Longi Green Energy signed a polysilicon procurement contract worth 251,300 tons with Daquan Energy
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On the evening of November 30, LONGi Green Energy announced that it had signed a long-term purchase contract for silicon materials with Daquan Energy. The announcement states that, in line with the company’s strategic plans and operational needs and in order to ensure a stable supply of polysilicon, on November 30, 2022, the company and its 9 subsidiaries ( namely Yinchuan Longi Silicon Materials Co., Ltd., Ningxia Longi Silicon Materials Co., Ltd., Baoshan Longi Silicon Materials Co., Ltd., Lijiang Longi Silicon Materials Co., Ltd., Huaping Longi Silicon Materials Co., Ltd., Yinchuan Longi Photovoltaic Technology Co., Ltd., Tengchong Longi Silicon Materials Co., Ltd., Qujing Longi Silicon Materials Co., Ltd., and Ordos Longi Silicon Materials Co., Ltd.) entered into long-term procurement agreements for polysilicon with Inner Mongolia Daquan New Energy Co., Ltd. Under these agreements, the volume of polysilicon traded between the two parties from May 2023 to December 2027 is 251,280 tons. The announcement states that under this contract, which adopts a long-term ordering approach featuring fixed volume but no fixed price, monthly price negotiations, and phased purchases, the total value of the contract is estimated at around 67.156 billion RMB based on current market prices (excluding taxes; this estimate does not constitute a price commitment). The announcement also states that the contract purchase price is negotiated on a monthly basis by all parties based on market conditions, and the volume of purchases represents a reasonable proportion of the company’s estimated total annual purchase volume; as a result, the risks associated with fulfilling the obligations under the contract are low due to fluctuations in the contract prices and changes in the company’s purchasing needs. The signing of this contract meets the needs of the company’s daily operations, helps to ensure a long-term and stable supply of polysilicon raw materials for the company, and will have no direct impact on the company’s performance.
A wholly-owned subsidiary of Daquan Energy recently signed a procurement agreement with Longi Green Energy (601012.SH) and its 9 subsidiaries. Under the terms of this agreement, Longi Green Energy is expected to purchase a total of 251,300 tons of polysilicon material from May 2023 to December 2027. Based on the average price of 302,000 yuan per ton (including taxes) for polysilicon compact material, as recently reported by PV InfoLink on November 24, the estimated procurement cost is around 75.887 billion yuan. The two parties agreed to use a monthly negotiation approach. That same night, LONGi Green Energy made a disclosure regarding this transaction, stating that the signing of the contract met the company’s regular operational needs and would help ensure a long-term and stable supply of polysilicon raw materials for the company.
Daquan Energy and Inner Mongolia Daquan signed a Framework Agreement on the Purchase and Sale of Polysilicon with a certain customer; the agreement stipulates that from January 2023 to December 2027, the buyer is expected to purchase 27,600 tons of crude polysilicon. Based on the latest prices from PV InfoLink as well, the estimated purchase cost is around 8.335 billion yuan. The two parties agreed to use a monthly negotiation approach. The total value of the aforementioned two long-term sales contracts is 84.222 billion yuan (including taxes). Dquan Energy stated that, if the sales contracts are fulfilled successfully, it is expected to have a positive impact on the company’s performance.
On December 14, 2020, LONGi Green Energy Technology Co., Ltd. issued a announcement regarding the signing of a major procurement contract. The announcement states that, in line with the company’s strategic plans and operational needs and to ensure a stable supply of polysilicon, on December 14, 2020, seven of the company’s subsidiaries—Yinchuan Longi Silicon Materials Co., Ltd., Ningxia Longi Silicon Materials Co., Ltd., Lijiang Longi Silicon Materials Co., Ltd., Huaping Longi Silicon Materials Co., Ltd., Yinchuan Longi Photovoltaic Technology Co., Ltd., Qujing Longi Silicon Materials Co., Ltd., and Tengchong Longi Silicon Materials Co., Ltd. (collectively referred to as “Party A”)—entered into a five-year polysilicon procurement agreement with Xinte Energy Co., Ltd. (hereinafter referred to as “Xinte Energy” or “Party B”). Under this agreement, the volume of polysilicon to be supplied by both parties from 2021 to 2025 is set at no less than 270,000 tons. The announcement states that, based on the average transaction price of 80,500 yuan per ton for single-crystal dense material as published by the Silicon Industry Branch of the China Non-ferrous Metals Industry Association on December 9, 2020, the total value of this contract is estimated to be around 19.235 billion yuan (excluding taxes). This total amount represents approximately 82.24% of the company’s audited operating costs for 2019, while the annual average value of the contract amounts to about 16.45% of those audited operating costs. This calculation does not constitute a price commitment, and this contract falls under the category of particularly significant procurement contracts. The counterparty to this contract, Xinte Energy, is one of the key suppliers of polysilicon material for the company, and a good business relationship has been established between the two parties. The announcement states that the signing of this contract meets the company’s future operational needs. By using a long-term procurement approach that fixes the quantity but not the price, allows for monthly price negotiations, and involves purchases in batches, it helps to ensure a stable long-term supply of polysilicon raw materials for the company, without having any direct impact on its current financial performance. The company’s main business will not become dependent on the counterparty as a result of the performance of this contract, and this will not affect the company’s operational independence.