Securities registered or to be registered pursuant to Section 12(b) of
the Act:
Securities registered or to be registered pursuant to Section 12(g) of
the Act:
None
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the annual report:
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated
filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
† The term “new or revised financial accounting
standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification
after April 5, 2012.
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:
If “Other” has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
On December 28, 2015, we effected
a change of the ratio of our ADSs to ordinary shares from one (1) ADS representing one (1) ordinary share to one (1) ADS representing
ten (10) ordinary shares. Unless otherwise indicated, ADSs and per ADS amount in this annual report have been retroactively adjusted
to reflect the change in ratio for all periods presented.
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISERS
Not Applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3.
KEY INFORMATION
|
A.
|
Selected Financial
Data
|
The following tables present our selected
consolidated financial information. You should read this information together with the consolidated financial statements and related
notes and information under “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual
report. The historical results are not necessarily indicative of results to be expected in any future periods.
The following selected consolidated statement
of comprehensive loss data for the years ended December 31, 2014, 2015 and 2016 and the following selected consolidated balance
sheet data as of December 31, 2015 and 2016 have been derived from our audited consolidated financial statements included
elsewhere in this annual report. The following selected consolidated statement of comprehensive loss data for the years ended December 31,
2012 and 2013 and the following selected balance sheet data as of December 31, 2012, 2013 and 2014 have been derived from
our audited consolidated financial statements not included in this annual report.
Our consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. All ADS data have
been retroactively adjusted to reflect the current ADS-to-ordinary share ratio for all periods presented.
|
|
Yingli Green Energy
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
(In thousands, except share, ADS, per share and per ADS data)
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Consolidated Statement of Comprehensive Loss Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
11,391,928
|
|
|
|
13,418,093
|
|
|
|
12,927,377
|
|
|
|
9,965,786
|
|
|
|
8,376,099
|
|
|
|
1,206,409
|
|
Gross profit (loss)
|
|
|
(368,801
|
)
|
|
|
1,458,854
|
|
|
|
2,238,245
|
|
|
|
1,187,330
|
|
|
|
1,151,873
|
|
|
|
165,904
|
|
Impairment of long-lived assets
|
|
|
(200,497
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,804,116
|
)
|
|
|
(1,277,373
|
)
|
|
|
(183,980
|
)
|
Provision for reserve for inventory purchase commitments
|
|
|
—
|
|
|
|
(393,048
|
)
|
|
|
—
|
|
|
|
(77,705
|
)
|
|
|
(90,300
|
)
|
|
|
(13,006
|
)
|
Provision for prepayment in relation to inventory purchase commitments
|
|
|
—
|
|
|
|
(87,134
|
)
|
|
|
—
|
|
|
|
(522,050
|
)
|
|
|
(10,672
|
)
|
|
|
(1,537
|
)
|
Disposal gain from long-lived assets and land use right in relation to a subsidiary and write off of related receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,167,317
|
|
|
|
(143,016
|
)
|
|
|
(20,599
|
)
|
Loss from operations (1)
|
|
|
(2,523,316
|
)
|
|
|
(1,118,382
|
)
|
|
|
(215,194
|
)
|
|
|
(4,228,025
|
)
|
|
|
(1,684,865
|
)
|
|
|
(242,672
|
)
|
Interest expense
|
|
|
(897,124
|
)
|
|
|
(971,597
|
)
|
|
|
(1,015,871
|
)
|
|
|
(977,176
|
)
|
|
|
(663,217
|
)
|
|
|
(95,523
|
)
|
Foreign currency exchange (losses)gain
|
|
|
(78,599
|
)
|
|
|
(32,230
|
)
|
|
|
(243,386
|
)
|
|
|
(132,709
|
)
|
|
|
6,000
|
|
|
|
864
|
|
Income tax benefit (expense)
|
|
|
205,742
|
|
|
|
(31,025
|
)
|
|
|
(89,723
|
)
|
|
|
(731,191
|
)
|
|
|
(12,895
|
)
|
|
|
(1,857
|
)
|
Net loss
|
|
|
(3,191,887
|
)
|
|
|
(2,054,898
|
)
|
|
|
(1,401,335
|
)
|
|
|
(5,898,836
|
)
|
|
|
(2,118,969
|
)
|
|
|
(305,195
|
)
|
Loss attributable to the non-controlling interests
|
|
|
(127,475
|
)
|
|
|
(110,473
|
)
|
|
|
(101,526
|
)
|
|
|
(298,310
|
)
|
|
|
(21,315
|
)
|
|
|
(3,070
|
)
|
Net loss attributable to Yingli Green Energy (1)(3)
|
|
|
(3,064,412
|
)
|
|
|
(1,944,425
|
)
|
|
|
(1,299,809
|
)
|
|
|
(5,600,526
|
)
|
|
|
(2,097,654
|
)
|
|
|
(302,125
|
)
|
Basic and diluted loss per ADS (2)(3)
|
|
|
(195.90
|
)
|
|
|
(124.15
|
)
|
|
|
(74.87
|
)
|
|
|
(308.12
|
)
|
|
|
(115.41
|
)
|
|
|
(16.62
|
)
|
Basic and diluted loss per ordinary share (3)
|
|
|
(19.59
|
)
|
|
|
(12.41
|
)
|
|
|
(7.49
|
)
|
|
|
(30.81
|
)
|
|
|
(11.54
|
)
|
|
|
(1.66
|
)
|
Weighted average ordinary shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
156,425,307
|
|
|
|
156,619,791
|
|
|
|
173,613,085
|
|
|
|
181,763,770
|
|
|
|
181,763,770
|
|
|
|
181,763,770
|
|
Diluted
|
|
|
156,425,307
|
|
|
|
156,619,791
|
|
|
|
173,613,085
|
|
|
|
181,763,770
|
|
|
|
181,763,770
|
|
|
|
181,763,770
|
|
|
|
Yingli Green Energy
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
(In percentages)
|
|
Other Consolidated Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) margin(4)
|
|
|
(3.2
|
)%
|
|
|
10.9
|
%
|
|
|
17.3
|
%
|
|
|
11.9
|
%
|
|
|
13.8
|
%
|
Operating loss margin(4)
|
|
|
(22.2
|
)%
|
|
|
(8.3
|
)%
|
|
|
(1.7
|
)%
|
|
|
(42.4
|
)%
|
|
|
(20.1
|
)%
|
Net loss margin(4)
|
|
|
(26.9
|
)%
|
|
|
(14.5
|
)%
|
|
|
(10.1
|
)%
|
|
|
(56.2
|
)%
|
|
|
(25.0
|
)%
|
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
(In thousands)
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
2,084,865
|
|
|
|
1,105,478
|
|
|
|
1,069,054
|
|
|
|
1,240,749
|
|
|
|
506,642
|
|
|
|
72,972
|
|
Accounts receivable, net
|
|
|
3,634,151
|
|
|
|
4,223,730
|
|
|
|
4,069,027
|
|
|
|
2,475,386
|
|
|
|
2,096,583
|
|
|
|
301,971
|
|
Inventories
|
|
|
2,523,550
|
|
|
|
2,164,902
|
|
|
|
2,099,082
|
|
|
|
1,484,314
|
|
|
|
1,314,834
|
|
|
|
189,375
|
|
Prepayments to suppliers
|
|
|
239,912
|
|
|
|
640,597
|
|
|
|
926,165
|
|
|
|
426,718
|
|
|
|
475,347
|
|
|
|
68,465
|
|
Accounts due from and prepayments to related parties
|
|
|
694,578
|
|
|
|
651,951
|
|
|
|
634,112
|
|
|
|
1,110,746
|
|
|
|
1,331,558
|
|
|
|
191,784
|
|
Total current assets
|
|
|
11,112,874
|
|
|
|
11,356,528
|
|
|
|
11,324,297
|
|
|
|
8,403,382
|
|
|
|
6,629,713
|
|
|
|
954,877
|
|
Long-term prepayments to suppliers
|
|
|
1,280,131
|
|
|
|
884,562
|
|
|
|
721,651
|
|
|
|
555,520
|
|
|
|
343,591
|
|
|
|
49,487
|
|
Land, property, plant and equipment, net
|
|
|
13,218,200
|
|
|
|
13,128,479
|
|
|
|
12,110,794
|
|
|
|
6,846,482
|
|
|
|
4,879,086
|
|
|
|
702,735
|
|
Project assets
|
|
|
63,291
|
|
|
|
355,643
|
|
|
|
1,369,662
|
|
|
|
720,286
|
|
|
|
672,045
|
|
|
|
96,795
|
|
Total assets
|
|
|
27,153,586
|
|
|
|
27,449,544
|
|
|
|
27,108,450
|
|
|
|
17,640,282
|
|
|
|
13,499,814
|
|
|
|
1,944,378
|
|
Short-term borrowings, including medium-term notes past due, and current portion of medium-term notes and long-term debt (5)
|
|
|
7,526,015
|
|
|
|
6,715,877
|
|
|
|
10,112,055
|
|
|
|
9,124,183
|
|
|
|
9,010,205
|
|
|
|
1,297,739
|
|
Total current liabilities
|
|
|
12,940,969
|
|
|
|
14,302,552
|
|
|
|
18,076,726
|
|
|
|
15,660,717
|
|
|
|
14,101,289
|
|
|
|
2,031,007
|
|
Long-term debt, excluding current portion
|
|
|
4,076,456
|
|
|
|
4,108,283
|
|
|
|
2,858,153
|
|
|
|
2,405,898
|
|
|
|
2,523,621
|
|
|
|
363,477
|
|
Reserve for inventory purchase commitments
|
|
|
851,694
|
|
|
|
1,100,661
|
|
|
|
1,231,701
|
|
|
|
1,322,448
|
|
|
|
1,412,748
|
|
|
|
203,478
|
|
Total liabilities
|
|
|
22,936,815
|
|
|
|
25,322,479
|
|
|
|
25,806,769
|
|
|
|
22,352,433
|
|
|
|
20,692,013
|
|
|
|
2,980,270
|
|
Shareholders’ equity: ordinary shares
|
|
|
12,241
|
|
|
|
12,252
|
|
|
|
13,791
|
|
|
|
13,791
|
|
|
|
13,791
|
|
|
|
1,986
|
|
Non-controlling interests
|
|
|
1,846,905
|
|
|
|
1,619,045
|
|
|
|
1,519,045
|
|
|
|
1,227,533
|
|
|
|
1,156,178
|
|
|
|
166,524
|
|
Total shareholders’ equity/(deficit)
|
|
|
4,216,771
|
|
|
|
2,127,065
|
|
|
|
1,301,681
|
|
|
|
(4,712,151
|
)
|
|
|
(7,192,199
|
)
|
|
|
(1,035,892
|
)
|
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Consolidated Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PV modules shipment (in megawatts)(6)
|
|
|
2,297.1
|
|
|
|
3,234.3
|
|
|
|
3,361.3
|
|
|
|
2,447.0
|
|
|
|
2,170.4
|
|
|
(1)
|
Subsequent
to furnishing the Form 6-K on April 13, 2017 related to the earnings release which included our financial information for
the fourth quarter and full year ended December 31, 2016, in consideration of the uncertainties involved in the appeals
process described below, our management reevaluated its earlier assessment of certain litigation originally filed against us
by a supplier in September 2015 and related court judgments issued at the end of December 2016 of which our company was
notified in
January 2017 and which we appealed, and concluded that our company should recognize a provision of RMB59 million (US$8.5
million) in respect of such litigation in the year ended December 31, 2016. The recognition of this provision impacted our
general and administrative expenses, total operating expenses, loss from operations, net loss, net loss attributable to
Yingli Green Energy, earnings per share and earnings per ADS in our results of operations for the year ended December 31,
2016. For more information, see “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry — We are
exposed to various risks related to legal or administrative proceedings or claims that could adversely affect our financial
condition, results of operations and reputation, and may cause losses to our business.” and “(25) Commitments
and
Contingencies” in the financial statements included elsewhere in this annual report.
|
|
(2)
|
One (1) ADS represents ten (10) ordinary shares.
|
|
(3)
|
The (increase)/decrease in net loss attributable to Yingli
Green Energy and (increase)/decrease in basic and diluted loss per share without the tax holidays for the years ended December 31,
2012, 2013, 2014; and the (increase)/decrease in net loss attributable to Yingli Green Energy and (increase)/decrease in basic
and diluted loss per share without the tax holidays and preference rates for the years ended December 31, 2015 and 2016 are as
follows:
|
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Yingli Green Energy
|
|
|
—
|
|
|
|
(15,030
|
)
|
|
|
(12,483
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Basic loss per share
|
|
|
—
|
|
|
|
(0.10
|
)
|
|
|
(0.07
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted loss per share
|
|
|
—
|
|
|
|
(0.10
|
)
|
|
|
(0.07
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(4)
|
Gross profit (loss) margin, operating loss margin and net
loss margin represent gross profit (loss), loss from operations and net loss attributable to Yingli Green Energy, respectively,
divided by net revenues.
|
|
(5)
|
Includes loans guaranteed or entrusted by related parties,
which amounted to RMB3,448.5 million, RMB3,602.9 million, RMB4,671.5 million, RMB3,871.2 million and RMB4,338.3 million (US$624.8
million), as of December 31, 2012, 2013, 2014, 2015 and 2016, respectively.
|
|
(6)
|
PV modules shipment for a given period represents the total
PV modules, as measured in megawatts, delivered during such period, including shipments for PV systems used for our own downstream
power plants in China.
|
Exchange Rate Information
Translations of Renminbi into U.S. dollars
in this annual report are based on the noon buying rate in The City of New York for cable transfers of Renminbi per U.S. dollar
as set forth in the H.10 weekly statistical release of the Federal Reserve Board. Unless otherwise noted, all translations from
Renminbi to U.S. dollars in this annual report were made at a rate of RMB6.9430 to US$1.00, the noon buying rate in effect as of
December 31, 2016. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted
into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government
imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign
exchange and through restrictions on foreign trade. On May 5, 2017, the noon buying rate as set forth in the H.10 weekly statistical
release of the Federal Reserve Board was RMB6.9021 to US$1.00.
The following table sets forth information
concerning exchange rates between RMB and U.S. dollar for the periods indicated.
|
|
Noon Buying Rate(1)
|
|
Period
|
|
Period End
|
|
|
Average(2)
|
|
|
High
|
|
|
Low
|
|
|
|
(RMB per US$1.00)
|
|
2012
|
|
|
6.2301
|
|
|
|
6.3093
|
|
|
|
6.2221
|
|
|
|
6.3879
|
|
2013
|
|
|
6.0537
|
|
|
|
6.1478
|
|
|
|
6.0537
|
|
|
|
6.2438
|
|
2014
|
|
|
6.2046
|
|
|
|
6.1620
|
|
|
|
6.0402
|
|
|
|
6.2591
|
|
2015
|
|
|
6.4778
|
|
|
|
6.2827
|
|
|
|
6.1870
|
|
|
|
6.4896
|
|
2016
|
|
|
6.9430
|
|
|
|
6.6400
|
|
|
|
6.4480
|
|
|
|
6.9580
|
|
October
|
|
|
6.7735
|
|
|
|
6.7303
|
|
|
|
6.6685
|
|
|
|
6.7819
|
|
November
|
|
|
6.8837
|
|
|
|
6.8402
|
|
|
|
6.7534
|
|
|
|
6.9195
|
|
December
|
|
|
6.9430
|
|
|
|
6.9198
|
|
|
|
6.8771
|
|
|
|
6.9580
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
6.8768
|
|
|
|
6.8907
|
|
|
|
6.8360
|
|
|
|
6.9575
|
|
February
|
|
|
6.8665
|
|
|
|
6.8694
|
|
|
|
6.8517
|
|
|
|
6.8821
|
|
March
|
|
|
6.8832
|
|
|
|
6.8940
|
|
|
|
6.8687
|
|
|
|
6.9132
|
|
April
|
|
|
6.8900
|
|
|
|
6.8876
|
|
|
|
6.8778
|
|
|
|
6.8988
|
|
May (through May 5, 2017)
|
|
|
6.9021
|
|
|
|
6.8959
|
|
|
|
6.8900
|
|
|
|
6.9021
|
|
(1) Source: H.10
weekly statistical release of the Federal Reserve Board.
(2) Annual averages
are calculated by averaging exchange rate on the last business day of each month or the elapsed portion thereof during the relevant
period. Monthly averages are calculated using the average of the daily rates during the relevant period.
|
B.
|
Capitalization and
Indebtedness
|
Not Applicable.
|
C.
|
Reasons for the Offer
and Use of Proceeds
|
Not Applicable.
Risks Related to Us and the PV Industry
Adverse economic conditions in our target markets as well
as an increased supply of PV modules have had and may continue to have a material adverse effect on our profitability and results
of operations.
Demand for our products substantially depends
on general economic conditions in our target markets. The economies of many countries around the world, including those in our
target markets, experienced a period of slow economic growth and adverse credit market conditions as a result of the global financial
crisis in 2008 and 2009 and the subsequent sovereign debt crisis in Europe. As PV projects generally require significant upfront
capital expenditures, our customers historically have relied on financing for the purchase of our products. As a result of weakened
macroeconomic conditions and in particular adverse credit market conditions, our customers experienced difficulty in obtaining
financing on attractive terms or at all. As a result, growth rate of demand for PV modules has declined significantly since the
fourth quarter of 2008. Although credit market conditions have improved since the second quarter of 2009, which contributed to
an increase in demand for our products, demand for our products slowed again in the first and fourth quarters of 2011, the third
quarter of 2012, the first quarter of 2013, the first quarter of 2014, the first quarter of 2015 and the third quarter of 2016.
This slowed demand was primarily caused by seasonal factors, including challenging weather conditions and holidays, as well as
the adjustments to subsidies and economic incentives for PV installations as part of government austerity measures in many countries.
However, since the middle of 2015, due to our tight operating cash flow, we had to reduce the utilization rate of our production
facilities, which negatively affected our ability to meet market demands in certain quarters of 2015 and 2016. In addition, overall
supply of PV modules has increased due to production capacity expansion by PV module manufacturers worldwide in recent years which,
together with slower growth in demand for PV modules and increasingly severe market competition, resulted in lower prices for PV
modules beginning in the fourth quarter of 2008. The decrease in the average selling price of our PV modules caused our gross profit
margin to decrease significantly from 16.7% for 2011 to negative 3.2% for 2012. While we achieved gross profit of 10.9% for 2013,
17.3% for 2014, 11.9% for 2015, and 13.8% for 2016, we continued to incur operating and net losses in 2013, 2014, 2015, and 2016.
There can be no assurance that the demand for our products will increase or remain at the current level or such demand will not
decline again in the near future, or our cost saving efforts will improve our profitability or prevent our profit margin from declining
further. While the average selling price of our PV modules has continuously decreased since the second quarter of 2013, it further
decreased significantly in 2015 and late 2016 and there can be no assurance that we will not experience further decreases in the
average selling price of our PV modules in the future or further declines in demand for our products, which may materially and
adversely affect our financial condition and results of operations.
There is substantial doubt as to our ability to continue
as a going concern.
In the past we have relied primarily on
borrowings from commercial banks to fund a significant portion of our capital expenditures and working capital needs, and we expect
to continue doing so in the future. Substantial doubt exists as to our ability to continue as a going concern. We have incurred
significant net losses in recent years. For the years ended December 31, 2014, 2015, and 2016, our net loss was RMB1.4 billion,
RMB5.9 billion, and RMB2.1 billion (US$305.2 million), respectively. As of December 31, 2016, we had a total deficit attributable
to Yingli Green Energy of RMB15.4 billion (US$2.2 billion) and a deficit in working capital of RMB7.5 billion (US$1.1 billion).
As of December 31, 2016, we had cash, cash equivalents and restricted cash of RMB0.9 billion (US$125.1 million) and short-term
borrowings, including the current portion of medium-term notes, medium-term notes past due described below and long-term debt,
of RMB9.0 billion (US$1.3 billion). The medium-term notes were issued by our major manufacturing subsidiaries, Baoding Tianwei
Yingli New Energy Resources Co., Ltd., or Tianwei Yingli, and Yingli Energy (China) Company Ltd., or Yingli China. On May 3, 2017,
we paid RMB300 million of the RMB-denominated five-year medium-term notes, or MTNs, issued by Yingli China in 2012 (the “2012
MTNs”) with full principal and accrued interest totaling RMB318 million when they matured. As such, Yingli China has discharged
all of its payment obligations under the 2012 MTNs. As of the date of this annual report, we have medium-term notes of RMB1,757
million past due, including (i) RMB357 million of the RMB-denominated unsecured five-year medium-term notes issued by Tianwei Yingli
in 2010 (the “2010 MTNs”), which became due on October 13, 2015, and (ii) RMB1.4 billion of the RMB-denominated unsecured
five-year medium-term notes issued by Tianwei Yingli in 2011 (the “2011 MTNs”), which became due on May 12, 2016. Our
company recently met with holders of the remaining portion of the 2010 MTNs and 2011 MTNs, and we are considering our options with
respect to the debt repayment issues faced by our company's principal subsidiaries. Our company is continuing its negotiations
with holders of the remaining portion of the 2010 MTNs and 2011 MTNs. See Item 5.B. “Liquidity and Capital Resources—Liquidity
and Going Concern”. We cannot assure you, however, that these negotiations will result in any agreement with holders of the
2010 MTNs or 2011 MTNs, and we cannot assure you that holders of the 2010 MTNs and 2011 MTNs will not demand Tianwei Yingli to
repay these notes, which are already due, or take other actions against Tianwei Yingli in the future. As Tianwei Yingli is one
of our major operating subsidiaries, its substantial indebtedness that already has become due and its noteholders’ rights
to enforce such debts, as well as our other substantial indebtedness and our net losses, may materially and adversely affect our
business, financial condition and results of operations, as well as our ability to meet our payment obligations.
