd.) and the target company (as plaintiff) initiated litigation against SFSY GREEN ENERGY (as defendant) in 2023, alleging breach of EPC documents. According to the EPC documents, all parties had agreed (among other things) that the group would provide EPC services to the target company, with a contract price of approximately RMB 705 million, and seller A was to provide a loan of about RMB 343 million to the target company.
SFSY GREEN ENERGY had committed (among other things) to completing all government approval procedures and grid-connection procedures for electricity generation, as well as agreeing to compensate seller A for all losses arising from land occupation issues. Relevant authorities issued notices to the target company in 2020 and 2022, stating that the target company had unlawfully occupied a total area of 800 acres of farmland. In 2021 and 2022, facilities related to the 100MW photovoltaic power station in Wangjiazai, Liupanshui City, which involved the aforementioned farmland, were dismantled in succession, leaving operations at a capacity of only 65MW thereafter.
Seller A and the target company are claiming damages of approximately RMB 361 million in the lawsuit, which includes: (i) losses from dismantling the power station of about RMB 253 million; (ii) loss of electricity sales of approximately RMB 57 million; (iii) penalties for delayed grid connection of about RMB 34 million; (iv) interest; (v) costs. Based on legal advice from the group's advisors in China, considering the evidence and case circumstances, the group is likely to bear substantial compensation liability in the lawsuit, particularly for the losses related to dismantling the power station amounting to approximately RMB 253 million.
The company believes that the acquisition essentially represents a resolution of the transactions under the EPC documents, requiring the company to purchase the target equity and repay debts at fair value (i.e., net debt of RMB 133 million after exempting debts owed to seller A). The company believes that resolving the issues through acquisition will significantly reduce the damages payable by the group in the event that no resolution is reached in the litigation, thereby saving costs.
Moreover, resolving the lawsuit and proceeding with the acquisition will release the funds and equity of the group's subsidiary that are currently under asset preservation measures, enhancing the group's credit rating and relieving operational pressure. Additionally, the group is a professional provider of renewable energy and green building solutions. The board of directors believes that the acquisition will complement the group's existing operations and expand its revenue sources by enhancing productivity and business scale.
Taking into account the discount of the acquisition price relative to the target equity valuation and the exemption of approximately RMB 133 million in debts owed by the target company to the seller, the group expects to achieve a pre-tax gain of approximately RMB 163 million upon completion. Since the acquisition represents a solution to the litigation and is favorable for the company, the board considers the acquisition beneficial for the group.