Our ability to continue as a going concern
is dependent upon our continued operations, which in turn is dependent upon our ability to meet our financial requirements, raise
additional capital, and the success of our future operations, which in turn, are subject to various risks discussed herein including,
among others, risks relating to economic conditions in our target markets as well as the supply and prices of PV modules in the
market, our ability to reach agreements with our creditors to extend the repayment dates of our debts or renew such debts as necessary
until we have the financial resources for their repayment, our ability to obtain additional capital or other funding to repay our
debts, our ability to restructure some of our existing debts if needed, the ability of guarantors of our debt to maintain their
financial condition, and our ability to comply with all covenants of our loan agreements or to obtain waivers if needed. The audited
consolidated financial statements included in this annual report on Form 20-F were prepared on the basis of our continuing as a
going concern. Facts and circumstances including recurring losses, negative working capital, net cash outflows, and uncertainties
as to the repayment of debts raise substantial doubt about our ability to continue as a going concern. Likewise, the report of
our independent registered public accounting firm includes a qualification that there is substantial doubt about our ability to
continue as a going concern. The audited financial statements do not include any adjustments that might result from the outcome
of these uncertainties. If we become unable to continue as a going concern, we may have to liquidate our assets, and the value
we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our audited consolidated
financial statements. Our lack of cash resources and our potential inability to continue as a going concern may materially and
adversely affect the price of our ADSs and our ability to raise new capital or to continue our operations.
We require a significant amount of cash to fund our operations
as well as meet our debt repayment obligations. If we cannot obtain additional financing and liquidity, our business, financial
condition and results of operation will be materially and adversely affected. Certain financing activities may also dilute your
equity interests in us and cause other material adverse effects on our financial condition and results of operations.
We require a significant amount of cash
to fund our operations. Since the middle of 2015, due to our tight operating cash flow, we had to reduce the utilization rate of
our production facilities, which caused substantial decrease in our PV module shipments (excluding PV module shipments to our company's
own downstream PV projects in China) from 3,101 MW in 2014 to 2,382 MW in 2015 and 2,117MW in 2016, and contributed to the substantial
decrease in our net revenues from RMB12.9 billion in 2014 to RMB10.0 billion in 2015 and RMB8.4 billion in 2016. This in turn had
a material adverse effect on our gross profit, which decreased from RMB2.24 billion in 2014 to RMB1.19 billion in 2015 and RMB1.15
billion in 2016. We also recorded an impairment loss of approximately RMB3.8 billion in 2015 and RMB1.3 billion in 2016 respectively,
for property, plant and equipment with respect to the production facilities based on the difference between carrying value and
fair value of such long-lived assets, which had a material adverse effect on our results of operations. Our ability to increase
or maintain the utilization rate of our production capacity, net revenues and gross profits and prevent any further impairment
loss for our production facilities will depend to a significant degree on our ability to obtain sufficient amount of additional
cash and liquidity to fund our operations. We also require a significant amount of cash to meet our debt repayment obligations.
See “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry — There is substantial doubt as to our
ability to continue as a going concern”.
Our ability to obtain additional financing
and liquidity in the future is subject to various uncertainties, including (i) our ability to improve our financial condition,
results of operations and cash flows, (ii) our ability to reach agreements with our existing creditors that would allow us
more time to repay our existing debts, (iii) our ability to identify additional suitable long-lived assets for disposition and
dispose of such assets at optimal prices, (iv) our ability to secure strategic investors in Yingli Green Energy or our subsidiaries,
(v) general market conditions for financing activities by manufacturers of PV and related products, and (vi) economic, political
and other conditions in China and elsewhere. As a result of weakened macroeconomic conditions including adverse credit market conditions
and our weakened financial position in recent years, we have experienced and may continue to experience increased difficulty in
obtaining financing on acceptable terms or at all. We cannot assure you that financing will be available in amounts or on terms
that are acceptable to us, or at all. If we are unable to obtain sufficient financing in a timely manner or on commercially acceptable
terms or at all, our business, financial condition and results of operations will be materially and adversely affected.
Furthermore, the issuance or sale of additional
equity or equity-linked securities by Yingli Green Energy may result in substantial dilution to our shareholders, and the issuance
or sale of additional equity or equity-linked securities by our subsidiaries may result in us losing control over such subsidiaries
and ceasing to consolidate such subsidiaries in our financial statements, which will have a material adverse effect on our financial
condition and results of operation. The incurrence of indebtedness by Yingli Green Energy or our subsidiaries has resulted and
may continue to result in increased fixed obligations, and has led and could continue to lead to the imposition of financial or
other restrictive covenants that would restrict our operations.
Our substantial indebtedness has had and may continue
to have material adverse effect on our business, financial condition and results of operations, as well as our ability to meet
our payment obligations under our debt instruments.
We have relied primarily on borrowings
from commercial banks in China to fund a significant portion of our capital expenditures and working capital needs, and we expect
to continue doing so in the future. We have a significant amount of debts and debt service requirements. As of December 31,
2016, we had RMB9,010.2 million (US$1,297.7 million) in outstanding short-term borrowings (including the current portion of long-term
debt, RMB357 million of the 2010 MTNs that became due on October 13, 2015 and RMB1.4 billion of the 2011 MTNs that became due on
May 12, 2016, RMB300.0 million of the 2012 MTNs that became due on May 3, 2017), and RMB2,523.6 million (US$363.5 million) in outstanding
long-term debt (excluding the current portion). This level of debt has had and may continue to have material adverse effect on
our business, financial condition and results of operations, including:
|
·
|
making it more difficult
for us to meet our payment and other obligations in respect of our outstanding and future debts;
|
|
·
|
resulting in an event of default if we fail to make principle or interest payment when due or comply with any of the financial and other restrictive covenants specified by our debt agreements, which could result in cross-defaults in other debt obligations which would lead to such other debt becoming immediately due and payable;
|
|
·
|
reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes as a result of interest payments, and limiting our ability to obtain additional financing for these purposes;
|
|
·
|
limiting our ability to obtain additional financing;
|
|
·
|
subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates;
|
|
·
|
limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and
|
|
·
|
placing us at a competitive disadvantage compared to our competitors that have less debt or are otherwise less leveraged.
|
Any of these factors could have a material
adverse effect on our business, financial condition and results of operations as well as our ability to meet our payment obligations
under our debt instruments.
We have significant amount of short-term loans from commercial
banks in China outstanding, and we may not be able to renew our short-term loans when they mature.
As of December 31, 2016, we had outstanding
short-term loans from commercial banks in China of RMB9,010.2 million (US$1,297.7 million). Generally, these loans contain no specific
renewal terms, although traditionally we have negotiated renewing certain of these loans shortly before they were to mature. However,
we cannot assure you that we will be able to renew similar loans in the future as they mature. If we are unable to renew any future
loans or obtain sufficient funding from alternative sources and on reasonable terms, we will have to repay these borrowings with
cash generated by our future operations, if any, or other sources, which could cause our liquidity and financial condition to deteriorate.
Tianwei Yingli is currently in payment default of the
2010 MTNs and 2011 MTNs, and we have breached in the past, and may breach in the future, certain financial and restrictive covenants
of our loan agreements, which may result in lenders accelerating repayment of the affected loans and trigger cross-default provisions
of other loans and borrowings, and we used to be overdue, and are still overdue, in some of our payment obligations under other
financing arrangements, all of which could materially and adversely affect our liquidity and our creditworthiness to borrow or
obtain other financings in the future.
Tianwei Yingli failed to repay RMB357 million
of the 2010 MTNs when they became due on October 13, 2015 and failed to repay RMB1.4 billion of the 2011 MTNs when they became
due on May 12, 2016. As such, Tianwei Yingli is currently in payment default of the 2010 MTNs and 2011 MTNs.
Our loan
agreements with commercial banks in China generally contain financial covenants, which require us to maintain certain financial
ratios, such as debt-to-asset ratios and coverage ratios. Other restrictive covenants in our loan agreements require us to obtain
written consents from the commercial banks before we conclude certain transactions, such as providing guarantees to third parties,
disposing of material assets or changing our shareholding structure. These covenants could limit the ability of us or our subsidiaries
to
undertake additional debt or secure additional equity financing. For example, a maximum
debt-to-asset ratio requirement imposed on us or any of our subsidiaries will limit the total amount of liabilities that may be
incurred by us or such subsidiary, and if we or such subsidiary’s total liabilities have reached or exceeded such limit,
we or such subsidiary will be restricted from incurring additional liabilities unless we or such subsidiary obtain a waiver from
the lender or increase our assets through issuance of additional equity. On the other hand, we or our subsidiaries may need to
obtain consent from our lenders before we can issue any additional equity. As such, we may not be able to obtain financings necessary
for us to react to market conditions or to meet our capital needs in a timely manner and we may have to curtail some of our operations
and growth plans to comply with these covenants. In addition, we have incurred and may continue to incur significant losses and
liabilities, which have had and may continue to adversely impact our ability to comply with the covenants of our outstanding loans.
Such breach may constitute an event of default, and if the relevant lenders do not grant us a waiver for any breach of a covenant,
the breach may trigger an acceleration of the amounts due under the relevant loan agreements. Some of our loan agreements also
contain cross-default provisions enabling lenders under such loan agreements to declare an event of default and/or accelerate repayment
when there is an event of default under the terms of another debt instrument. If a covenant under another loan is breached, these
cross-default provisions may be triggered if a waiver of the breach cannot be obtained in a timely manner.
We had been in breach of certain financial
covenants, such as debt-to-asset ratios, under certain of our loan agreements with commercial banks in China, which would have
triggered cross-default provisions of most of other relevant loan agreements. As of May 16 2017, we have obtained written waivers
from all of the relevant banks with respect to the loan agreements affected, waiving such past breaches and/or cross-defaults.
While we have been in compliance with the financial covenants under all of our other loan agreements, our continued compliance
depends upon our future business, financial condition and results of operations. We may not be able to continue to comply with
such financial covenants in the future. In the event of a future breach, we may not be able to cure the breach or to obtain a
waiver on a timely basis or at all, which could result in an event of default. An event of default under any agreement governing
our existing or future debt, if not cured by us or otherwise waived by our creditors, could result in an acceleration of the repayment
of all or a portion of the outstanding loan amount.
In addition, we have obtained financing
through other arrangements, such as failed sale and lease back of certain machinery and equipment and financing in the form of
sale and repurchase of certain equity interest in its subsidiary, in substance, they are financing in nature and recorded as liabilities.
We have failed to fulfill our payment obligations under some of these arrangements in the past. As of December 31, 2016, we had
RMB100 million of payment obligation overdue under our agreement with a third party for sale and repurchase of 5.50% equity interest
of Hainan Yingli and recorded the RMB100 million of payment obligation overdue as “Payables to non-controlling interest holders”
in the Consolidated Balance Sheet. While we are still in negotiation with the third party about the extension of our payment schedule
under the relevant agreements, we cannot assure you that the negotiation will lead to results satisfactory to us or the third
party will not take any action against us to enforce our payment obligation. We may not be able to enter into similar arrangements
to obtain additional financing in the future either.
If we were required to repay all or a significant
portion of the past due 2010 MTNs or 2011 MTNs or our loans from commercial banks, we would not have sufficient financial resources
to do so, which would materially and adversely affect our liquidity position. Moreover, our failure to repay the 2010 MTNs and
2011 MTNs and any failure to comply with restrictive covenants in existing loan agreements or fulfill our obligations under other
financing arrangements will materially and adversely affect our ability to obtain bank loans and other financing in the future
and could have a material and adverse effect on our financial condition and business prospects.
The high cost or inaccessibility of financing for solar
energy projects has adversely affected and may continue to adversely affect demand for our products and materially reduce our revenue
and profits.
If financing for solar energy projects
continues to become more costly or inaccessible, the growth of the market for solar energy applications may be materially and adversely
affected which could adversely affect demand for our products and materially reduce our revenue and profits. The demand for our
products, as reflected by the average selling price of our PV modules, has decreased significantly since the fourth quarter of
2008, due partly to tightened credit for financing PV system projects as the result of the global financial crisis in 2008 and
2009 and the subsequent sovereign debt crisis in Europe. In addition, rising interest rates could render existing financings more
expensive, as well as hinder potential financings that otherwise would spur the growth of the PV industry. Furthermore, some countries,
government agencies and the private sector have, from time to time, provided subsidies or financing on preferred terms for rural
electrification programs. Some of our products are used in “off-grid” solar energy applications, where solar energy
is provided to end users independent of an electricity transmission grid. We believe that the availability of financing could have
a significant effect on sales of off-grid solar energy applications, particularly in developing countries where users otherwise
may not have sufficient resources or credit to acquire PV systems. If these existing financing programs are reduced or eliminated,
or if financing for solar energy projects continues to be in short supply or become more expensive, demand for our products would
be materially and adversely affected and our revenue and profits could decline as a result.
A significant reduction in or discontinuation of government
subsidies and economic incentives may have a material and adverse effect on our results of operations.
Demand for our products substantially depends
on government incentives aimed at promoting greater use of solar power. In many countries where we are currently active or intend
to become active, PV markets generally — and the market for “on-grid” PV systems in particular — would
not be viable commercially without government incentives. This is because the costs of generating electricity from solar power
currently exceed the costs of generating electricity from conventional or non-solar sources of renewable energy.
The scope of government incentives for
solar power depends largely on political and policy developments in a given country related to environmental, economic or other
concerns, which could lead to a significant reduction in or a discontinuation of the support for renewable energy sources in such
country. For example, subsidies have been reduced or eliminated in some countries such as Germany, Italy, Spain, the United Kingdom,
China, and Japan. In June 2012, the German government passed the PV amendment to its renewable energy law (EEG) 2012, which
changed the 52 gigawatts capacity threshold, reduced the available PV rate, revised the volume-based degression schedule, and limited
the amount of electricity that PV generators can export to the grid. On July 5, 2013, the Italian government discontinued
feed-in tariff payments, and feed-in tariffs for new solar PV projects have not been available since July 2013. In August 2013,
the National Development and Reform Commission, or the NDRC, of China adjusted feed-in tariffs for utility scale PV projects from
the nationwide benchmark price of RMB1.00 per kWh to three regional variations of RMB0.90 per kWh, RMB0.95 per kWh and RMB1.00
per kWh, based on solar resources and construction costs in the relevant regions. The feed-in tariff (FIT) policy applied to all
PV plants approved after September 1, 2013, and those approved before that date but not commissioned until on or after January
1, 2014. In December 2015, the NDRC issued a statement that the FIT would be further reduced by RMB0.02 to RMB0.10 per kWh for
on-grid utility scale PV projects in 2016. On December 26, 2016, NDRC announced on its website the solar power tariff revisions
for 2017 as follows: (i) in 2017, for solar power plants in resource zones I, II and III, the FIT shall be lowered from the 2016
rates of RMB0.80 per kWh, RMB0.88 per kWh and RMB0.98 per kWh, respectively, to RMB0.65 per kWh, RMB0.75 per kWh and RMB0.85 per
kWh, respectively, representing decreases of 19%, 15% and 13%, respectively; (ii) the subsidy for distributed solar power plants
shall remain unchanged at RMB0.42 per kWh; (iii) for solar power projects registered prior to 2017 and eligible for fiscal subsidies,
the 2016 FIT rates shall remain applicable if they are connected to the grid and in operation by June 30, 2017; and (iv) future
solar power tariffs will be revised annually in accordance with cost changes. In March 2015, Japan’s Ministry of Economy,
Trade and Industry (METI) announced the new FIT scheme for the fiscal year 2015. Under the scheme, since April 2015, Japan’s
FIT level has decreased from JPY32 ($0.27) per kWh in 2014 to JPY29 ($0.24) per kWh, and further to JPY27 ($0.22) per kWh since
July 1, 2015. In March 2016, METI furtherly reduced the country’s FIT by 11% for fiscal year 2016. In March 2017, METI also
announced a new FIT scheme to gradually reduce the country’s FIT rate in fiscal year 2017, 2018 and 2019. In addition, in
certain countries, including countries to which we export PV products, government financial support of PV products has been, and
may continue to be, challenged as being unconstitutional or otherwise unlawful. A significant reduction in the scope or discontinuation
of government incentive programs, especially in our target markets, would have a material and adverse effect on the demand for
our PV modules as well as our results of operations.
We face risks associated with the marketing and sale of
our PV products internationally, and if we are unable to effectively manage these risks, our ability to expand our business abroad
will be limited.
In 2014, 2015, and 2016, 64.8%, 59.1%,
and 41.1% respectively, of our total net revenues derived from our sales to customers outside of China, including customers in
Japan, the United States, Europe, South Africa, Turkey, South Asia, Australia, Latin Americas and Middle East, etc. The marketing
and sale of our PV products to international markets expose us to a number of risks, including, but not limited, to:
|
·
|
fluctuations in foreign currency
exchange rates;
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increased costs associated with maintaining the ability to understand local markets and follow their trends, as well as develop and maintain effective marketing and distributing presences across various countries;
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the availability of advance payments made by our customers;
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difficulty in providing customer service and support in these markets;
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difficulty in staffing and managing overseas operations;
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failure to develop appropriate risk management and internal control structures tailored to overseas operations;
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difficulty and costs relating to compliance with different commercial and legal requirements of overseas markets;
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failure to obtain or maintain certifications for our products or services in these markets;
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inability to obtain, maintain or enforce intellectual property rights;
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unanticipated changes in prevailing economic conditions and regulatory requirements; and
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trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses.
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Our business in foreign markets requires
us to respond timely and effectively to rapid changes in market conditions in relevant countries. Our overall success as a global
business depends, in part, on our ability to succeed under different legal, regulatory, economic, social and political conditions.
We may not be able to develop and implement policies and strategies that will be effective in each location where we do business.
To the extent that we conduct business in foreign countries by means of participations or joint ventures, there are additional
risks. See “— We may undertake acquisitions, investments, joint ventures or other strategic alliances, which may have
a material adverse effect on our ability to manage our business, and such undertakings may be unsuccessful”. A change in
one or more of the factors described above may have a material and adverse effect on our business, prospects, financial condition
and results of operations.
We are subject to risks relating to adverse trade policies
imposed against exports from China in certain important markets for our products.
Although our sales to markets in Europe
have significantly declined due to continuous reductions in incentives in the European market and the disturbance of trade measures
initiated by the European Commission against Chinese solar companies, we still export a small number of our products to Europe.
In 2016, our sales to Europe accounted for 2.6% of our total revenue, compared to19.0% in 2014, and 14.5% in 2015.
On September 5 and November 8,
2012, respectively, the European Commission initiated anti-dumping and anti-subsidy investigations into crystalline silicon photovoltaic,
or CSPV, wafers, cells, and modules from China. On June 4, 2013, the European Commission issued its provisional anti-dumping determination
and on August 2, 2013, the European Commission accepted an undertaking, or the Undertaking, made by a group of Chinese PV
products exporters (including us) jointly with the China Chamber of Commerce for Import and Export of Machinery and Electronic
Products, or CCCME. Pursuant to the Undertaking, certain Chinese exporters would limit their exports of solar panels to the EU
to a certain quota and set prices above a minimum price, in exchange for the EU agreeing to forgo the imposition of anti-dumping
duties on these solar panels from China. CCCME was responsible for allocating the quota among these exporters, and we were allocated
a portion of the quota. On December 5, 2013, the Council of the European Union adopted the final findings of the European Commission
and imposed anti-dumping and anti-subsidy duties on CSPV modules and key components (i.e. cells) originating in or consigned from
the PRC. Wafers were excluded from the scope of products subject to these final findings. The anti-dumping duty rates ranged from
27.3% to 64.9%, while the anti-subsidy duty rates ranged from 0% to 11.5%. The anti-dumping duty and anti-subsidy duty rates applicable
to us are 35.5% and 6.3%, respectively. The definitive duties are being imposed for a two-year period starting from December 6,
2013. At the same time, the Council of the European Union also confirmed the European Commission’s acceptance of the Undertaking.
In December 2015, the EU Commission initiated an expiry review of the anti-dumping measure and the EU Commission has initiated
ex officio a partial interim review as to whether the maintenance of the anti-dumping measure is in the Union’s interest.
In March 2017, as the result of these reviews, the EU Commission determined and proposed that the anti-dumping measure shall be
maintained and extended for 18 months.
While we were exempted from paying any
anti-dumping and anti-subsidy duties to the EU starting from August 6, 2013, increased sale prices and reduced consumption
in the European market under the Undertaking may bring significant uncertainties to our business in the European market. For example,
increased price for our modules sold in EU has made returns for some ground-mounted solar projects of our customers less attractive
and demand in large-utility projects have declined in Europe compared with the period before the effectiveness of the Undertaking.
We also face competitions from modules manufactured in third countries at a lower price than ours. In addition, if we breach or
withdraw from the Undertaking, or the European Commission withdraws its acceptance of the Undertaking, the anti-dumping and anti-subsidy
duties previously applicable to us would automatically apply to us at the prior rates. Thus, there can be no assurance that our
entry into and performance of the Undertaking will entirely protect our business in Europe and results of operations from and against
any and all potential material and adverse effects of anti-dumping and anti-subsidy duties.
On November 7, 2012, the U.S. International
Trade Commission, or the ITC, determined that CSPV modules produced from Chinese cells are materially injuring the U.S. CSPV cells
and modules industry. The U.S. Department of Commerce, or the DOC, issued its final determinations on the rates of the anti-dumping,
or AD, and countervailing duties, or CVD, on October 10, 2012, which became effective upon issuance of the final anti-dumping
and countervailing duties orders in early December 2012. As a result of such final determinations, we, as a voluntary respondent,
are subject to an average aggregated AD/CVD rate of 29.18%. However, this average aggregated AD/CVD rate might be subject to change
due to the administrative review process initiated by DOC in early 2014. We were mandatory respondent in the first administrative
review of the anti-dumping duty order and obtained an anti-dumping rate of 0.79% in the final determination in July 2015. As one
of the non-mandatory respondents in the first administrative review of the countervailing duty order, we obtained a countervailing
duty rate of 20.94% in July 2015. In February 2015, the DOC initiated the second administrative review of the AD/CVD duty order.
We are a mandatory respondent in the second administrative review of the anti-dumping duty order and obtained an anti-dumping duty
of 12.19% in the final determination in June 2016. We were not part of the second administrative review of the countervailing duty
order and therefore the final result of the second administrative review of the countervailing duty order is inapplicable to us.
On February 3, 2016, the DOC initiated the
third administrative review of the anti-dumping duty order (“Solar 1ADAR3”) covering the period of December 1, 2014
to November 30, 2015 and the third administrative review of the countervailing duty order (“Solar 1 CVD AR3”) covering
the period of January1, 2014 to December 31, 2014 of CSPC whether or not assembled into modules (certain solar cells and panels)
from the PRC. Subject merchandise includes CSPV, modules or panels, whether or not partially or fully assembled into other products,
including, but not limited to modules, laminates, and building integrated materials. On December 22, 2016, the DOC published
its preliminary determination of the AD review and the dumping margins for the entities covered by this review are from 7.72% to
238.95%. As a separate rate company in this review, the AD margin applicable to us is 13.97%. On January 9, 2017, the DOC published
its preliminary determination of the CVD review and the countervailable subsidy rates for the entities covered by this review are
from 12.48% to 20.98%. Since the final results of this review are the basis for the assessment of anti-dumping duties on period
of review, or POR, entries and for future deposits of estimated anti-dumping duties, upon issuance of the final results of this
review, the DOC will determine, and Customs and Border Protection, or CBP, CBP shall assess anti-dumping duties on all appropriate
entries covered by this review. The DOC will likely issue the final determination for this review in July 2017. For CVD review,
both Yingli and Solar World withdrew the CVD review requests within 90 days of the date of publication of the notice of initiation,
and therefore, we are no longer subject to CVD review and the entries of subject merchandise into the United States during the
CVD AR3 review period are to be liquidated at the CVD rates applicable at the time of entry and CBP will collect cash deposits
of estimated CVDs at the most recent CVD countervailable rate applicable to us (20.94%).
On February 13, 2017, the DOC initiated
the fourth administrative review of the anti-dumping duty order (“Solar 1 AD AR4”) covering the period of December
1, 2015 to November 30, 2016 and the third administrative review of anti-dumping duty order (“Solar 1 CVD AR4”) covering
the period of January1, 2015 to December 31, 2015 of CSPC whether or not assembled into modules (certain solar cells and panels)
from the PRC. On the same day, we, as a listed party, were required by the DOC to file an anti-dumping Quantity & Value, or
Q&V, questionnaire, and the response to which would be the basis for the DOC to select mandatory respondents. We have filed
the anti-dumping Q&V and provided all documents required by the DOC. The mandatory respondent selection result for this AD
administrative review and CVD administrative review has not been issued.
On January 23, 2014, the DOC initiated
a parallel AD investigation into CSPV products from Mainland China and Taiwan and CVD investigation into CSPV products from Mainland
China. The products concerned are CSPV cells, and modules, laminates and/or panels consisting of CSPV cells, whether or not partially
or fully assembled into other products, including building integrated materials. Subject merchandise also includes modules, laminates
and/or panels assembled in Mainland China and Taiwan consisting of CSPV cells that are completed or partially manufactured within
a customs territory other than Mainland China and Taiwan, using ingots, wafers that are manufactured in Mainland China and Taiwan,
or cells where the manufacturing process begins in Mainland China and Taiwan and is completed in other countries (hereinafter “Solar
II”). On December 23, 2014, the DOC published its confirmative final determination on these investigations by imposing
punitive AD tariffs ranging from 26.71% to 165.04% and CVD tariffs ranging from 27.64% to 49.21%. As a separate rate company in
these investigations, the AD and CVD tariffs applicable to our company will be 52.31% and 38.43%, respectively. On February 10,
2015, the ITC issued its final injury determinations by confirming injury to the U.S. CSPV module industry by Chinese CSPV module
manufacturers. As a result of these determinations of the DOC and ITC, Chinese modules integrating cells from third countries will
be subject to the new AD and CVD tariffs when exported to the US. Although we have very limited sales of modules to the U.S. incorporating
third country cells, such determinations may adversely affect our business flexibility in the U.S. market and our business in the
U.S. may be materially and adversely impacted.
In April 2016, the DOC initiated the first
administrative review for the anti-dumping measure and countervailing measure for Solar II for certain Chinese exporters. In February
2017, the DOC issued a preliminary determination as to its first administrative review of the AD and CVD measures. The preliminary
result for the Chinese exporters included in the first administrative review of the anti-dumping measure was 14.70%, and the preliminary
result for the Chinese exporters included in the first administrative review of the countervailing measure was 13.93%. Our company
was not included in either the AD or CVD first administrative review and therefore the result of such reviews will not affect the
rates applicable to our company.
In February 2017, the U.S. petitioner requested
a second administrative review for the anti-dumping measure and countervailing measure for Solar II for certain Chinese exporters,
including our company. The DOC has not yet initiated such administrative reviews.
On November 23, 2012, the Department of Commerce
of the Government of India initiated its anti-dumping investigations concerning into imports of photovoltaic products originating
in or exported from Malaysia, China, Taiwan and the United States. Both crystalline silicon and thin-film products are were under
investigation. Relevant investigatory authorities in India issued recommended tariffs ranging from US$0.11/watt to US$0.81/watt.
However, since these recommendations were not supported by India’s ministry of finance, the punitive tariffs were not levied
against Chinese modules exported into the Indian market.
On May 14, 2014, the Anti-dumping
Commission of Australian Customs and Border Protection Services, or the Anti-dumping Commission, initiated an anti-dumping investigation
into certain PV modules or panels exported to Australia from China. Subject merchandise includes certain crystalline silicon PV
modules or panels, whether exported assembled or unassembled, and whether or not they have an inverter capable of producing any
power. On April 6, 2015, the Anti-dumping Commission determined that the injury caused by Chinese solar-panels exports to
the Australian industry is negligible. Although this finding is preliminary and subject to change upon evaluation of submissions
by interested parties, the Anti-dumping Commission will terminate this investigation if no meaningful submissions are made by interested
parties.
On July 1, 2016, Turkey’s Ministry
of Economy initiated an anti-dumpling investigation on imports of crystalline silicon PV modules from China. The final result was
announced on April 1, 2017. Turkey’s Ministry of Economy decided to impose anti-dumping tariffs on solar panel (PV module)
products exported from China for a period of five years. The tariff rates applicable to Chinese exporters of solar panel range
from US$20 per square meter to US$25 per square meter.
There can be no assurance that any governmental
or international trade body in the future will not institute trade policies or remedies that are adverse to exports from China.
Any significant changes in international trade policies, practices or trade remedies, especially those instituted in our target
markets or markets where our major customers are located, could potentially increase the price of our products relative to our
competitors or decrease our customers’ demand for our products, which in turn may materially and adversely affect our business
prospects and results of operations.
Our polysilicon costs may be higher than those of other
market players due to our long-term commitment to purchase polysilicon at fixed prices, and we have failed to perform certain of
our obligations under these long-term polysilicon supply contracts according to their original terms.
In response to the industry-wide shortage
of polysilicon in recent years until the third quarter of 2008, we had entered into short-, medium- and long-term supply contracts
with fixed or adjustable prices guided by set formulas to secure our supply of polysilicon. We also paid a significant amount of
prepayments to secure these contracts. Since the fourth quarter of 2008, the price of polysilicon has decreased significantly as
a result of increased industry-wide polysilicon manufacturing capacity and downward price pressure exerted by decreasing average
selling prices of PV modules. To address this significant decrease in polysilicon prices, we have renegotiated, and are still negotiating,
with our polysilicon suppliers to reduce purchase prices for a substantial amount of polysilicon supplied under certain of our
polysilicon supply contracts. We periodically reassess the purchase commitments under those supply contracts to make sure if additional
provision should be recognized.
As of December 31, 2013, we recognized
total liability for loss on inventory purchase commitments of RMB1,244,743 relating to long-term fixed price polysilicon contracts
with one supplier (“Supplier A”). The assessment is made by applying a methodology similar to that used in the lower
of cost or market evaluation with respect to inventory. The provision was determined by using management’s best estimates
of future purchase prices over the remaining terms of the contracts and applying such estimated purchase prices in the lower of
cost or market evaluation. In estimating the anticipated renegotiated purchase prices, we considered the pertinent terms of each
of the long-term supply contracts, the history and progress of renegotiation with the relevant vendors and the actual price concessions
granted, the polysilicon market development based on available industry research data and the likelihood of achieving different
levels of renegotiated prices for future periods. In addition to the estimated renegotiated purchase price, certain other key assumptions
were used in measuring the loss accrual, which included but were not limited to (i) the estimated net realizable value of the PV
modules manufactured from the polysilicon expected to be purchased under the long-term supply contracts, and (ii) the normal profit
margin of the PV modules for purposes of estimating the replacement cost or market price under the lower of cost or market evaluation.
We also considered the quantities that were required to be purchased and amounts due on take or pay arrangements, as well as the
history and progress of renegotiation with the relevant vendors and the actual concessions granted in developing the amount of
the estimated loss contingencies. We did not recognize such a provision in 2012 and 2014. In 2013, we recognized additional provisions
of RMB393.0 million. In 2015 and 2016, we did not recognize additional contingency losses for inventory firm purchase commitment.
However, due to significant fluctuation in the foreign exchange rates between Renminbi and U.S. dollars and given that the inventory
purchase commitment is dominated in U.S. dollars, which is different from the functional currency of our related subsidiaries,
we recognized a foreign exchange re-measurement loss of RMB77.7 million and RMB90.3 million respectively
In 2013, except for the Supplier A mentioned
above, we achieved significant progress in the negotiations, and purchase prices under certain of our long-term polysilicon supply
contracts were close to the market price of polysilicon.
Our management has been negotiating with
our other suppliers on adjusting the prices under these long-term contracts. However, in 2013, 2015 and 2016, we failed to purchase
contractual volume as stated in the long-term contract with another supplier (“Supplier C”). Unlike the take or pay
obligation for the Supplier A mentioned above, under the agreement with the Supplier C mentioned above, if we fail to take the
full amount of the agreed annual quantity in any calendar year, we are not required to pay for the remaining annual commitment,
but rather only forfeit the unutilized portion of the prepayment we made related to that year. Further, we don’t have the
right to utilize this prepayment for deliveries in the following years. This supplier claimed that certain advance payments had
been forfeited according to the contractual terms. In 2013, 2015 and 2016, we recognized provisions of RMB87.1 million, RMB71.3
million and RMB10.7 million, respectively, against the forfeited advance payments. We also recognized a provision of RMB450.8 million
in 2015 on the prepayment in relation to our inventory purchase commitments under the long-term contract with this supplier for
the remaining contract period as we estimated that we will also fail to purchase contractual volume as stated in the long-term
contract in the remaining contract period in the future. We didn’t record such provisions in 2016. Should the results of
these ongoing negotiations differ from the assessment based on which we recognized such provisions in 2013, 2015, and 2016, these
provisions would need to be adjusted accordingly to reflect such a new assessment. If the prices under our current contracts remain
higher than prices for polysilicon available in the market, we may incur higher polysilicon costs relative to other competitors
who purchase their polysilicon from the spot market.
We have not fully performed our long-term
polysilicon supply contracts on their original terms due to continuously declining market prices of polysilicon. We have successfully
renegotiated pricing terms with some of our long-term polysilicon suppliers. Although we received various requests from some of
our other suppliers to perform such contracts in accordance with their original terms, and notices of breach of contract, as of
the date of this annual report, two of these long-term polysilicon suppliers have agreed to supply us with polysilicon at prices
comparable to spot market prices under tentative arrangements and on a monthly or quarterly basis. Although we continue to negotiate
with these suppliers on amending the original pricing and supply terms under these contracts, our negotiation efforts may not be
successful and these suppliers may require us to perform our obligations pursuant to the contracts’ original terms and conditions.
For example, two of these suppliers have sent us invoices or demand letters for failing to perform certain obligations under these
long-term supply contracts. Currently, we are still in discussion with the supplier to find an amicable solution to resolve the
issues under the long-term supply contracts. In addition, certain suppliers may bring lawsuits against us for damages they may
have suffered from our failure to perform these contracts. If we are required to perform these long-term supply contracts according
to their original pricing terms, or are ordered to pay substantial amounts of damages to these suppliers, our business, financial
condition and results of operations may be materially and adversely affected.
Our dependence on a limited number of suppliers for a
substantial majority of our polysilicon could prevent us from delivering our products in a timely manner to our customers in the
required quantities, which could result in cancellations of orders, decreased revenue and loss of market share.
In 2014, 2015 and 2016, our five largest
suppliers in the aggregate supplied approximately 80.3%, 90.9%, and 83.1% of our total polysilicon purchases. In 2016, we purchased
the majority of our polysilicon from two vendors with which we have entered into long-term polysilicon supply contracts at prices
adjusted on a monthly or quarterly basis. If we fail to develop or maintain our relationships with these or our other suppliers,
we may not be able to manufacture our products, our products may only be available at a higher cost or after a long delay, or we
could be prevented from delivering our products to our customers in the required quantities, at competitive prices and on acceptable
terms of delivery. Problems of this kind could cause us to experience cancellations of our orders, decreased revenue and loss of
our market share. In general, the failure of a supplier to supply materials and components that meet our quality, quantity and
cost requirements in a timely manner due to lack of supplies or other reasons could impair our ability to manufacture our products
or could increase our costs, particularly if we are unable to obtain these materials and components from alternative sources in
a timely manner or on commercially reasonable terms. Some of our suppliers have a limited operating history and limited financial
resources, and some contracts which we have entered into with these suppliers do not clearly provide for remedies to us in the
event any of these suppliers is not able to, or otherwise does not, deliver to us, in a timely manner or at all, any materials
that it is contractually obligated to deliver. We expect to continue to rely on third-party polysilicon suppliers for our polysilicon
needs. Accordingly, any disruption in their supplies of polysilicon to us may adversely affect our business, financial condition
and results of operations.
Historically, due to a shortage of raw
materials for producing PV modules, increased market demand for polysilicon raw materials, the failure by some polysilicon suppliers
to achieve expected production volumes and certain other factors, a few of our polysilicon suppliers failed to perform fully their
commitments to us under our polysilicon supply contracts, and consequently we did not receive from these suppliers a portion of
the quantities of polysilicon raw materials that had been agreed upon in those contracts. While we were able to replace such expected
deliveries of polysilicon through purchases from the spot market and new supply contracts, we cannot assure you that any future
failure of our suppliers to deliver agreed quantities of polysilicon will be substantially replaced in a timely manner, or at all,
or that the prices of such purchases or the terms of such contracts will be favorable to us.
Our failure to obtain polysilicon in sufficient quantities,
of appropriate quality and in a timely manner, could disrupt our operations and reduce and limit the growth of our manufacturing
output and revenue.
Polysilicon is the most important raw material
used in the production of our PV products. To maintain competitive manufacturing operations, we depend on our suppliers’
timely deliveries of polysilicon in sufficient quantities and of appropriate quality. Until the third quarter of 2008, there had
been an industry-wide shortage of polysilicon. As a result, historically we faced the prospects of a polysilicon shortage and late
or failed delivery of polysilicon from suppliers. In the future we may experience actual shortages, or late or failed deliveries,
of polysilicon for various reasons. Our failure to obtain the amounts and quality of polysilicon we need, on time and at affordable
prices, could seriously hamper our ability to meet our contractual obligations to deliver PV products to our customers. Any failure
by us to meet such obligations could have a material and adverse effect on our reputation, retention of customers, market share,
business and results of operations, and may subject us to claims from our customers and cause other disputes. In addition, our
failure to obtain sufficient amounts of polysilicon of the appropriate quality could result in underutilization of our existing
and new production facilities, an increase in our marginal production costs, and may prevent us from implementing future capacity
expansion plans, if any. Any of the above events could have a material and adverse effect on our business, financial condition
and results of operations.
Volatility in polysilicon prices may materially and adversely
affect our results of operations.
Until the third quarter of 2008, there
had been an industry-wide shortage of polysilicon, primarily due to growing demand for PV products and limited supply of polysilicon,
which resulted in increasing prices of polysilicon under both long-term supply contracts and on the spot market. From the fourth
quarter of 2008 until the second quarter of 2009, as a result of increased industry-wide polysilicon manufacturing capacity and
a decrease in demand for polysilicon due to the global financial crisis in 2008 and 2009, polysilicon prices decreased significantly.
Although polysilicon prices rebounded between the third quarter of 2010 and the first quarter of 2011 due in part to stronger demand
for PV products in certain markets, polysilicon prices again decreased significantly since the second quarter of 2011 as a result
of increased polysilicon manufacturing capacity and downward price pressure exerted by lower average selling prices for PV modules.
In 2012, polysilicon prices continued to decline and reached approximately US$14 per kilogram in November 2012. Since June
2013, polysilicon prices began to increase and reached approximately US$22 per kilogram until the first half of 2014. From the
second half of 2014, polysilicon price began to decrease significantly and the spot market price fluctuated under US$20 per kilogram
as of the date of this annual report with a historically low level close to US$12 per kilogram at the end of 2016.
In 2012, the Ministry of Commerce of the
People’s Republic of China, or MOFCOM, initiated anti-dumping and anti-subsidy investigations into imports of solar-grade
polysilicon originating from the United States, South Korea and the European Union. On January 20, 2014, MOFCOM issued its final
determination to impose anti-dumping and anti-subsidy duties for five years on imports of solar-grade polysilicon originating from
the United States and South Korea at aggregated rates ranging from 2.4% to 59.1%. On January 24, 2014, MOFCOM issued a preliminary
ruling that imports of solar-grade polysilicon originating from the European Union had been subsidized at a rate of 10.7% and were
sold at dumping price margins from 21.8% to 68.9%. On March 20, 2014, MOFCOM announced that it had accepted an undertaking
proposal submitted by Wacker Chemie AG, an EU-based supplier of solar-grade polysilicon. According to Wacker, this undertaking
agreement was effective from May 1, 2014 until the end of April 2016. The undertaking agreement specifies that MOFCOM will
refrain from applying anti-dumping and anti-subsidy duties on Wacker’s products in exchange for Wacker’s undertaking
that it will not sell polysilicon produced at its European plants below a specific minimum price in China. On April 29, 2016, Wacker
stated that the undertaking agreement will remain effective while MOFCOM conducts a one-year review of EU polysilicon import duties.
MOFCOM will complete the review by April 30, 2017, and while the review is underway, the duties will remain. Polysilicon is one
of the major raw materials we need for the production of wafers, which also affects the production of PV cells and modules. A large
portion of the polysilicon we use is sourced from countries that are subject to the investigations mentioned above. Therefore,
any such anti-dumping or anti-subsidy duties (whether provisional or final) imposed by MOFCOM may increase our cost to produce
solar modules. Due in part to China’s anti-dumping and anti-subsidy investigations into polysilicon manufacturers from the
United States, the European Union and South Korea, together with an overall increase in demand, polysilicon prices have increased
since June 2013 and reached approximately US$22 per kilogram until the first half of 2014. From the second half of 2014, polysilicon
price began to decrease significantly and the spot market price fluctuated under US$20 per kilogram as of the date of this annual
report with a historically low level close to US$12 per kilogram at the end of 2016. There can be no assurance that polysilicon
prices in the future will not increase significantly. To the extent that we are not able to pass on any increased costs to our
customers, we may be placed at a competitive disadvantage relative to our competitors, and our business, cash flows, financial
condition and results of operations may be materially and adversely affected.
We depend, and expect to continue to depend, on a limited
number of customers for a significant percentage of our revenues. The loss of, or a significant reduction in orders from, any of
these customers would significantly reduce our revenues and harm our results of operations. In addition, a significant portion
of our outstanding accounts receivable is derived from sales to a limited number of customers. Failure of any of these customers
to meet their payment obligations would materially and adversely affect our financial position, liquidity and results of operations.
We currently expect that our results of
operations will, for the foreseeable future, continue to depend on sales of our PV modules to a relatively small number of customers
until we become successful in significantly expanding our customer base or diversifying our product offerings. In 2014, 2015, and
2016, sales to our five largest customers accounted for approximately 13.9%, 19.4%, and 10.7% of our net revenues respectively.
We cannot assure you that we will continue to generate significant revenues from these customers or that we will be able to maintain
these customer relationships. In addition, our business and continued sales depend on the ability of our major customers to compete
effectively and sell their products in the market. Any decline in our customers’ businesses could reduce their purchases
of our products. The loss of any sales in respect of these customers also could have a material and adverse effect on our business,
prospects and results of operations.
In addition, a significant portion of our
outstanding accounts receivable derive from sales to a limited number of customers. As of December 31, 2014, 2015, and 2016, our
five largest accounts receivable balances outstanding (net of provisions) accounted for approximately 27.2%, 27.6%, and 16.3% respectively,
of our total outstanding accounts receivable. We are exposed to the credit risks of these customers, some of which are new customers
with whom we have not historically had extensive business dealings. Any failure by these customers to meet their payment obligations
to us would materially and adversely affect our financial position, liquidity and results of operations.
As a measure to reduce our operating cash requirements
in 2015 and 2016, we have contracted with third parties to allow them operate more than half of our polysilicon ingot and wafer
production facilities and we agree to purchase wafers so produced from the third parties. If these third parties breach their contracts
with us or terminate their business relationships with us, our business, results of operations and financial condition may be materially
and adversely impacted.
As a measure to reduce our operating cash
requirements in 2015 and 2016, we have contracted with third parties to allow them operate more than half of our polysilicon ingot
and wafer production facilities. These third parties pay us a monthly fee to operate these production facilities, pay the salaries
of our staff members employed and utility expenses incurred at such facilities, produce fixed volumes of polysilicon ingots and
wafers on a monthly basis, and cover all other manner of operating, ancillary, and raw material expenses of such production. As
part of the arrangement, we agree to purchase all or part of the wafers so produced by said third parties based on our needs at
designated prices, subject to certain adjustments under the relevant agreements.
As these third parties would provide all
the working capital required for production of the polysilicon ingots and wafers, these arrangements effectively help us finance
our production value chain, reduce our working capital requirements, and increase the utilization of our polysilicon ingot and
wafer production facilities. Our agreements with these third parties typically have a term of one year. In 2016 and in the first
quarter of 2017, no party has breached or early terminated the agreements. For agreements that have expired, we have renewed some
of the agreements and signed agreements with new third parties to replace those agreements which were not renewed. We cannot assure
you that we will be able to renew these agreements when they expire or that these third parties will not breach or early terminate
the agreements. If any of these third parties breaches the agreement or elects to terminate their business relationships with us,
we may need to resume production at these facilities with our own working capital, which will significantly increase our working
capital requirements, or if we do not resume production at these facilities, the utilization rates of these production facilities
may decrease. Consequently, we may not have sufficient working capital to continue in-house production of polysilicon ingots and
wafers at these facilities, and we may need to recognize impairment losses on our fixed assets, including factories and equipment
in such facilities. Without sufficient volumes of self-produced polysilicon wafers, we may be forced to buy wafers from third parties
at expensive prices and with insufficient control over such wafers’ quality, and our unit costs for cells and PV modules
could thereby increase, or else we may be forced to reduce our production volumes of cells and PV modules. The occurrence of any
of these issues could materially and adversely affect our business, results of operations and financial condition.
We process cells and PV modules as
an Original Equipment Manufacturer (OEM) and are thereby subject to risks associated with product liability and supply. These risks
and any product liability claims may adversely impact our reputation, results of operations, financial performance and business.
Since the middle of
2015, we have experienced lower-than-expected utilization of our production capacity, which in turn has led to an increase in our
unit manufacturing cost and to decreases in our in-house PV module shipments and total net revenues. To increase the utilization
of our production capacity, we have entered into several agreements, or the OEM agreements, with third parties, or OEM customers,
to process cells and PV modules as an Original Equipment Manufacturer (OEM). In 2015 and 2016, we generated RMB389.5 million and
RMB308.4 million, or 3.9% and 3.7% respectively of our total revenue, from our cells and PV module processing services.
These OEM agreements
involve risks that we may: (i) have economic or business interests or goals that are inconsistent with those of our OEM customers;
(ii) be unable to fulfill our obligations to such customers under the OEM agreements, including obligations to meet their production
deadlines, quality standards and product specifications; (iii) have unexpected financial or operational difficulties; (iv) encounter
shortages of or significant increases in the price for polysilicon, the key raw material used in our production process, that may
impact and impair our operating margins; and (v) be unable to recover payments from our OEM customers on accounts receivable under
the OEM agreements on a timely basis, if at all. The occurrence of any of these issues could materially adversely affect our results
of operations and financial performance.
In addition, if we
experience significant fluctuations in demand from our OEM customers, there can be no assurance that we will be able to meet their
requirements in the event increased orders for cells and PV modules, or that we will be able to find new and replacement customers
in the event such orders decrease. Furthermore, we may need to deliver cells and PV modules to our OEM customers by third-party
carriers over long distances. Delays in the shipment or delivery of our cells and PV modules due to transportation shortages, work
stoppages, port strikes, infrastructure congestion or other factors could adversely impact our financial performance. Manufacturing
delays or unexpected demand for our products may require us to use faster, but more expensive, transportation methods such as aircraft,
which could adversely affect our operating margins and profitability.
Although we have quality
assurance procedures and programs in place that are intended to identify and address any problems related to the quality of our
products, including cells and PV modules, we may not have effective or sufficient control over the quality of these products so
as to avoid any claim or liability for products processed and delivered under the OEM agreements. We do not maintain product liability
insurance for the products processed and sold by us to our OEM customers. As such, any loss we suffer or compensation which we
are otherwise required to pay in the event of a material product liability claim will be directly borne by us at our own expense.
Accordingly, any successful product liability claim brought against us may materially and adversely affect our business and financial
results. In addition, we may incur significant resources and time to defend ourselves if legal proceedings are brought against
us. If any such claims are made, our reputation, results of operations, financial performance and business may be materially and
adversely affected.
We face intense competition in the PV modules and PV system
markets. Our PV products compete with different types of solar power systems, as well as with other sources of renewable energy
in the alternative energy market. We cannot guarantee that we will continue to compete effectively in the markets in which we operate.
Our failure to adapt to changing market conditions and to compete successfully with existing or future competitors would have a
material and adverse effect on our business, prospects and results of operations.
The PV market is intensely competitive
and rapidly evolving. The number of PV product manufacturers has rapidly increased due to growth in actual and forecasted demand
for PV products and relatively low barriers to entry. If we fail to attract and retain customers in our target markets for our
current and future core products, namely PV modules and PV systems, we will not be able to increase our revenues and market share.
We compete with both local and international
producers of solar products, including PV module manufacturers such as SunPower Corporation, thin film solar module manufacturers
such as First Solar, Inc. and integrated PV product manufacturers such as SolarWorld AG, Renewable Energy Corporation and
Trina Solar Limited. Unlike other companies based overseas, our company is located in China, where PV remains a policy-driven market.
The introduction, modification or phasing-out of national support schemes will heavily impact the development of the PV market
and related industries, and also could significantly influence our company’s operations. Furthermore, the entire PV industry
also faces competition from providers of energy from conventional and non-solar renewable sources.
Many of our existing and potential competitors
may have substantially greater financial, technical, manufacturing and other resources than we do. Some of our competitors also
have better brand name recognition, more established distribution networks, larger bases of customers, or more in-depth knowledge
of certain important and target markets. As a result, they may be able to devote greater resources to the research, development,
promotion and sale of their products and respond more quickly than we can to evolving industry standards and changes in market
conditions. Our failure to adapt to changing market conditions and to compete successfully with existing or future competitors
would have a material and adverse effect on our business, prospects and results of operations.
We may not be able to establish a successful solar project
development and operations business on a large scale and on a timely basis, or at all.
Since 2012, we have engaged in the solar
project development and operations business on a small scale in China and planned on leveraging our experiences with PV system
installation to build up rapidly our capacity to develop and operate solar projects. As of September 2015, we had engaged the construction
of approximately 600 megawatts of PV projects in China and connected approximately 200 megawatts of said projects to the grid.
However, the operation of large ground-mounted
PV stations over the long term requires significant capital. With due consideration of China’s nationwide delay in allocating
subsidies as well as our cash flow challenges, we decided to suspend new downstream development business in China from September
2015 until we regain a healthier financial position. Accordingly, we continued to accelerate the disposition of our downstream
PV projects in China in order to liquidate these assets and generate more working capital from our downstream business. In 2016,
we continued selling PV projects in various stages of development. If appropriate market conditions arise in the future, we may
consider resuming the development of new PV projects in China and may operate the PV projects that we develop.
The solar project business involves a high
degree of risk and uncertainty. We do not have a long track record of, or substantial prior experience with, solar project development
and operations. Our expansion into this business area is faced with significant challenges.
Developing and operating solar projects
requires significant upfront investments in land use rights and power grid connection rights, preliminary engineering, permitting,
legal and other expenses before we can determine whether a project is feasible from an economic, technological or other perspective.
There generally are many months or even years between the time when significant initial upfront investments are made in solar projects,
and the time when those projects begin to generate revenue. Such delays between upfront investments and generating revenue may
adversely affect our cash flow, our other businesses and our overall results of operations. In addition, we will need to rely on
long-term financing, including equity and debt financing, to fund this solar projects business. We may not be able to obtain necessary
financing in sufficient amounts, on favorable terms or in a timely manner, if at all.
Solar projects require certain conditions
of sunlight and solar energy that can only be found in a limited number of geographic regions. We may not be able to identify suitable
sites in a timely manner or at all. Even if we do identify suitable sites, our ability to obtain requisite land use rights in respect
of a site is subject to growing competition from other solar power producers that may have better access to local government support,
financial or other resources. If we are unable to identify suitable sites or obtain land use rights for such sites, our ability
to develop new solar projects on a timely basis, if at all, will be significantly and adversely affected.
Solar projects often are awarded through
competitive bidding processes. It is difficult to predict whether and when we will be awarded a new solar project. These bidding
and selection processes generally are affected by a number of factors, including factors beyond our control, such as market conditions
or government incentive programs. Any increase in competition during the bidding process could have a material and adverse effect
on our ability to secure solar projects and to satisfy the financial terms and conditions of those projects.
In addition to risks and uncertainties
generally applicable to all other project development and operation businesses, we face many risks and uncertainties specific to
solar projects that relate to our abilities to, among other things, negotiate satisfactory engineering, procurement and construction
agreements; obtain required land use rights and construction permits and approvals; obtain rights to connect the project to the
power grid or to transmit the electricity which it generates; pay grid connection and other deposits, some of which are non-refundable;
make arrangements to finance the purchase of electricity generated by our project; purchase and install appropriate equipment in
a timely manner and on favorable terms; implement and complete the construction in a timely manner; handle potential challenges
from project stakeholders, such as local residents, environmental organizations, and others who may not support the project; and
address unforeseen engineering problems.
The development and operation of solar
projects also may be adversely affected by many other factors outside of our control, such as inclement weather, acts of God, and
delays in regulatory approvals or in third parties’ delivery of equipment or other materials. Shortages of skilled labor
also could significantly delay a project or otherwise increase our costs. Changes in project plans or defective execution of those
plans may increase our costs and reduce our margins. The solar project business also may significantly divert our resources and
the attention of our management, which may affect the performance of our other business segments.
If we fail to address the above risks and
uncertainties, our ability to establish a large-scale solar project development and operation business in a timely manner will
be harmed, and our financial condition, results of operations and growth prospects may be materially and adversely affected.
Existing regulations and policies governing the electric
utility industry, as well as changes to these regulations and policies, may adversely affect demand for our products and materially
reduce our revenue and profits.
The electric utility industry is subject
to extensive regulation, and the market for PV products is heavily influenced by these regulations as well as the policies promulgated
relating to electric utilities. These regulations and policies often affect electricity pricing and technical connections of end-user
power generators to power grids. As the market for solar and other alternative, renewable energy sources continues to evolve, these
regulations and policies are subject to change and may continue to be modified. Customer purchases of, or further investment in
the research and development of, solar and other alternative energy sources may be significantly affected by these regulations
and policies, which potentially could significantly reduce demand for our products and materially reduce our revenue and profits.
Moreover, we expect that our PV products
and their installation will be subject to oversight and regulation in accordance with international, national and local ordinances
relating to building codes, safety, environmental protection, utility power grid connections and metering and related matters in
various countries and regions. We also have to comply with the requirements of individual localities, and design equipment to comply
with different standards applicable in the various jurisdictions where we conduct our business. Any new government regulations
or utility policies pertaining to our PV products may result in significant additional expenses to us, our distributors and our
end users. Accordingly, such new regulations or policies could cause a significant reduction in demand for our PV products, as
well as materially and adversely affect our financial condition and results of operations.
Advance payment arrangements between us and some of our
polysilicon suppliers and many of our equipment suppliers expose us to the credit risks of such suppliers and may increase our
costs and expenses, which has had and may continue to have a material adverse effect on our liquidity, financial condition and
results of operation.
We made advance payments to some of our
polysilicon suppliers under long-term supply contracts we signed with them. As of December 31, 2016, we had long-term prepayment
balances for polysilicon totaling RMB343.6 million (US$49.5 million) under such long-term contracts. We continue to renegotiate
with some of our polysilicon suppliers on the purchase price of a substantial amount of polysilicon to be supplied under certain
of these long-term contracts. See “—Our polysilicon costs may be higher than those of other market players due to our
long-term commitment to purchase polysilicon at fixed prices, and we have failed to perform certain of our obligations under these
long-term polysilicon supply contracts according to their original terms” above. If we fail to reach agreements with such
suppliers on the quantities and prices of polysilicon to be supplied under those contracts, the suppliers may hold the advance
payment and issue claims for further damages. As of December 31, 2016, total amount we prepaid to one supplier (“Supplier
A”) was RMB 239.3 million under the long-term fixed price supply contract entered into in 2011, which is effective from 2013
to 2020. Due to the anti-dumping duty and anti-subsidy investigation against Solar-Grade Polysilicon launched by the Ministry of
Commerce of the People’s Republic of China, we had not made any purchase from this supplier. We received invoices from this
supplier under our take-or-pay obligation for failing to take the shipments in 2013 to 2016. Currently, we are in negotiation with
this supplier to seek an acceptable solution to both parties. We believe that under the “take or pay” obligation, which
required us to pay full amount to this supplier according to the purchase and payment schedule listed in the agreements, regardless
of whether we actually purchase raw materials from the supplier or not, it is probable for us to continue performance of the agreements
when we could get an acceptable solution from this supplier. We also believe that it is reasonably assured that i) these prepayments
are not legally forfeited; ii) these prepayments could be utilized for deliveries once we start purchasing from this supplier.
Except for the supplier mentioned above, we also had made significant amount of prepayments to another supplier.
In
2013, 2015 and 2016, we failed to purchase contractual volume as stated in the long-term contract with the latter supplier mentioned
above under the supplier’s agreement. If we fail to take the full amount of the agreed annual quantity in any calendar
year, we do not have to pay for the remaining annual commitment, but rather only forfeits the unutilized portion of the prepayment
related to that year. This supplier claimed that certain advance payments had been forfeited according to the original terms in
2013, 2015 and 2016. (In 2014, we purchased the required amounts of polysilicon from this supplier and utilized the portion of
prepayments related to 2014). Therefore, in 2013, 2015 and 2016, we recognized incremental provisions of RMB87.1 million , RMB71.3
million, and RMB10.7 million, respectively, on the prepayment in relation to our inventory purchase commitments for those
years under the long-term contract with this supplier. We also recognized a provision of RMB450.8 million in 2015 on the prepayment
in relation to our inventory purchase commitments under the long-term contract with this supplier for the remaining contract period as
we estimated that we will also fail to purchase contractual volume as stated in the long-term contract in the remaining contract
period in the future. No such provision was recognized in 2016. As of December 31, 2016, carrying value of prepayments to
this supplier is RMB238.2 million. In addition, under existing contracts with many of our equipment suppliers, consistent with
industry practice, we make advance payments to our suppliers prior to the scheduled dates on which certain equipment will be delivered.
In many such cases, we make advance payments without receiving collateral for such payments. As a result, our claims in respect
of such payments would rank as unsecured claims, which in turn would expose us to the credit risks of our suppliers in the event
of their bankruptcy or insolvency. Under such circumstances, our claims against defaulting suppliers would rank below those of
secured creditors, which would undermine our chances of recovering advance payments for which we did not receive any value. Accordingly,
any of the above scenarios may have a material and adverse effect on our liquidity, financial condition and results of operations.
The growth of our business may require substantial capital
expenditures, significant engineering efforts, timely delivery of manufacturing equipment, dedicated attention of management, and
recruiting and training new employees. Our failure to complete our future expansion plans or otherwise effectively manage our growth
could have a material and adverse effect on the growth of our sales and earnings.
While we are currently facing challenges
relating to over-capacity, the growth of our success in the future may depend in part on our ability to expand our manufacturing
capacity to meet market demand for our products promptly and in a cost-efficient manner. If we are not able to do so, we will not
be able to attain the desired level of economies of scale in our operations or lower our marginal production costs to the level
necessary to maintain effectively our pricing and other competitive advantages. In 2015 and 2016, our total annual PV module shipments
were 2,447.0 megawatts and 2,170.4 megawatts respectively. Currently, we have annual manufacturing capacity of approximately 3,000
megawatts for ingots and wafers, 3,200 megawatts for PV cells and 4,000 megawatts for PV modules. Our growth has required and may
continue to require substantial capital expenditures, significant engineering efforts, timely delivery of manufacturing equipment,
dedicated attention of management and the recruitment and training of new employees. Our growth therefore is subject to significant
risks and uncertainties, including:
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we may need to continue to
contribute significant additional capital to our subsidiaries through the issuance of equity or debt securities or by entering
into new credit facilities or other arrangements in order to finance the costs of developing new manufacturing facilities, which
may not be conducted on reasonable terms or at all, and which could be dilutive to our existing shareholders; such capital contributions,
if contributed from outside the PRC, also require PRC regulatory approvals in order for such funds to be transferred to our subsidiaries
within the PRC, which approvals may not be granted in a timely manner, or at all;
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we will be required to obtain governmental approvals, permits or documents of a similar nature with respect to any new expansion projects, but it is uncertain whether such approvals, permits or documents will be obtained in a timely manner, or at all;
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we may experience cost overruns, construction delays, equipment problems, including delays in deliveries of manufacturing equipment or deliveries of equipment that is damaged or does not meet our specifications, and other operating difficulties;
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we are using, and expect to continue to use, new equipment and technology to lower our unit capital and operating costs, but we cannot assure you that such efforts will be successful; and
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we may not have sufficient management resources to properly oversee future expansion of our manufacturing capacity.
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Any of these or similar difficulties could
adversely affect our ability to manage the growth of our operations. Any significant delays or constraints to our future plans
to expand our manufacturing capacity, if any, could limit our ability to increase sales, reduce marginal manufacturing costs or
otherwise improve our prospects and profitability. In addition, we may have over-capacity as a result of expanding our future manufacturing
capacity if we do not sufficiently increase our sales.
We may undertake acquisitions, investments, joint ventures
or other strategic alliances, which may have a material and adverse effect on our ability to manage our business, and such undertakings
may be unsuccessful.
We may undertake acquisitions, participation
in joint ventures, and other strategic alliances with companies in China and overseas. Acquisitions, investments, joint ventures
and other strategic alliances may expose us to new operational, regulatory, market and geographical risks as well as risks associated
with additional capital requirements, including:
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our inability to integrate new businesses, operations, personnel, products, services and technologies;
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unforeseen or hidden liabilities, including exposure to administrative or legal proceedings associated with newly acquired companies;
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the diversion of resources from our existing businesses;
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disagreements with joint venture or strategic alliance partners;
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contravention of regulations governing cross-border investment;
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failure to comply with laws and regulations as well as industry or technical standards of the overseas markets into which we expand;
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our inability to generate revenues sufficient to offset the costs and expenses of acquisitions, strategic investments, joint venture formations or other strategic alliances;
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our inability to achieve the intended cost efficiency, level of profitability or other intended strategic goals for the acquisitions, strategic investments, joint ventures or other strategic alliances; and
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potential loss of, or harm to, employees or customer relationships.
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Any of these events could disrupt our ability
to manage our business, which in turn could have a material and adverse effect on our financial condition and results of operations.
Such risks also could result in our failure to generate the intended benefits of the acquisitions, strategic investments, joint
ventures or other strategic alliances and we may be unable to recover our investment in such initiatives.
We may not be able to resume our
in-house production of polysilicon as cost-effectively as we had expected, or at all.
In January 2009, we acquired Cyber
Power Group Limited, or Cyber Power, a development stage enterprise designed to produce polysilicon, and its principal operating
subsidiary in China, Fine Silicon Co., Ltd., or Fine Silicon, with an intention to establish our own polysilicon production
operations. Fine Silicon started trial production in late 2009 and was initially expected to reach its full production capacity
of 3,000 tons of polysilicon per year. However, as market prices for polysilicon have decreased sharply in recent years, Fine Silicon’s
designed production capacity was no longer cost-effective. Currently, Fine Silicon is not manufacturing any meaningful amount of
polysilicon. We recorded a non-cash impairment of the long-lived assets of Fine Silicon in amounts of RMB2,275.0 million and RMB200.5
million for 2011 and 2012, respectively, which in the aggregate was equivalent to our writing-down the total value of Fine Silicon’s
equipment. In April 2015, Fine Silicon also sold its land use rights to the land underlying its manufacturing facilities as
well as the attachments thereon to a government entity in Baoding. Although we still may resume the in-house production of polysilicon
through cooperation with third parties in order to utilize the remaining equipment of Fine Silicon, we do not have any concrete
plan yet and do not expect that such cooperation will happen in the near future. Even if such cooperation could happen in the future,
we cannot assure you that it will be successful, or that such cooperation could result in any meaningful in-house production of
polysilicon at costs comparable to or lower than prevailing market prices. If we fail to do so, we will not be able to realize
the expected positive effect on our results of operations, and the cost of our polysilicon supply will remain uncertain and vulnerable
to market fluctuations.
Ingot production is energy intensive and if our energy
costs rise or if our energy supplies are disrupted, our results of operations may be materially and adversely affected.
The ingot production process is highly
dependent on a constant supply of electricity to maintain the optimal conditions for production. If these levels are not maintained,
we may experience significant delays in the production of ingots. With the rapid development of the Chinese economy, demand for
electricity has continued to increase. There have been shortages in electricity supply in various regions across China, especially
during peak seasons such as summer. In the event that electricity and other energy supplies to our manufacturing facilities are
disrupted, our business, results of operations and financial condition could be materially and adversely affected. In addition
to shortages, we are vulnerable to potential interruptions in our energy supply due to equipment failure, weather events or other
causes. There can be no assurance that we will not face power-related problems in the future. Even if we had access to reliable
electricity sources, since our manufacturing processes consume substantial amounts of electricity, any significant increase in
the price we pay for electricity could adversely affect our profitability. If electricity and other energy costs were to increase,
our business, financial condition, results of operations or liquidity position could be materially and adversely affected.
If PV technology is not suitable for widespread adoption,
or sufficient demand for PV products does not develop or takes longer to develop than we anticipated, our sales may not continue
to increase or may even decline, and we may not be able to sustain profitability.
The PV market is in the relatively early
stages of its development and the extent to which PV products will be widely adopted is uncertain. The PV industry also may be
particularly susceptible to economic downturns. Market data for the PV industry are not as readily available as data in other more
established industries, where trends can be assessed more reliably from data gathered over a longer period of time. If PV technology
proves unsuitable for widespread adoption, or if demand for PV products fails to develop sufficiently, we may not be able to grow
our business or generate sufficient revenues to sustain our profitability. In addition, demand for PV products in our targeted
markets, including China, may not develop or may develop to a lesser extent than we had anticipated. Many factors may affect the
viability of widespread adoption of PV technology and demand for PV products, including (i) cost-effectiveness of PV products as
compared with conventional and other non-solar energy sources and products; (ii) performance and reliability of PV products
as compared with conventional and other non-solar energy sources and products; (iii) availability of government subsidies
and incentives to support the development of the PV industry; (iv) success of other alternative energy generation technologies,
such as fuel cells, wind power and biomass; (v) fluctuations in economic and market conditions that affect the viability of
conventional and non-solar alternative energy sources, such as increases or decreases in the prices of oil and other fossil fuels;
(vi) capital expenditures by end users of PV products, which tend to decrease when the economy slows down; and (vii) deregulation
of the electric utility industry and broader energy industry.
Fluctuations in exchange rates in the past have adversely
affected, and in the future may continue to adversely affect, our results of operations.
Currently most of our sales are denominated
in U.S. dollar, Renminbi, Japanese Yen and Euro, while a substantial portion of our costs and expenses is denominated in Renminbi,
Japanese Yen and U.S. dollar. In addition, we must constantly convert one currency into another in order to make payments. Therefore,
fluctuations in currency exchange rates could have a significant effect on our results of operations due to mismatches among various
foreign currency-denominated transactions, including sales of PV modules in overseas markets and purchases of silicon raw materials
and equipment in China, and the gap in time between the signing of related contracts and receipts of cash and disbursements related
to those contracts. In 2016, we recognized a net foreign currency exchange gain of RMB6.0 million (US$0.9 million) mainly because
Japanese Yen and Euro appreciated against Renminbi in 2016 and our company had a balance of net financial assets denominated in
Japanese Yen and Euro, which was substantially offset by the currency exchange loss caused by the depreciation of Renminbi against
the U.S. dollar in 2016 because our company had a balance of net financial liabilities denominated in U.S. dollars. We have entered
into hedging and foreign currency forward arrangements to limit our exposure to foreign currency exchange risk. However, we will
continue to be exposed to foreign currency exchange risk to the extent that our hedging and foreign currency forward arrangements
do not cover all of our expected revenues denominated in foreign currencies. We cannot predict the effect of exchange rate fluctuations
on our foreign currency exchange gains or losses in the future. We may continue to reduce the effect of such exposure through hedging
or other similar arrangements. However, due to the limited availability of such hedging instruments in China, we cannot assure
you that we always will find a hedging arrangement suitable for us, or that such derivatives will be effective in managing our
foreign exchange risk, if at all.
In addition, Renminbi is the functional
currency for our PRC subsidiaries. Sales generated by our PRC subsidiaries which are denominated in foreign currencies need to
be translated into Renminbi when they are recorded as our revenues. Therefore, any depreciation in the foreign currencies in which
our sales are denominated, such as the Euro, Japanese Yen and U.S. dollar, against Renminbi will cause our reported revenues to
appear lower than they otherwise would. In 2014, the depreciation of Euro, U.S. dollar and Japanese Yen against Renminbi adversely
affected our total net revenues, as a majority of our PV module shipments were delivered under Euro, U.S. dollar and Japanese Yen-denominated
contracts. In 2015, the depreciation of Renminbi against Euro, U.S. dollar and Japanese Yen resulted in the decrease of our foreign
currency exchange loss. In 2016, the appreciation of Japanese Yen and Euro against Renminbi in 2016 resulted our foreign currency
exchange gain because we had a net balance of financial assets denominated in Japanese Yen and Euro, which was partially offset
by the currency exchange loss caused by the depreciation of Renminbi against the U.S. dollar in 2016 because we had a net balance
of financial liabilities denominated in U.S. dollar. However, we cannot predict the trend of future exchange rate fluctuations
of Renminbi against other currencies and any further depreciation in foreign currencies in which our sales are denominated against
Renminbi may continue to materially and adversely affect our revenues and results of operations
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Our product development initiatives and other research
and development efforts may fail to improve manufacturing efficiency or yield commercially viable new products.
We are making efforts to improve our manufacturing
processes and to improve the quality of our PV products. We believe that the efficient use of polysilicon is essential to reducing
our manufacturing costs. We have been exploring several measures to enhance the efficient use of polysilicon in our manufacturing
processes, including reducing the thickness of silicon wafers. However, the use of thinner silicon wafers may have unforeseen negative
consequences, such as increased breakage and reduced reliability and conversion efficiency of our PV cells and modules. As a result,
reducing the thickness of silicon wafers may not lead to the cost reductions we expect to achieve, while at the same time it may
reduce customer satisfaction with our products, which in turn could have a material and adverse effect on our customer relationships,
reputation and results of operations.
We also are exploring ways to improve our
PV module products. Additional research and development efforts will be needed before our products in development may be manufactured
and sold at a commercially viable level. We cannot assure you that such efforts will improve the efficiency of manufacturing processes
or yield new products that are commercially viable. In addition, any failure to realize the intended benefits of our product development
initiatives could limit our ability to keep pace with rapid technological changes in the industry, which in turn would hurt our
business and prospects. For example, in order to meet increasing demand for our products and further drive down costs through increased
cell conversion efficiency and manufacturing on a larger scale, we started to implement Project PANDA, a research and development
project for next-generation high efficiency monocrystalline PV cells, in June 2009. By the end of 2016, we achieved an average
cell conversion efficiency rate of 20.8% on the PANDA commercial production lines. We may not be able to overcome all of the technical
challenges involved in the process of commercializing new technologies developed from Project PANDA. We also may not be able to
maintain or further improve the cell conversion efficiency rate that we have already achieved. In addition, we have limited experience
with customer demands in the monocrystalline PV market and may not be able to adapt to the conditions in this market. Established
and more experienced competitors in the monocrystalline PV market may possess superior technology and have brand names that are
better known than ours. If we fail to continue commercializing our monocrystalline PV technology successfully, or are unable to
operate competitively in the monocrystalline market, we may not be able to recover the cost of our investments, which may have
a material and adverse effect on our business, financial condition, results of operations and prospects.
Our operating results may fluctuate from period to period.
Our results of operations are subject to
many factors beyond our control, which include, among others, changes in costs of raw materials, delays in equipment delivery,
suppliers’ failure to perform their delivery obligations, cancellation or delay of customers’ orders, interruptions
in supplies of utilities and other key production inputs, general economic conditions and changes in government policies or incentive
schemes, and uncertainties relating to, or accounting changes caused by, any of these factors. Any one, or a combination, of these
factors may cause our results of operations to fluctuate significantly from period to period or to deviate from the expectations
of the investment community or our own projections. As a result, comparing our results of operations on a period-to-period basis
may not be meaningful, and you should not rely on our past results or projections as an indication of our future performance.
Failure to achieve satisfactory output of our PV modules
and PV systems for any reason could result in a decline in sales and material and adverse effect on our profitability.
The manufacture of PV modules and PV systems
is a highly complex process. Disruptions or deviations in one or more components of the manufacturing process can cause a substantial
decrease in output and, in some cases, disrupt production significantly or result in no output. Historically, we from time to time
experienced lower-than-anticipated manufacturing output during the ramp-up period of our production lines. This often occurred
during the production of new products, the installation of new equipment or the implementation of new process technologies. In
addition, we may not able to achieve full utilization of our production facilities due to market and other financial reasons. For
example, in the fourth quarter of 2012, due to challenging conditions in the solar market and a continuing decline in average selling
prices of PV modules, we recognized an impairment of long-lived assets of Fine Silicon in an amount of RMB200.5 million and a loss
of RMB61.7 million related to disposal of certain equipment. In 2015 and 2016, we recognized a non-cash impairment charge on our
long-lived assets totaling RMB3,804.1 million and RMB1,277.4 million respectively, which was primarily due to lower-than-expected
utilization of certain production facilities during certain quarters of 2015 and the significant drop in selling price in late
2016, respectively. These non-cash charges significantly and adversely affected our results of operations in the relevant periods.
If we bring additional lines or facilities into production in the future, we may operate at less than optimal capacity during the
ramp-up period and produce less output than expected. Any of these would result in higher marginal production costs which could
have a material and adverse effect on our profitability.
Unsatisfactory performance of or defects in our products
may cause us to incur additional warranty expenses, damage our reputation and cause our sales to decline.
Before September 30, 2011, our PV
modules typically were sold with a two- or five-year limited warranty for defects in materials and workmanship, and a 10-year and
25-year warranty guaranteeing 90% and 80% of initial power generation capacity, respectively. Starting from October 1, 2011,
we implemented a new and improved warranty term that guarantees 91.2% of nominal power output for 10 years, and 80.7% of nominal
power output for 25 years for multicrystalline PV modules, and to guarantee 98.0% of nominal power output for the first year, 92.0%
of nominal power output for 10 years, and 82.0% of nominal power output for 25 years for monocrystalline Panda PV modules. On September
1, 2014, we updated our warranty terms to guarantee 91.2% of nominal power output for 10 years and 80.7% of nominal power output
for 25 years for multicrystalline PV modules, and to guarantee 98.0% of nominal power output for the first year, 92.2% of nominal
power output for 10 years, and 82.4% of nominal power output for 25 years for monocrystalline Panda PV modules. In addition, we
also provided our multicrystalline PV modules and monocrystalline Panda PV modules with a linear-based warranty that guarantees
each year’s power output during the twenty-five-year warranty period. In 2012, we entered into a module performance warranty
insurance agreement with Munich Re’s specialty primary insurers. According to the agreement, both we and Munich Re could
provide additional economic security for large-scale commercial and utility project developers, investors and debt providers during
the period from October 1, 2012 to September 30, 2013 in connection with our multicrystalline PV modules. In December
2013, we entered into a similar module performance warranty insurance agreement with another insurance company for the same scope
of beneficiaries for 2014, and renewed the agreement in March 2015, January 2016, and January 2017 for the same scope of beneficiaries
for 2015, 2016 and 2017, respectively. Nevertheless, we bear the risk of warranty claims long after we have sold our products and
recognized revenues. We have only sold PV modules since January 2003, and none of our PV modules has been in use for the entire
duration of its warranty period. As of December 31, 2014, 2015 and 2016, our accrued warranty costs amounted to RMB748.4 million,
RMB792.1 million, and RMB841.8 million (US$121.2 million) respectively. Moreover, because our products have only been in use for
a relatively short period of time, our assumptions regarding the durability and reliability of our products may not be accurate.
Since our products have relatively long warranty periods, we cannot assure you that the amount of accrued warranty for our products
will be adequate in light of our products’ actual performance. If we experience a significant increase in warranty claims,
we may incur significant repair and replacement costs associated with such claims. Furthermore, widespread product underperformances
or failures will damage our reputation and customer relationships and may cause our sales to decline, which in turn could have
a material and adverse effect on our financial condition and results of operations.
Failure to achieve and maintain effective internal control
in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and ADS price.
We are subject to reporting obligations
under the United States federal securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or the
Sarbanes-Oxley Act, requires that we establish and maintain an effective internal control structure and procedures for financial
reporting and include a report of management on our internal control over financial reporting in our annual report. Our annual
report on Form 20-F must contain an assessment by management of the effectiveness of our internal control over financial reporting
and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified. In
addition, our independent registered public accounting firm must attest to the effectiveness of our internal control over financial
reporting.
We identified a material weakness in our
internal control over financial reporting as of December 31, 2016 and concluded that our internal control over financial reporting
was not effective as of December 31, 2016. The material weakness was that we lacked sufficient accounting and financial reporting
personnel to formalize and carry out key controls over the reporting process with respect to certain significant and complex accounting
assessments and preparation of our financial statements based on U.S. GAAP and SEC reporting requirements. While we plan to remediate
this material weakness (please refer to “Item 15. Controls and Procedures”), we cannot assure you that we will be
able to achieve and maintain the adequacy of our internal control over financial reporting in a timely manner.
The requirements of Section 404 of the
Sarbanes Oxley Act are ongoing and also apply to future years. Although we are committed to continue to improve our internal control
processes and we will continue to diligently and vigorously review our internal control over financial reporting in order to ensure
compliance with the Section 404 requirements, any control system, regardless of how well designed, operated and evaluated, can
provide only reasonable, not absolute, assurance that its objectives will be met. Effective internal control over financial reporting
is necessary for us to produce reliable financial reports and is important to help prevent fraud. As a result, our failure to achieve
and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability
of our financial statements, which in turn could harm our business and negatively impact the trading price of our ADSs. Furthermore,
we anticipate that we will incur additional costs and use significant management time and other resources in an effort to achieve
and maintain the effectiveness of our internal control over financial reporting. Regardless of the efforts we make, we cannot be
certain that in the future additional material weaknesses or significant deficiencies will not exist or otherwise be discovered.
Natural disasters, acts of war, terrorism or other factors
beyond our control may materially and adversely affect our business, results of operations and financial condition.
Natural disasters such as earthquakes,
floods, severe weather conditions or other catastrophic events may severely affect the regions where we, our suppliers or our customers
operate. Such natural disasters also could cause a material economic downturn in the affected area or internationally. Although
we have limited exposure to any catastrophic event, any future disaster in areas where we, our suppliers or our customers operate
could have a material and adverse effect on our business prospects, financial condition and results of operations. Similarly, war,
terrorist activity, or threats thereof, social unrest, as well as geopolitical tension and international conflict, for example,
tensions within the Middle East and on the Korean Peninsula, and territorial disputes between China and other countries, could
negatively affect international or regional economic development. This in turn could have a material and adverse effect on our
business, financial condition and results of operations. In addition, we may not be adequately prepared in terms of contingency
planning or have capabilities sufficient to recover from a major incident or crisis. As a result, our operational continuity may
be materially and adversely affected by any major crisis or incident.
We have limited insurance coverage and may incur uncoverable
losses resulting from business interruption or natural disasters.
Our insurance coverage is limited and we
do not maintain any business interruption insurance coverage. As a result, we may have to use our own funds to pay for financial
and other losses, damages and liabilities, including those in connection with or resulting from natural disasters and other events
beyond our control, which could have a material and adverse effect on our financial condition and results of operations.
We obtain some of the equipment used in our manufacturing
process from a small number of selected suppliers. If our equipment is damaged or new or replacement equipment is not delivered
to us in a timely manner or is otherwise unavailable, our ability to deliver products timely will suffer, which in turn could result
in cancellations of orders and loss of revenue for us.
Some of the equipment used in our production
of polysilicon ingots, wafers, PV cells and PV modules, such as ingot casting furnaces, diffusion furnaces and wire saws, have
been customized to our specifications and are not readily available from multiple vendors. Such equipment would be difficult to
repair or replace. There also are limited sources of supply for the principal polysilicon manufacturing equipment we use and we
may not be able to replace such sources at reasonable costs and on a timely basis, or at all. If any of our key equipment suppliers
were to experience financial difficulties or to go out of business, we may have difficulties with repairing or replacing our key
equipment in the event of any damage to or a breakdown of such equipment. Furthermore, new or replacement equipment may not be
delivered to us in a timely manner. In such cases, our ability to deliver products in a timely manner would suffer, which in turn
could result in cancellations of orders from our customers and loss of revenue for us. In addition, the equipment we may need for
our future expansion may be in high demand. A supplier’s failure to deliver equipment to us in a timely manner, in sufficient
quantity and on terms acceptable to us could delay expansion of our capacity and otherwise disrupt our production schedule or increase
our production costs.
If certain customers were to cease their practice of making
advance payments when they place orders with us, or if our customers were to fail to meet their payment obligations, we may experience
increased needs to finance our working capital requirements and may be exposed to increased credit risk, which may materially and
adversely affect our financial position and results of operations.
We require many of our customers to make
an advance payment representing a small percentage of their orders, which is a business practice that help us manage our accounts
receivable, prepay our suppliers and reduce the amount of funds that we need to finance our working capital requirements. We cannot
assure you that in the future our customers will not cease adhering to this practice. If our customers were to cease making prepayments
to us at the time of their orders, we may not be able to secure additional financing on a timely basis or on terms acceptable to
us, or at all. Currently, a significant portion of our revenue derives from credit sales to our customers, generally with payments
due within four months after shipment. As a result, any future decrease in the use of cash advance payments by our customers may
negatively impact our short-term liquidity and, coupled with increased credit sales to a small number of major customers, may expose
us to additional and more concentrated credit risk. This is because a significant portion of our outstanding accounts receivable
derives from sales to a limited number of customers. As of December 31, 2014, 2015 and 2016, our five largest accounts receivable
balances outstanding accounted for approximately 27.2%, 27.6%, and 16.3% respectively, of our total outstanding accounts receivable.
The failure of any of these or other customers to meet their payment obligations would materially and adversely affect our financial
position, liquidity and results of operations. Besides, from time to time we may need to commence legal proceedings in order to
recover accounts receivables from customers, which also may increase our cost. Although we have been able to maintain adequate
working capital primarily through short-term borrowing, our prior convertible senior notes offering, follow-on offering and medium-term
notes offering, other debt issuances and long-term bank borrowings, any failure by our customers to settle outstanding accounts
receivable in the future could materially and adversely affect our cash flow, financial condition and results of operations.
We have issued, and may issue in the future, equity securities
or securities convertible into or exchangeable for our ordinary shares, the conversion of which may cause our existing shareholders
to incur further dilution of their holdings.
We have issued, and may issue in the future,
equity securities or securities convertible into our ordinary shares. In the event that the securities convertible into our ordinary
shares are converted, our existing shareholders may incur further dilution of their holdings. For example, in January 2009,
we issued an aggregate amount of US$49.4 million of senior secured convertible notes due 2012, or senior secured convertible notes,
to Trustbridge Partners II, L.P., or Trustbridge, or its affiliates in connection with our acquisition of Cyber Power. From June 2009
to January 2012, we issued an aggregate of 11,588,713 ordinary shares to Trustbridge as a result of the conversion of the
full amount of the senior secured convertible notes. In addition, in connection with a credit agreement between Yingli Energy (China)
Company Ltd., or Yingli China, and a fund managed by Asia Debt Management Hong Kong Limited, or ADM Capital, entered into in January 2009,
we issued an aggregate of 4,125,000 warrants to ADM Capital under the terms of a warrant agreement entered into in April 2009.
From May 2010 to May 2011, a total of 2,454,271 ordinary shares in the form of ADSs were issued to ADM Capital in connection
with its exercise of all 4,125,000 of these warrants. As of the date of this annual report, there are no convertible securities
issued by Yingli Green Energy that remain outstanding. Any future issuance of equity securities or securities convertible into
or exchangeable for our equity securities may cause further dilution to our existing shareholders. If our future acquisitions,
expansions, or market changes or other developments cause us to require additional funding, we may issue additional securities
convertible into or exchangeable for our ordinary shares, and our existing shareholders could incur substantial dilution.
Our principal shareholder has significant influence over
our management and their interests may not be aligned with our interests or the interests of our other shareholders, including
holders of our ADSs.
The family trust of Liansheng Miao, the
chairperson of our board of directors and our chief executive officer, controls and beneficially owns 100% of the equity interests
in Yingli Power. Yingli Power, in turn, currently beneficially owns approximately 28.88% of our ordinary shares outstanding.
Yingli Power has significant influence over us, including on matters relating to mergers, consolidations and the sale of
all or substantially all of our assets, election of directors and other significant corporate actions. The interests of Yingli
Power may conflict with our interests or the interests of our other shareholders, including holders of our ADSs.
Baoding Tianwei Baobian Electric Co., Ltd., or Tianwei
Baobian, and Baoding Tianwei Group Co., Ltd., or Tianwei Group, our joint venture partners as to Tianwei Yingli, have significant
influence over Tianwei Yingli, one of our operating entities, and they may prevent Tianwei Yingli from taking actions that are
in the best interests of us or Tianwei Yingli. In addition, each of Tianwei Baobian and Tianwei Group will have significant influence
over us if it were to exercise its right to subscribe for ordinary shares of Yingli Green Energy. The interests of Tianwei Baobian
and Tianwei Group may not be aligned with our interests or the interests of our other shareholders.
Tianwei Baobian and Tianwei Group, which
are affiliated with each other, own in the aggregate a 25.99% equity interest in Tianwei Yingli, one of our operating entities.
Tianwei Baobian and Tianwei Group have significant influence over Tianwei Yingli through their representation on Tianwei Yingli’s
board of directors and through other rights which they enjoy pursuant to Tianwei Yingli’s articles of association and our
joint venture contract with them. Tianwei Baobian and Tianwei Group are entitled to appoint jointly three of Tianwei Yingli’s
nine directors. We, on the one hand, and Tianwei Baobian and Tianwei Group, on the other hand, may have different views and approaches
with respect to the management and operation of Tianwei Yingli. Tianwei Baobian or Tianwei Group may disagree with us in the management
and operation of Tianwei Yingli and may vote against actions that we believe are in the best interests of Tianwei Yingli or us.
For example, directors appointed by Tianwei Baobian and Tianwei Group may vote against matters that require unanimous approval
of all directors. Directors appointed by Tianwei Baobian and Tianwei Group also may hinder or delay the adoption of relevant resolutions
by not attending a board meeting, thereby preventing achievement of a quorum and forcing the meeting to be postponed for no more
than seven days. See “Item 4.A. History and Development of the Company — Joint Venture Contract — Tianwei Yingli’s
Management Structure and Board of Directors”. Due to the ability of each of Tianwei Baobian and Tianwei Group to exercise
substantial influence over Tianwei Yingli through their appointed directors, and through their other rights under the joint venture
contract, any significant deterioration of our relationship, or any disagreement with Tianwei Baobian and Tianwei Group may cause
disruption to Tianwei Yingli’s business, which in turn could have a material and adverse effect on our business prospects,
financial condition and results of operations.
Tianwei Baobian and Tianwei Group also
may have a disagreement or dispute with us with respect to our respective rights and obligations on matters such as the exercise
of Tianwei Baobian and Tianwei Group’s right to subscribe for ordinary shares newly issued by us in exchange for their equity
interest in Tianwei Yingli. Except in limited circumstances, we may not be able to terminate unilaterally the joint venture contract
in the event of such disagreement or dispute even if such termination would be in our best interests. See “Item 4.A. History
and Development of the Company — Joint Venture Contract — Unilateral Termination of the Joint Venture Contract”.
Any such dispute may result in costly and time-consuming litigation or other dispute resolution proceedings which may significantly
divert the efforts and resources of our management and disrupt our business operations.
Furthermore, Tianwei Baobian and Tianwei
Group may transfer all or a part of their equity interest in Tianwei Yingli pursuant to the joint venture contract. If we fail
to exercise our right of first refusal in accordance with the procedures set forth in the joint venture contract and are thus deemed
to have consented to any such proposed transfer by Tianwei Baobian and/or Tianwei Group to a third party, or if Tianwei Baobian
and/or Tianwei Group transfers its and/or their equity interests in Tianwei Yingli to its affiliates or a third party, such affiliate
or third party will become a holder of Tianwei Yingli’s equity interest. The interests of such party may not be aligned with
our interests or the interests of Tianwei Yingli. See “Item 4.A. History and Development of the Company— Joint Venture
Contract — Transfer of Equity Interests in Tianwei Yingli — Right of First Refusal”.
In addition, according to the joint venture
contract, Tianwei Baobian and Tianwei Group may exercise a subscription right in respect of our shares, and if they exercise such
subscription right, they may become significant shareholders of Yingli Green Energy. If they become our shareholders, they
may have significant influence over our business, including decisions regarding mergers, consolidations and the sale of all or
substantially all of our assets, election of directors and other significant corporate actions. If Tianwei Baobian and/or Tianwei
Group become our shareholders, their interests may not be aligned with our interests or those of our other shareholders.
Negative publicity, rumors or media coverage of Tianwei
Group, Tianwei Baobian, our company, our affiliates or business partners could materially and adversely affect our reputation,
business and financial condition.
Since all of Tianwei Yingli’s equity
interests are held together by us, Tianwei Group and Tianwei Baobian, negative rumors or media coverage of Tianwei Group or of
Tianwei Baobian, whether or not accurate and whether or not applicable to us, could have a material and adverse effect on our reputation,
business and financial condition.
In addition, negative publicity of our
company or our affiliates or business partners, whether or not accurate and whether or not applicable to us, could have a material
adverse effect on our reputation, business and financial condition. For example, in our annual report on Form 20-F for the year
ended December 31, 2014 and 2015, we stated that there was substantial doubt as to our ability to continue as a going concern.
However, this statement was taken and interpreted out of context in some media coverage, which exerted considerable pressure on
the price of our ADSs. We have stated in this annual report that there is still substantial doubt as to our ability to continue
as a going concern. We cannot assure you that our statements in this annual report or other filings and press releases will not
be misinterpreted by media or other market participants in the future which may have a material adverse effect on the price of
our ADSs and our reputation, business and financial condition. We cannot assure you that in the future there will not be negative
rumors or media coverage related to Tianwei Group, Tianwei Baobian, our company, our affiliates or business partners.
If Tianwei Baobian, Tianwei Group or any of their affiliates
were to engage in sanctionable activities inconsistent with the laws or policies of other countries, our reputation and the reputation
of Tianwei Yingli may be negatively affected. As a result, some of our shareholders may divest our shares and prospective investors
may decide not to invest in our shares, which may cause the price of our ADSs to decline.
The United States and other countries maintain
economic and other sanctions against several countries, or the sanctioned countries, and persons engaged in specified activities,
such as supporting terrorism or the proliferation of weapons of mass destruction.
Tianwei Baobian and Tianwei Group are our
joint venture partners with respect to one of our operating subsidiaries, Tianwei Yingli. Based on publicly available information,
Tianwei Group was acquired by China South in March 2008, and Tianwei Group and China South collectively own 56.43% of the
equity interests in Tianwei Baobian.
There have been news reports that China
South, Tianwei Group and Tianwei Baobian in recent years have conducted construction activities in or exported transformers to
certain countries, including Iran and Sudan, that were subject to ongoing sanctions, or sanctioned countries, at the time such
construction activities were conducted or such transformers were exported. China North Industries Corporation, or Norinco, an affiliate
of China South, was recognized by the U.S. State Department under the Iran Nonproliferation Act of 2000 as having been engaged
in the transfer to Iran of equipment and technology having the potential to make a material contribution to the development of
weapons of mass destruction. Norinco also was reported to have had activities in and exported products to some sanctioned countries,
including Iran, Sudan and Syria, some of which activities and products involved or included military products and applications.
In addition, Norinco is listed as a prohibited company by some state and municipal governments, universities and investors in the
United States due to its business relationships with the sanctioned countries. Certain of the sanctioned countries in which China
South, Tianwei Group, Tianwei Baobian or Norinco has been reported to have had activities, such as Iran, Syria and Sudan, are identified
by the U.S. State Department as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls.
As a result of China South’s acquisition
of Tianwei Group discussed above, Tianwei Yingli, our subsidiary, became an affiliate (as defined under the rules of the Exchange
Act) of China South and Norinco. Neither our company nor any of our other subsidiaries is an affiliate of China South or Norinco.
We have no control over Tianwei Baobian, Tianwei Group, China South, Norinco or their respective affiliated entities, nor has any
such respective affiliated entity requested Tianwei Yingli or us to have contacts with or otherwise conduct any sanctioned activity
in any sanctioned country. However, to the extent that such entities are involved in activities that, if performed by a U.S. person,
would be illegal under U.S. sanctions, or if any such entity were to become subject to any economic sanctions maintained by the
United States or other countries or entities, reputational issues may arise relating to Tianwei Yingli or us, and investor sentiment
with respect to our ADSs may be materially and adversely affected. Although neither we nor any of our other subsidiaries is an
affiliate of China South or Norinco, investors in the United States may believe that the value of their investment in us may be
adversely affected due to Tianwei Yingli’s affiliation with such entities or due to our connection with such entities through
Tianwei Yingli. Investors may choose not to invest in, or to divest from any investments in, issuers that are associated even indirectly
with sanctioned activities or sanctioned countries. Any such negative investor sentiment as the result of reputational issues may
cause the price of our ADSs to decline and materially and adversely affect the value of your investment in us.
Our joint venture partner, Tianwei Group defaulted on
certain of its debt obligations and has declared insolvency. Tianwei Group could be potentially controlled by its creditors, subject
to bankruptcy or liquidation proceedings. If Tianwei Group were controlled by its creditors, they could prevent Tianwei Yingli
from taking actions in its or our best interests, and those creditors could cause Tianwei Group to subscribe for our ordinary shares
and thereby exert significant influence over our company. The interests of Tianwei Group’s creditors may not be aligned with
our interests or the interests of Tianwei Yingli’s other equity interest holder, Tianwei Baobian.
Our joint venture partner, Tianwei Group
has defaulted on certain of its debt obligations and it may again default on its debt obligations in the future. Based on publicly
available information, in April 2015 Tianwei Group failed to pay approximately US$13.8 million in interest due on its bonds
traded in China. On September 18, 2015, Tianwei Group submitted an application for bankruptcy reorganization to the Intermediate
People's Court of Baoding as the firm was unable to meet its maturing liabilities on time. In January 2016, the Intermediate People's
Court of Baoding accepted Tianwei Group’s application for bankruptcy reorganization and designated an insolvency administrator.
In May 2016, Tianwei Group announced to recruit intentional investors. Under the joint venture contract entered into by and among
Tianwei Baobian, Tianwei Group and us, Tianwei Group has significant influence over Tianwei Yingli, one of our principal operating
entities. See “Item 4.A. History and Development of the Company — Joint Venture Contract”. If Tianwei Group were
controlled by its creditors, there would be uncertainty as to how Tianwei Group’s creditors would exercise their rights in
respect of Tianwei Yingli. Tianwei Group’s creditors could prevent Tianwei Yingli from taking actions that are in the best
interests of us or Tianwei Yingli. Pursuant to the joint venture contract, Tianwei Group’s creditors also could cause Tianwei
Group to subscribe for ordinary shares in us and thereby exert significant influence over our company.
The interests of Tianwei Group’s
creditors may not be aligned with our interests or the interests of Tianwei Yingli. Due to the ability of Tianwei Group to exercise
substantial influence over Tianwei Yingli through their appointed directors, and through their other rights under the joint venture
contract, any significant deterioration of our relationship, or any disagreement, with Tianwei Group’s creditors may cause
disruption to Tianwei Yingli’s business, which in turn could have a material and adverse effect on our business prospects,
financial condition and results of operations. Any dispute with Tianwei Group’s creditors may result in costly and time-consuming
litigation or other dispute resolution proceedings which may significantly divert the efforts and resources of our management and
disrupt our business operations.
Our joint venture partners, Tianwei Baobian and Tianwei
Group, have entered into competing businesses with us, which may materially and adversely affect our business, prospects, financial
condition and results of operations.
Our joint venture contract with Tianwei
Baobian and Tianwei Group, and Tianwei Yingli’s articles of association, do not impose non-compete restrictions upon Tianwei
Baobian and Tianwei Group. While Tianwei Baobian and Tianwei Group’s current principal businesses are the manufacture of
large electricity transformers, Tianwei Baobian and Tianwei Group have entered into the PV business through investments in various
companies that are engaged in the manufacture of polysilicon, ingots, wafers, PV cells or PV modules and thin film modules. As
these companies continue to expand their respective businesses, they may compete with us both for customers and for supplies of
raw materials, and we may not have any legal right to prevent them from doing so. Because of Tianwei Baobian and Tianwei Group’s
familiarity with, and their ability to influence, the business of Tianwei Yingli, competition from Tianwei Baobian and Tianwei
Group or their affiliates could have a material and adverse effect on our business, prospects, financial condition and results
of operations.
The grant of employee share options and other share-based
compensation could materially and adversely affect our net income.
We adopted a stock incentive plan in December 2006,
or the 2006 stock incentive plan. Our board of directors approved the 2006 stock incentive plan in April 2007, and in May 2007
our shareholders approved the first amendment to the 2006 stock incentive plan in order to increase the number of ordinary shares
which we are authorized to issue under the 2006 stock incentive plan. The second amendment to the 2006 stock incentive plan was
approved by our board of directors in July 2009 and by our shareholders in August 2009. This second amendment again increased
the number of ordinary shares which we are authorized to issue under the 2006 stock incentive plan. Under the 2006 stock incentive
plan, as amended, we may grant to our directors, employees and consultants up to 2,715,243 restricted shares and options to purchase
up to 10,030,195 of our ordinary shares. As of May 16, 2017, we have granted to four executive officers, 671 employees and 4 independent
directors options to purchase 9,563,414 ordinary shares in the aggregate (excluding forfeited and cancelled options) and an aggregate
of 2,631,268 restricted shares (excluding forfeited restricted shares) to DBS Trustee Limited, or the trustee, for the benefit
of 4 executive officers and 77 employees and non-employees. See “Item 6.B. Directors, Senior Management and Employees —
Compensation of Directors and Executive Officers — 2006 Stock Incentive Plan”. We account for compensation costs for
all share-based awards, including share options granted to our directors and employees, using a fair-value based method. Moreover,
the additional expenses associated with share-based compensation may reduce the attractiveness to us of having such an incentive
plan. However, as share options are an important tool to recruit and retain qualified and desirable key personnel, we may not be
able to attract and retain such key personnel if we were to reduce the scope of our stock incentive plan.
Our results of operations are difficult to predict, and
if we do not meet market expectations, the price of our ADSs will likely decline.
Our results of operations are difficult
to predict and in the past such results have fluctuated from time to time. We expect that in the future our results of operations
may continue to fluctuate from time to time. It is possible that our results of operations for some reporting periods will fail
to meet the expectations of the market. Our results of operations are affected by a number of factors as set forth in “Item
5. Operating and Financial Review and Prospects”. If our results of operations are lower than market expectations for a given
reporting period, investors may react negatively, and as a result, the price of our ADSs will be likely to decline.
Our limited intellectual property protection both within
and outside of China may undermine our competitive position and subject us to intellectual property disputes with third parties,
either of which may have a material and adverse effect on our business, results of operations and financial condition.
As of the date of this annual report, we
have been granted 1,602 patents and currently are applying for 90 patents.
Aside from know-how available in the public
domain, we have developed in-house unpatented technical know-how that we use to manufacture our products. Many elements of our
manufacturing processes involve proprietary know-how, technology or data, either developed by us in-house or transferred to us
by our equipment suppliers. Such proprietary know-how, technology and data are not covered by patents or patent applications, and
include manufacturing technologies and processes and production line and equipment designs. We rely on a combination of laws and
regulations pertaining to patent, trademark, anti-unfair competition and trade secret rights, as well as nondisclosure agreements
and other methods, to protect our intellectual property rights. Nevertheless, these measures provide only limited protection and
the actions we take to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate
our proprietary technologies or other of our intellectual property rights, which could have a material and adverse effect on our
business, financial condition or results of operations. Policing unauthorized use of proprietary technology can be difficult and
expensive. Also, litigation may be necessary to protect our trade secrets or to determine and enforce the validity and scope of
the proprietary rights of us or of other rights holders. We cannot assure you that the outcome of any such potential litigation
will be in our favor. Such litigation may be costly and may divert the attention of our management as well as our other resources
away from our business. In addition, we have no insurance coverage against litigation costs and would have to bear all costs arising
from such litigation to the extent that we are unable to recover them from other parties. An adverse determination in any such
litigation could result in the loss of one or more of our intellectual property rights and may materially and adversely harm our
business, prospects and reputation.
We have exported in the past, and expect
to continue to export in the future, a substantial portion of our PV products outside of China. Because we do not have, and have
not applied for, any patents for our proprietary technologies outside of China, it is possible that others may independently develop
substantially equivalent technologies or otherwise gain access to our proprietary technologies and obtain patents for such intellectual
properties in other jurisdictions, including the countries to which we export our PV modules. If any third party is successful
in obtaining one or more patents for technologies that are substantially equivalent to, or the same as, our proprietary technologies
in any market where we have not obtained such patent protection, and such third party enforces its intellectual property rights
against us, our ability to sell products containing the allegedly infringing intellectual property in that market will be materially
and adversely affected. If we are required to stop selling such allegedly infringing products, to seek licenses or to pay royalties
for the relevant intellectual properties, or to redesign such products so as to refrain from using the allegedly infringing technologies,
our business, results of operations and financial condition will be materially and adversely affected.
Third parties may initiate claims against us of infringement
or misappropriation, which, if upheld against us or otherwise determined adversely, could cause us to pay significant damage awards.
Our success depends, in large part, on
our ability to use and develop technology and know-how without infringing the intellectual property rights of third parties. The
validity and scope of claims relating to PV technology patents involve complex scientific, legal and factual questions and analysis
and, therefore, may be highly uncertain. Although we take steps in the course of developing our products in order to ensure that
we are not infringing the existing intellectual property rights of others, such as reviewing related patents and patent applications
prior to developing our products, these steps may not be adequate. While we currently are not aware of any action pending or threatened
against us, we may be subject to litigation involving claims of patent infringement or violation of intellectual property rights
of third parties. Resolving intellectual property disputes and related legal and administrative proceedings can be both costly
and time-consuming, and may significantly divert the efforts and resources of our technical and management personnel away from
our business. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to
significant liability to third parties, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign
our PV modules or subject us to injunctions prohibiting the manufacture and sale of our PV modules or the use of our technologies
in certain markets. Protracted litigation also could cause our customers or potential customers to defer or limit their purchase
or use of our PV modules until a time when such litigation has been resolved.
We are exposed to various risks related to legal or administrative
proceedings or claims that could adversely affect our financial condition, results of operations and reputation, and may cause
losses to our business.
Litigation generally can be expensive,
lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict.
We may be involved in allegations, litigation or legal or administrative proceedings from time to time as a result of our normal
business operations.
For example, in October 2012, we received
notice of an antitrust and unfair competition lawsuit filed by Solyndra, LLC, a U.S.-based solar company, against us and our subsidiary,
Yingli Green Energy Americas, Inc., or Yingli Americas, and two other China-based solar manufacturers in the U.S. District
Court for the Northern District of California. Together with co-defendants Suntech Power Holdings Co., Ltd., Suntech America, Inc.,
Trina Solar Ltd. and Trina Solar (U.S.) Inc., in early March 2013 we and Yingli Americas filed a joint motion to dismiss all of
the claims in an amended complaint that was filed by Solyndra’s liquidation trustee. On April 9, 2014, we received an
order denying defendants’ joint motion to dismiss Solyndra’s claims. In February 2016, we entered into an agreement
to settle these claims, or the Settlement Agreement. According to the Settlement Agreement, we and Yingli Americas paid US$7.5
million to settle Solyndra’s claims. If the annual total sales of PV modules from us and all of our affiliates in any single
calendar year between 2016 to 2018 to the United States and Canada and any of their respective territories or districts equals
or exceeds 800 megawatts, we will pay Solyndra a single additional payment of US$10 million. The Settlement Agreement was approved
by United States Bankruptcy Court for the District of Delaware, which is responsible for adjudicating the Solyndra bankruptcy,
in March 2016. The aforementioned lawsuit against us has been dismissed with prejudice, and under the Settlement Agreement, and
Solyndra has released us and all of our affiliates from any further claims based on the same or any related facts or allegations.
In 2015, we recognized provisions of settlement fee of US$7.5 million (RMB48.7 million) and we didn’t recognize any provisions
for the conditional additional payment of US$10 million (RMB64.8 million) since it is not probable that a liability has been incurred.
In October 2013, we received
notice of an antitrust lawsuit filed by Energy Conversion Devices Liquidation Trust, or ECD, through its liquidating trustee, against
us and two other China-based photovoltaic panel manufacturers in the U.S. District Court of the Eastern District of Michigan. On
April 18, 2014, we and our co-defendants (Suntech America, Inc., Trina Solar Ltd. and Trina Solar (U.S.) Inc.) filed a joint motion
to dismiss all of ECD’s claims. On October 31, 2014, the U.S. District Court of the Eastern District of Michigan granted
the joint motion dismissing all claims. ECD brought a motion for reconsideration, which was denied on August 20, 2015. ECD brought
two separate motions, in December 2014 and August 2015, each to alter or amend the judgment and for leave to file an amended complaint,
both which were denied by September 2015. ECD appealed to the U.S. Court of Appeals for the Sixth Circuit, which unanimously affirmed
the trial court’s dismissal of ECD’s claims in August 2016. ECD filed a petition for a writ of certiorari to the U.S.
Supreme Court, which was denied on April 17, 2017, ending the litigation.
In May and June 2015, two individual plaintiffs
respectively filed purported class action securities fraud lawsuits against us, our chairperson and chief executive officer, Mr.
Liansheng Miao, and our director and chief financial officer, Mr. Yiyu Wang, in the U.S. District Court for the Central District
of California, both alleging, among other things, that we made false and misleading statements and failed to disclose certain material
financial information. In October 2015, the cases were consolidated, and the court appointed lead plaintiffs and lead counsel.
In November 2015, lead plaintiffs filed a consolidated amended complaint. The amended complaint contended that we and certain of
our officers and directors made false or misleading statements between December 2, 2010 and May 15, 2015 regarding (i) the Chinese
government’s Golden Sun program, which provided subsidies for solar projects in China; and (ii) our accounts receivable attributable
to Chinese customers. The sole claim in that complaint was for violation of Section 10(b) of the Securities Exchange Act of 1934.
In December 2015, we filed a motion to dismiss the consolidated suit, and, on May 10, 2016, the Court granted that motion with
leave to amend. On June 24, 2016, lead plaintiffs filed a new complaint, again alleging that, between December 2, 2010 and
May 15, 2015, Yingli’s officers made false or misleading statements regarding Golden Sun and accounts receivables. This
complaint added an additional claim against Mr. Miao and Mr. Wang for violation of Section 20(a) of the Exchange Act. On
August 8, 2016, we again filed a motion to dismiss the suit, and, on March 15, 2017, the Court again dismissed the plaintiffs’
claims with leave to amend. The plaintiffs filed a second amended complaint on April 24, 2017. The Court set a briefing schedule
requiring the filing of our motion to dismiss by May 30, 2017, plaintiffs’ opposition by July 5, 2017, and our reply by July
19, 2017. A hearing on the motion is set for August 14, 2017. It is premature at this stage of the litigation to evaluate
the likelihood of favorable or unfavorable outcomes. Our company intends to defend vigorously against all allegations.
See “Item 8.A. Consolidated Statements
and Other Financial Information — Legal and Administrative Proceedings”.
In the past years, we signed several
agreements and amendments with a supplier to provide certain service for us. Due to certain quality control issues related to
the supplier and substantial changes in the market, we and this supplier had disputes over the performance of the contracts
and our payments of accounts receivable to the supplier. In May 2013, the supplier informed us that it would like to cease
the recovery service and claimed compensation. In July 2014, we filed litigation against this supplier for breach of contract
and claimed damages against this supplier. In September 2015, the supplier also filed litigation against us for the default
in performance of contract and claimed compensation. The Provincial High People’s Court consolidated these two disputes
in January 2016, in accordance with our request. At the end of December 2016, the court issued judgments as to these two
disputes and we were informed of the judgments in January 2017, in which the court ruled that the agreements and amendments
with the supplier shall be rescinded, and we shall pay compensation to the supplier. All other claims of us and the supplier
were rejected. At this time, both we and the supplier have appealed to the Supreme People’s Court, so no judgments of
the Provincial High People’s Court have yet taken effect. The Supreme People’s Court has not held any hearing
yet. We believe that the supplier’s claims lack merit. As such, we are hopeful that the judgment from the Provincial High People’s Court will be overturned in our favor.
However, considering the uncertainties involved in the appeals process, we made a provision of RMB59 million, representing
the entire amount awarded to the supplier by the initial judgment from the Provincial High People’s Court.
Nevertheless, such provision does not constitute, and should not be interpreted or viewed in any manner as, any recognition
by us of the merit of any aspect of the judgment from the Provincial High People’s Court. Accordingly, we recorded an
accrual for the amount of compensation to the supplier in the year ended December 31, 2016.
Regardless of the merits, responding to
allegations, litigation or legal or administrative proceedings and defending against litigation can be time consuming and costly,
and may result in us incurring substantial legal and administrative expenses, as well as the attention of our management being
diverted away from our business. Any such allegations, lawsuits or proceedings could have a material and adverse effect on our
business operations. Further, unfavorable outcomes from these claims or lawsuits could materially and adversely affect our business,
financial condition and results of operations.
Our business depends substantially on the continuing efforts
of our executive officers and key technical personnel, and our ability to retain a skilled labor force. Our business may be materially
and adversely affected if we lose their services.
Our future success depends substantially
on the continuing services of our executive officers, in particular Liansheng Miao, our chief executive officer, Jingfeng Xiong,
our vice president, Yiyu Wang, our chief financial officer, and Dengyuan Song, our chief technology officer. If one or more of
our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily,
if at all. In addition, if any of our executive officers joins a competitor or forms a competing company, we may lose some of our
customers. Each of our executive officers has entered into an employment agreement with us, which contains confidentiality and
non-compete provisions. However, if any dispute were to arise between one of our executive officers and us, we cannot assure you
that such officer’s employment agreement could be fully enforced in China. Furthermore, recruiting and retaining capable
personnel, particularly experienced engineers and technicians who are familiar with our PV products manufacturing processes, is
vital to maintaining the quality of our PV products and to improving continuously our production methods. There is substantial
competition for qualified technical personnel, and we cannot assure you that we will be able to attract or retain qualified technical
personnel. If we are unable to attract and retain qualified employees, key technical personnel and our executive officers, our
business may be materially and adversely affected.
Any failure to manage our growth, or otherwise to develop
appropriate internal organizational structures, effective internal controls and systems to monitor and manage risk in parallel
with our rapid growth could result in a material and adverse effect on our business, prospects, financial condition and results
of operations.
Our business and operations have been expanding
rapidly. Significant management resources must be expended to develop and implement appropriate structures for our internal organization
and flows of information, effective internal controls and systems to monitor and manage risk in parallel with our rapid growth.
We also need to be able to continue hiring and integrating qualified employees into our organization. It is challenging for us
to hire, integrate and retain qualified employees in certain key areas of operations, such as engineers and technicians who are
familiar with the PV industry. In addition, disclosure and other ongoing obligations associated with our being a public company
further increase the challenges faced by our finance, legal and accounting teams. It is possible that our existing systems for
monitoring and managing risk could prove inadequate. If we fail to develop and implement appropriate structures for our internal
organization and flows of information, effective internal controls and systems to monitor and manage risk, we may not be able to
identify unfavorable business trends, administrative oversights or other risks that could materially and adversely affect our business,
prospects, financial condition and results of operations.
Compliance with construction and environmental regulations
can be expensive, and noncompliance with present or future construction and environmental regulations may result in adverse publicity,
potentially significant monetary damages and fines or suspensions of our business operation.
Historically, we started construction of
and operation at certain of our facilities without having obtained all of the necessary construction permits and environmental
approvals that were required under relevant regulations. We also started constructing certain other facilities as part of our capacity
expansion projects while applications for relevant construction permits and environmental approvals were still being processed
and had not yet been approved. Both prior failures and any current failure on our part to obtain relevant construction permits
and environmental approvals needed for the construction of our facilities may prevent us from obtaining ownership certificates
for our facilities. Our failure to obtain construction permits, environmental approvals, and ownership certificates may subject
us to fines or penalties, which may materially and adversely affect our construction process, business operations and results of
operations.
Moreover, we started manufacturing without
having completed certain examination and acceptance procedures required by relevant regulations. Our failure to pass these examination
and acceptance procedures before commencing manufacturing may subject us to penalties, such as monetary fines or suspension of
our business operations. Moreover, on March 6 and March 12, 2014, Hainan Yingli received notices from the Department
of Land, Environment and Resources of Hainan Province, or Hainan LER Department, and the Haikou Municipal Environmental Protection
Bureau, respectively, requesting Hainan Yingli to (i) suspend partially its production lines, and (ii) apply for new environmental
impact assessments for the increase in its production capacity due to equipment upgrades. See “Item 4.B. Business Overview
— Environmental Matters”. On May 16, 2014, Hainan Yingli obtained trial production permits from Hainan LER Department,
and on October 29, 2014, Hainan LER Department approved our application for new environmental impact assessments. On December
12, 2014, Hainan Yingli obtained a Pollutant Discharge Permit from Hainan LER Department which was valid until December 12, 2015.
On March 26, 2015, Hainan Yingli received a notice from the Haikou Municipal Environmental Protection Bureau, demanding payment
of an environmental penalty of RMB62,630.40, and Hainan Yingli paid the penalty amount in full in April 2015. On December 12, 2015,
Hainan Yingli obtained a renewed Pollutant Discharge Permit from Hainan LER Department which will be valid until December 22, 2017.
On November 2016, Hainan Yingli received notices from the Department of Ecology and Environment Protection of Hainan Province and
Haikou Municipal Environmental Protection Bureau for its failure to meet the requirements for waste acid and pollutant discharge,
demanding payment of environmental penalties in the total amount of RMB 0.4 million and Hainan Yingli paid the penalty amount in
full in December 2016. Meantime, Hainan Yingli has adopted a series of measures, such as strengthening management and upgrading
facilities, to avoid the recurrence of similar incidents in the future.
In addition, any failure by us to control
the use of, or to adequately restrict the discharge of, hazardous substances from our manufacturing facilities could subject us
to potentially significant monetary damages and fines or suspensions in our business operations. Our manufacturing processes generate
noise, waste water, gaseous byproducts and other industrial wastes and these processes are required to comply with national and
local regulations regarding environmental protection. Except as disclosed in this annual report, we believe that we currently are
in compliance in all material respects with present environmental protection requirements, and have obtained or in the process
of obtaining all necessary environmental permits. In addition, if more stringent regulations are adopted in the future, the costs
of complying with these new regulations could be substantial. If we fail to comply with any future environmental regulations, we
may be required to pay substantial fines, suspend production or cease operations. See “Item 4.B. Business Overview —
PRC Governmental Regulations — Environmental Regulations”.
We had failed to fully make contributions to the social
insurances and housing provident fund for our employees, which may subject us to penalties from local regulatory authorities and
cause disputes with our employees.
Under relevant local regulations in China
where we have operations, we are required to make contributions to our employees’ social insurances and housing provident
fund on a monthly basis, and will be subject to penalties if we delay any of such contributions for more than three months. Due
to our tight cash flow since mid-2015, some of our subsidiaries failed to fully make contributions to the social insurances and
housing provident fund for their employees on time. As such, these subsidiaries had not been in compliance with local regulations
on social insurances and housing provident fund, and could be subject to penalties from local regulatory authorities. Under PRC
laws, potential penalties could reach 100%-300% of the delayed amount for social insurances and 300%-500% of the delayed amount
for housing provident fund. We have engaged in active discussions with the relevant local regulatory authorities, clarifying our
situation to them and seeking their understanding. While the local regulatory authorities indicated that they understood our situation
and had not imposed any penalties on us yet and we have fully paid up all overdue amounts and are currently making contributions
to our employees’ social insurances and housing provident fund on a monthly basis as of the date of this annual report, there
can be no assurance that they will not impose penalties on us in the future. In addition, our employees may file claims against
us for, or otherwise have disputes with us resulting from, our failure to make the required contributions and such disputes could
lead to lengthy and costly lawsuits or other legal proceedings. Any penalties imposed on us by regulatory authorities, any further
failure on our part to make the required contributions on time and in full, or any disputes with our employees or lawsuits and
legal proceedings resulting therefrom could have a material adverse effect on our business, financial condition and results of
operations.
We are subject to cyber security risks and breaches, which
could materially and adversely affect our business and disrupt our operations.
We are subject to cyber security risks
and may incur substantial costs to minimize those risks. Cyber security breaches, such as unauthorized access, accidents, employee
errors or malfeasance, computer viruses, hackings or other disruptions, could compromise the security of our data and information
technology infrastructure, thereby exposing such information to unauthorized third parties. Techniques used to obtain unauthorized
access to information systems, or to sabotage those systems, change frequently and generally are not recognized until launched
against a target. We may be required to expend significant capital and other resources to remedy, protect against or alleviate
these and related problems, and we may not be able to remedy these problems in a timely manner, or at all. Any security breaches
that occur could disrupt our operations, increase our security costs, or expose us to potential losses due to data corruption or
information leakage, which could have a material and adverse effect on our business.
Registered public accounting firms in China, including
our independent registered public accounting firm, are not inspected by the U.S. Public Company Accounting Oversight Board, which
deprives us and our investors of the benefits of such inspection.
Auditors of companies whose shares are
registered with the U.S. Securities and Exchange Commission and traded publicly in the United States, including our independent
registered public accounting firm, must be registered with the U.S. Public Company Accounting Oversight Board (the “PCAOB”)
and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the
laws of the United States and professional standards applicable to auditors. Our independent registered public accounting firm
is located in, and organized under the laws of, the PRC, which is a jurisdiction where the PCAOB, notwithstanding the requirements
of U.S. law, is currently unable to conduct inspections without the approval of the Chinese authorities. In May 2013, PCAOB announced
that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance,
which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations
undertaken by PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively. PCAOB continues to
be in discussions with the CSRC and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are
registered with PCAOB and audit Chinese companies that trade on U.S. exchanges.
This lack of PCAOB inspections in China
prevents the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting
firm. As a result, we and investors in our ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered
public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are
subject to PCAOB inspections, which could cause investors and potential investors in our ADSs to lose confidence in our audit procedures
and reported financial information and the quality of our financial statements.
Proceedings instituted by the SEC against the Big Four
PRC-based accounting firms, including our independent registered public accounting firm, could result in our financial statements
being determined to not be in compliance with the requirements of the Exchange Act.
In December 2012, the SEC brought administrative
proceedings against the Big Four accounting firms, including our independent registered public accounting firm, in China, alleging
that they had refused to produce audit work papers and other documents related to certain other China-based companies under investigation
by the SEC for potential accounting fraud. On January 22, 2014, an initial administrative law decision, or Initial Decision, was
issued, censuring these accounting firms and suspending four of the five firms from practicing before the SEC for a period of six
months. The accounting firms filed a Petition for Review of the Initial Decision to the SEC. On February 6, 2015, the Big Four
China-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of
their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed
procedures and to seek to provide the SEC with access to Chinese firms’ audit documents via the China Securities Regulatory
Commission, or the CSRC. If future document productions fail to meet specified criteria, the SEC retains authority to impose a
variety of additional remedial measures on the firms depending on the nature of the failure. While we cannot predict if the SEC
will further review the four China-based accounting firms’ compliance with specified criteria or if the results of such a
review would result in the SEC imposing penalties such as suspensions or restarting the administrative proceedings, if the accounting
firms are subject to additional remedial measures, our ability to file our financial statements in compliance with SEC requirements
could be impacted. A determination that we have not timely filed financial statements in compliance with SEC requirements could
ultimately lead to the delisting of our common stock from NYSE or the termination of the registration of our common stock under
the Securities Exchange Act of 1934, or both, which would substantially reduce or effectively terminate the trading of our common
stock in the United States.
The ordinary shares underlying the ADSs you purchased
could become redeemable by us without your approval.
Under the express terms of our ordinary
shares, the ordinary shares underlying the ADSs in our issued and outstanding share capital are not redeemable. However, our board
of directors may pass resolutions to allow us to redeem the ordinary shares from the holders, and two-thirds of the votes cast
by the holders of the ordinary shares may approve such variation of share rights. The minority shareholders will not be able to
prevent their share rights being varied in such a way and their ordinary shares could become redeemable by us as a result.
We have adopted a shareholders rights plan, which, together
with the other anti-takeover provisions of our articles of association, could discourage a third party from acquiring us, which
could limit our shareholders’ opportunity to sell their shares, including ordinary shares represented by our ADSs, at a premium.
Our current articles of association contain
provisions that limit the ability of others to acquire control of our company or to cause us to engage in change-of-control transactions.
On October 17, 2007, our board of directors adopted a shareholders rights plan, which was amended on June 2, 2008. Under
this rights plan, one right was distributed with respect to each of our ordinary shares outstanding at the closing of business
on October 26, 2007. These rights entitle the holders to purchase ordinary shares from us at half the market price at the
time of purchase in the event that a person or group obtains ownership of 15% or more of our ordinary shares (including by acquisition
of the ADSs representing an ownership interest in the ordinary shares) or enters into an acquisition transaction without the approval
of our board of directors.
This rights plan and the other anti-takeover
provisions of our articles of association could have the effect of depriving our shareholders of an opportunity to sell their shares
at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender
offer or similar transaction. Our existing authorized ordinary shares confer on the holders of our ordinary shares equal rights,
privileges and restrictions. The shareholders have, by virtue of adoption of our third amended and restated articles of association,
authorized the issuance of shares of par value of US$0.01 each without specifying any special rights, privileges or restrictions.
Therefore, our board of directors may, without further action by our shareholders, issue our ordinary shares, or issue shares of
such class and attach to such shares special rights, privileges or restrictions, which may be different from those associated with
our ordinary shares. Preferred shares also could be issued quickly with terms calculated to delay or prevent a change in control
of our company or to make removal of management more difficult. If our board of directors decides to issue ordinary shares or preferred
shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially
and adversely affected.
A simple majority of the holders of our shares who vote
at a general meeting may sub-divide any of our shares into shares of a smaller par value and may determine that, among the shares
so sub-divided, some of such shares may have preferred or other rights or restrictions that are different from those applicable
to other such shares.
Under our articles of association, a simple
majority of the holders of our shares who vote at a general meeting may sub-divide any of our shares into shares of a smaller par
value than is fixed by our articles of association, subject to the Companies Law of the Cayman Islands, and may by such resolution
determine that, among the shares so sub-divided, some of such shares may have preferred or other rights or restrictions that are
different from those applicable to the other such shares resulting from such sub-division. Any sub-divided shares will be allocated
on a pro-rated basis among the holders of our shares, and a two-thirds vote of any class of shares having special rights or restrictions
as a result of such sub-division will be required to further vary the special rights or restrictions attached to such shares.
The purpose of this provision is to give
flexibility to shareholders to vary our share capital by effecting a sub-division and to alter the rights attaching to the sub-divided
shares in order to facilitate transactions where shareholders provide benefits or contribute assets to our company in consideration
for an enhancement of the rights of their shares instead of issuing new shares. However, as the minority shareholders will not
be able to prevent the majority shareholders from effecting such sub-division and designation of special rights or restrictions,
such rights of our majority shareholders may discourage investors from making an investment in us, which may have a material adverse
effect on the price of our ADSs.
The quorum for the general meeting of our shareholders
is one-third of our issued voting shares. Accordingly, shareholder resolutions may be passed without the presence of the majority
of our shareholders in person or by proxy.
The quorum required for the general meeting
of our shareholders is two shareholders entitled to vote and present in person or by proxy or, if the shareholder is a corporation,
by its duly authorized representative representing not less than one-third in nominal value of our total issued voting shares.
Therefore, subject to obtaining the requisite approval from a majority of the shareholders so present, a shareholder resolution
may be passed at our shareholder meetings without the presence of the majority of our shareholders present in person or by proxy.
Such rights by the holders of a minority of our shares may discourage investors from making an investment in us, which may have
a material and adverse effect on the price of our ADSs.
If a poll is not demanded at our shareholder meetings,
voting will be by show of hands and shares will not be proportionately represented.
Voting at any of our shareholder meetings
is by show of hands unless a poll is demanded. A poll may be demanded by the chairperson of the meeting, or by at least three shareholders
present in person or by proxy, or by any shareholder or shareholders present in person or by proxy holding at least 10% of the
total voting rights of all shareholders having the right to vote at the meeting, or by a shareholder or shareholders present in
person or by proxy holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid
up equal to not less than one-tenth of the total sum paid up on the shares conferring that right. If a poll is demanded, each shareholder
present in person or by proxy will have one vote for each ordinary share registered in his name. If a poll is not demanded, voting
will be by show of hands and each shareholder present in person or by proxy will have one vote regardless of the number of shares
registered in his name. In the absence of a poll, shares therefore will not be proportionately represented.
Risks Related to Doing Business in China
Adverse changes in political and economic policies of
the PRC government could have a material and adverse effect on the overall economic growth of China, which could reduce the demand
for our products and materially and adversely affect our competitive position.
Our business is based in China and some
of our sales are made in China. Accordingly, our business, financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed
countries in many respects, including the level of government involvement, the level of development, the growth rate, the control
of foreign exchange, and the allocation of resources. While the Chinese economy has grown significantly in the past 30 years, the
growth has been uneven, both geographically and across various sectors of the economy. The PRC government has implemented various
measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese
economy, but may have a negative effect on us. For example, our financial condition and results of operations may be materially
and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.
In addition, we cannot assure you that
the Chinese economy will continue to grow, or that if there is growth, such growth will be steady and uniform, or that if there
is a slowdown, such slowdown will not have a negative effect on our business. For example, the growth rate of China’s gross
domestic product has slowed down in recent years, from 6.9% in 2015 to 6.7% in 2016. The Chinese government has set the expected
gross domestic product growth rate at 6.5% for 2017. We cannot assure you that the various macroeconomic measures, monetary policies
and economic stimulus package adopted by the PRC government to guide economic growth and the allocation of resources will be effective
in sustaining the rapid growth rate of the Chinese economy.
The Chinese economy has been transitioning
from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures
emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the
establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is
still owned by the PRC government. The continued control of these assets and other aspects of the national economy by the PRC government
could materially and adversely affect our business. The PRC government also exercises significant control over Chinese economic
growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and
providing preferential treatment to particular industries or companies.
Any adverse change in the economic conditions
or government policies in China could have a material and adverse effect on overall economic growth and the level of renewable
energy investments and expenditures in China, which in turn could lead to a reduction in demand for our products and consequently
have a material and adverse effect on our businesses.
Uncertainties with respect to the PRC legal system could
have a material and adverse effect on us and substantial uncertainties exist with respect to the enactment timetable, the final
version, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current
corporate structure, corporate governance and business operations.
We are incorporated in the Cayman Islands
and are subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to Sino-foreign
equity joint venture companies and wholly foreign owned companies. The PRC legal system is based on written statutes. Prior court
decisions may be cited for reference but have limited precedential value. Since 1979, PRC legislation and regulations have significantly
enhanced the protections afforded to various forms of foreign investment in China. However, since these laws and regulations are
relatively new and the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are
not always uniform, and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections
available to us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources
and management attention. However, since these laws and regulations are relatively new and the PRC legal system continues to evolve
rapidly, the interpretations of laws, regulations and rules are not always uniform, and enforcement of these laws, regulations
and rules involve uncertainties, which may limit legal protections available to us. In addition, any litigation in China may be
protracted and result in substantial costs and diversion of resources and management attention.
The Ministry of Commerce published a discussion
draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating
foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture
Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.
The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime
in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign
and domestic investments. The Ministry of Commerce has solicited comments on this draft and substantial uncertainties exist with
respect to its enactment timetable, the final version, interpretation and implementation. The draft Foreign Investment Law, if
enacted as proposed, may materially impact our corporate governance practice and increase our compliance costs. For instance, the
draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and
the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment
and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are
required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may
potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject
to criminal liabilities. It is uncertain when the draft would be signed into law and whether the final version would have any substantial
changes from the draft.
The PRC rule on mergers and acquisitions may subject
us to sanctions, fines and other penalties and negatively affect our ability to acquire complementary businesses in order to grow
our business in the future.
On August 8, 2006, six PRC government
and regulatory authorities, including the PRC Ministry of Commerce, or the MOFCOM, and the Chinese Securities Regulatory Commission,
or the CSRC, promulgated a rule entitled
Provisions regarding Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors
, or the M&A Rule, which became effective on September 8, 2006 and was amended on June 22, 2009. The M&A
Rule, as amended, among other things, established procedures and requirements that could make merger and acquisition activities
by foreign investors time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance
of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise or of a foreign company
with substantial PRC operations, if certain thresholds are triggered under the Provisions on Thresholds for Prior Notification
of Concentrations of Undertakings, issued by the State Council on August 3, 2008. Furthermore, MOFCOM promulgated the
Rules of
Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisition of Domestic Enterprises by Foreign
Investors
in August 2011, or the MOFCOM Security Review Rules, which came into effect on September 1, 2011, to implement
the
Notice of the General Office of the State Council on Establishing the Security Review System for Mergers and Acquisitions
of Domestic Enterprises by Foreign Investors
promulgated on February 3, 2011, or Circular No. 6. According to Circular
No. 6, a security review is required for mergers and acquisitions by foreign investors of PRC domestic enterprises (i) having
“national defense and security” concerns, and (ii) where the foreign investors may acquire the “de facto
control” of PRC domestic enterprises having national security concerns such as key farm products, key energy and resources,
and key infrastructure, transportation, technology and major equipment manufacturing industries. Circular No. 6, however,
does not define the terms “key” or “major”, nor has it exhausted all of the industries that may be deemed
as sensitive industries subject to a security review. When deciding whether a specific merger or acquisition of a domestic enterprise
by foreign investors is subject to a security review by MOFCOM, the principle of “substance over form” should be applied.
Foreign investors are prohibited from bypassing the security review requirement by structuring transactions through nominee holding
structures, trusts, indirect investments, leases, loans, control through contractual arrangements, offshore transactions, or other
means. We believe that our current business is not in an industry that is sensitive or related to national security. However, we
cannot preclude the possibility that MOFCOM or other government agencies may release interpretations or new rules contrary to our
understanding, or broaden the scope of such security review in the future. In the future, we may grow our business in part by acquiring
complementary businesses, although we do not have any plans to do so at this time. Complying with the requirements of these regulations
in order to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval
from the MOFCOM, may delay or inhibit the completion of such transactions, which could affect our ability to expand our business
and maintain our market share.
PRC regulations relating to overseas investment by PRC
residents may restrict our overseas and cross-border investment activities and adversely affect the implementation of our strategy
as well as our business and prospects.
In 2005, the PRC State Administration of
Foreign Exchange, or SAFE, issued a number of rules regarding offshore investments by PRC residents. The rule currently in effect,
the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing
and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, was issued on July 4, 2014, which replaced the
former circular commonly known as SAFE Circular 75 promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents
to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity,
for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in
domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a special purpose vehicle. SAFE Circular
37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle,
such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material
event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration,
the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent
and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in
its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration
requirements described above could result in liability under PRC law for evasion of foreign exchange controls. On February 13,
2015, SAFE released the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct
Investment, or SAFE Circular 13, which will become effective on June 1, 2015. According to this notice, local banks will examine
and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and
amendment registration, under SAFE Circular 37. However, since the notice has not yet come into effect, there exists a high degree
of uncertainty as to how it will be interpreted and implemented by governmental authorities and banks. Since we are a Cayman Islands
company with a substantial portion of our shares held by Yingli Power Holding Company Ltd., a British Virgin Islands company controlled
by Mr. Liansheng Miao, our chairperson and chief executive officer who is a PRC resident, Mr. Miao is subject to the registration
requirements under SAFE Circular 37 and other related rules.
Mr. Miao made the requisite SAFE registration
under SAFE Circular 75 with respect to his investment in Yingli Power Holding Company Ltd. and us in August 2006. Mr. Miao amended
his SAFE registration in June 2007, January 2008, October 2009 and January 2014, in connection with our initial public offering
in June 2007, our secondary and convertible senior notes offerings in December 2007, our issuance of senior secured convertible
notes and the follow-on offering in 2009, and the change of Mr. Miao’s shareholding in Yingli Power Holding Company Ltd.
and us in 2014, respectively.
Mr. Miao amended his SAFE registration under SAFE Circular 75 in accordance with SAFE
Circular 37 in connection with our follow-on offering in 2014
.
We have requested other of our beneficial owners who
are PRC residents to make the necessary applications and filings in connection with our offshore financing transactions as required
under SAFE Circular 37 and relevant SAFE guidance. However, we may not be informed of the identities of all the PRC residents holding
direct or indirect interest in our company, and we cannot provide any assurance that these PRC residents will comply with our request
to make or obtain any applicable registrations or comply with other requirements under SAFE Circular 37 or other related rules.
The failure or inability of Mr. Miao or any of our PRC resident shareholders to comply with the registration procedures set forth
in SAFE Circular 37 and other related rules may subject Mr. Miao or other PRC resident shareholders to fines and legal penalties,
result in potential liability for our PRC subsidiaries, and in some instances, for their legal representatives and other liable
individuals, limit our ability to contribute additional capital into or provide loans to our PRC subsidiaries, and also may limit
the ability of our PRC subsidiaries to pay dividends or otherwise distribute profits to us, or otherwise adversely affect us. See
“Item 4.B. Business Overview — PRC Governmental Regulations — Regulation of Foreign Exchange in Certain Onshore
and Offshore Transactions”.
Dividends we may receive from our operating subsidiaries
located in the PRC may be subject to PRC withholding tax.
The Enterprise Income Tax Law, or the EIT
Law, and its implementation rules provide that withholding tax at a rate of 10% is applicable to dividends payable to non-PRC
investors that are “non-resident enterprises”, to the extent such dividends are derived from sources within the PRC,
unless any such non-PRC investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different
withholding arrangement. Furthermore, a circular issued on February 22, 2008 by the Ministry of Finance, or the MOF, and the
State Administration of Taxation stipulates that undistributed earnings generated prior to January 1, 2008 are exempt from
enterprise income tax. We are a Cayman Islands holding company, Yingli Green Energy (International) Holding Company Limited, or
Yingli International, is a British Virgin Islands intermediate holding company, and Cyber Lighting Holding Company Limited, or
Cyber Lighting, is a Hong Kong intermediate holding company. The Cayman Islands and the British Virgin Islands where such holding
companies are incorporated do not have a tax treaty with China. According to the
Arrangement between Mainland China and the
Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes
on Income
entered into in August 2006, or the Mainland and the Hong Kong Taxation Arrangement, subject to the confirmation
of the local tax authority in charge, dividends paid by a foreign-invested enterprise in China to its direct holding company in
Hong Kong will be subject to withholding tax at a rate of no more than 5%, if the foreign investor is the “beneficial owner”
and owns directly at least 25% the equity interests in the foreign-invested enterprise. Furthermore, the State Administration of
Taxation promulgated the
Notice on How to Understand and Determine the Beneficial Owners in Tax Agreement
s in October 2009,
or Circular 601, which provides guidance for determining whether a resident of a contracting country is the “beneficial owner”
of an item of income under China’s tax treaties and tax arrangements. According to Circular 601, a beneficial owner generally
must be engaged in substantive business activities. An agent or conduit company will not be regarded as a beneficial owner and,
therefore, will not qualify for treaty benefits. A conduit company normally refers to a company that is set up for the purpose
of avoiding or reducing taxes or transferring or accumulating profits. Substantially all of our income may be derived from dividends
we receive from our operating subsidiaries located in the PRC. Thus, dividends for earnings accumulated beginning on January 1,
2008 payable to us by our subsidiaries in China, if any, will be subject to a 10% withholding tax or, in the case of the dividends
paid to Cyber Lighting, 5% withholding tax (subject to the confirmation of the local tax authority), if we are considered under
the EIT Law to be a “non-resident enterprise”. We intend indefinitely to reinvest undistributed earnings accumulated
in and after 2008 and therefore have not recognized a deferred income tax liability with respect to those earnings. If we are subject
under the EIT Law to such withholding tax for any dividends we may receive from our subsidiaries, it will materially and adversely
increase our income tax expenses.
We and some of our subsidiaries may be deemed resident
enterprises under the EIT Law and be subject to PRC taxation as to our worldwide income.
The EIT Law also provides that enterprises
established outside China whose “de facto management bodies” are located in China are considered “resident enterprises”
and generally are subject to the uniform 25% enterprise income tax rate as to their worldwide income. Under the implementation
rules for the EIT Law issued by the State Council, a “de facto management body” is defined as a body that has
substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties
and other factors of an enterprise. On April 22, 2009, the State Administration of Taxation promulgated the
Notice Regarding
the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto
Management Bodies
, or SAT Circular 82 which sets out criteria for determining whether “de facto management bodies”
are located in China for overseas incorporated, domestically controlled enterprises. However, as this circular only applies to
enterprises incorporated under laws of foreign countries or regions that are controlled by PRC enterprises or groups of PRC enterprises,
it remains unclear how the tax authorities will determine the location of “de facto management bodies” for enterprises
incorporated overseas that are controlled by individual PRC residents like us and some of our subsidiaries. Therefore, although
substantially all of our management is currently located in the PRC, it remains unclear whether the PRC tax authorities would require
or permit our overseas registered entities to be treated as PRC resident enterprises. If the PRC tax authorities determine that
Yingli Green Energy and some of our subsidiaries, such as Yingli International, Yingli Capital, Yingli Hong Kong, Cyber Power and
Cyber Lighting, are PRC resident enterprises, we and such subsidiaries may be subject to enterprise income tax at the rate of 25%
as to our global income, which could have an impact on our effective tax rate and a material and adverse effect on our net income
and results of operations, although dividends distributed from our PRC subsidiaries to us would be exempt from the PRC dividend
withholding tax, since such income distribution is exempted under the EIT Law if paid to PRC resident recipients.
Dividends payable by us to non-PRC holders of our ordinary
shares or ADS and gains on the sale of our ordinary shares or ADSs may become subject to taxes under PRC tax laws.
Under the EIT Law and implementation rules issued
by the State Council, PRC withholding tax at a rate of 10% is applicable to payments of dividends to investors that are “non-resident
enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place
of business but the relevant income is not effectively connected with the establishment or place of business, to the extent that
such payments of dividends have their sources within the PRC. PRC withholding tax at a rate of 20% is applicable to payments of
dividends to investors who are non-resident individuals, to the extent that such payments of dividends have their sources within
the PRC. Any gain realized on the transfer of ADSs or ordinary shares by such investors also is subject to PRC income tax if such
gain constitutes income derived from sources within the PRC. It is currently unclear what constitutes income derived from sources
within the PRC. Therefore, it is unclear whether dividends we may pay with respect to our ordinary shares or ADSs, or the gain
you may realize from the transfer of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC
and be subject to PRC tax if we were treated as a PRC resident enterprise. Furthermore, according to Circular 601, a beneficial
owner generally must be engaged in substantive business activities. An agent or conduit company will not be regarded as a beneficial
owner and, therefore, will not qualify for treaty benefits. A conduit company normally refers to a company that is set up for the
purpose of avoiding or reducing taxes or transferring or accumulating profits. We cannot assure you that any dividends to be distributed
by us to our non-PRC shareholders and ADS holders whose jurisdiction of incorporation has a tax treaty with China providing for
a different withholding arrangement will be entitled to the benefits under that relevant withholding arrangement. If we are required
under the EIT Law to withhold PRC income tax on dividends payable to non-PRC holders of our ordinary shares or ADSs, or if you
are required to pay PRC income tax on the transfer of our ordinary shares or ADSs, the value of your investment in our ordinary
shares or ADSs may be materially and adversely affected.
We face uncertainties with respect to indirect transfers
of equity interests in PRC resident enterprises or other assets attributed to a Chinese establishment of a non-Chinese company,
or immovable properties located in China owned by non-Chinese companies. PRC tax authorities’ heightened scrutiny of acquisition
transactions involving any such indirect transfer may have a negative impact on our acquisition strategy.
On February 3, 2015, the State Administration
of Taxation issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises,
or Bulletin 7, which replaced or supplemented previous rules under the Notice on Strengthening Administration of Enterprise Income
Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698, issued by the State Administration of Taxation, on December
10, 2009. Pursuant to this Bulletin, an “indirect transfer” of assets, including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if
such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise
income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin
7, “PRC taxable assets” include assets attributed to an establishment in China, immoveable properties located in China,
and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC
resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a “reasonable commercial
purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity
interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise
mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise
and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their
actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability
of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax
treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain
is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would
consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable
properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment
or place of business of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential
tax treatment under applicable tax treaties or similar arrangements, and the payer bears the withholding obligation. Where the
payer fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within
the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Bulletin 7 does not apply
to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction
through a public stock exchange.
There is uncertainty as to the application
of Bulletin 7 and the previous rules under Circular 698. Tax authorities may determine that Bulletin 7 is applicable to any offshore
transaction involving both us and a non-PRC resident enterprise. As a result, both transferors and transferees may be subject to
obligations to withhold, or make filings regarding, EIT, and one or more of our PRC subsidiaries may need to assist with such filing.
Furthermore, we and one or more of our non-PRC resident enterprises or PRC subsidiaries may need to spend valuable resources in
order to comply with Bulletin 7, or to establish that we and our non-PRC resident enterprises should not be taxed under Bulletin
7. Any such expenditure of valuable resources may have a material and adverse effect on our financial condition and results of
operations.
Restrictions on currency exchange may limit our ability
to receive dividends from our PRC subsidiaries and their ability to obtain overseas financing.
Under the Foreign Currency Administration
Rules, the foreign exchange incomes of domestic entities and individuals can be remitted into China or deposited abroad, subject
to terms and conditions to be issued by SAFE. Our PRC subsidiaries are able to pay dividends to their shareholders, including us,
in foreign currency without prior approval from SAFE, by complying with certain procedural requirements. However, we cannot assure
you that in the future the PRC government will not take measures to restrict access to foreign currencies for current account transactions,
including payment of such dividends.
Foreign exchange transactions for capital
account items, such as direct equity investments, loans and repatriation of investments, by our PRC subsidiaries continue to be
subject to significant foreign exchange controls and require the approval of PRC governmental authorities, including SAFE. In particular,
if our PRC subsidiaries borrow foreign currency-denominated loans from us or other foreign lenders, these loans must be registered
with the local offices of SAFE. These limitations could affect their ability to obtain additional equity or debt funding that is
denominated in foreign currencies.
PRC regulation of direct investment and loans by offshore
holding companies to PRC entities may delay or limit us from making additional capital contributions or loans to our PRC subsidiaries.
Any capital contributions or loans that
we, as an offshore entity, make to our PRC subsidiaries are subject to PRC regulations. For example, any of our loans to our PRC
subsidiaries cannot exceed the difference between the total amount of investment our PRC subsidiaries are approved to make under
relevant PRC laws and the respective registered capital of our PRC subsidiaries, and must be registered with the local branch of
SAFE as a procedural matter. In addition, our capital contributions to our PRC subsidiaries must be approved by MOFCOM or its local
counterpart. We cannot assure you that we will be able to obtain these approvals on a timely basis, or at all. If we fail to obtain
such approvals, our ability to make equity contributions or to provide loans to our PRC subsidiaries or to fund their operations
may be negatively affected, which could adversely affect their liquidity and its ability to fund their working capital and expansion
projects and meet their obligations and commitments. In addition, our capital contributions and, in limited circumstances, loans,
to Tianwei Yingli also are subject to approvals by Tianwei Baobian, the holder of the minority equity interest in Tianwei Yingli.
See “Item 4.A. History and Development of the Company — Joint Venture Contract — Increase or Reduction of Tianwei
Yingli’s Registered Capital”.
We rely principally on dividends and other distributions
on equity paid by our PRC operating subsidiaries and limitations on their ability to pay dividends to us could have a material
and adverse effect on our business and results of operations.
We are a holding company and we rely principally
on dividends and other distributions on equity paid by our major PRC operating subsidiaries, including Tianwei Yingli, Yingli China,
and Hainan Yingli New Energy Resources Co., Ltd., or Hainan Yingli, a PRC limited liability company and a subsidiary of Yingli
China, for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to
our shareholders, to service any debt we may incur and to pay our operating expenses. If Tianwei Yingli, Yingli China, Hainan Yingli,
Tianjin Yingli or Lixian Yingli incurs debt on their own behalf in the future, the instruments governing the debt may restrict
their ability to pay dividends or make other distributions to us. As entities established in China, Tianwei Yingli, Yingli China,
Hainan Yingli, Tianjin Yingli and Lixian Yingli are subject to certain limitations with respect to dividend payments. PRC regulations
currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and
regulations in China.
As a Sino-foreign equity joint venture,
Tianwei Yingli also is required each year to set aside a percentage, as decided by its board of directors, of its after-tax profits
based on PRC accounting standards to its reserve fund, enterprise development fund and employee bonus and welfare fund. As of December 31,
2016, such restricted reserves of Tianwei Yingli amounted to RMB236.9 million (US$34.1 million).
As a foreign investment enterprise, Yingli
China is required to allocate at least 10% of its after-tax profits to its reserve fund until the cumulative amount of such reserve
fund reaches 50% of its registered capital, and to set aside a certain amount of its after-tax profits each year, if any, to its
employee bonus and welfare fund. These reserves may not be distributed as cash dividends. As of December 31, 2016, such restricted
reserves of Yingli China amounted to RMB183.9 million (US$26.5 million).
As a PRC domestic company, Hainan Yingli
is required to allocate at least 10% of its after-tax profits to its reserve fund until the cumulative amount of such reserve fund
reaches 50% of its registered capital. These reserves may not be distributed as cash dividends. As of December 31, 2016, such
restricted reserves of Hainan Yingli amounted to RMB56.1 million (US$8.1 million).
As a PRC domestic company, Tianjin Yingli
is required to allocate at least 10% of its after-tax profits to its reserve fund until the cumulative amount of such reserve fund
reaches 50% of its registered capital. These reserves may not be distributed as cash dividends. As of December 31, 2016, such
restricted reserves of Tianjin Yingli amounted to RMB9.7 million (US$1.4 million).
As a PRC domestic company, Lixian Yingli
is required to allocate at least 10% of its after-tax profits to its reserve fund until the cumulative amount of such reserve fund
reaches 50% of its registered capital. These reserves may not be distributed as cash dividends. As of December 31, 2016, such
restricted reserves of Lixian Yingli amounted to RMB2.0 million (US$0.3 million).
In addition, if any of our PRC operating
subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends
or make other distributions to us. Limitations on the ability of our PRC operating subsidiaries to pay dividends to us could adversely
limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends, or otherwise
fund and conduct our business. Accordingly, if for any of the above or other reasons, we cannot receive dividends from our PRC
operating subsidiaries, our liquidity, financial condition and ability to make dividend distributions to our shareholders will
be materially and adversely affected.
SAFE rules and regulations may limit our ability
to convert and transfer the net proceeds from our financings to our PRC subsidiaries, which may adversely affect the business expansions
of our PRC subsidiaries, and we may not be able to convert the net proceeds from our financings into Renminbi to invest in or acquire
any other PRC companies.
On August 29, 2008, SAFE promulgated
Circular 142, or SAFE Notice 142, a notice regulating the conversion by a foreign invested company of foreign currency into Renminbi
by restricting how the converted Renminbi may be used. The notice requires that the registered capital of a foreign-invested company,
which is settled in Renminbi and converted from foreign currencies, may only be used for purposes within that company’s business
scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition,
SAFE heightened its scrutiny of the flow and purpose of use of the registered capital of a foreign-invested company settled in
Renminbi converted from foreign currencies. The purpose of use for such Renminbi capital shall be within the business scope of
the user as approved by the relevant governmental authority, and may not be changed without SAFE’s approval, and may not
in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of SAFE Notice 142 may
result in severe penalties, such as heavy fines. On July 15, 2014, SAFE issued a SAFE Notice 36 which launched the pilot reform
of administration regarding conversion of foreign currency registered capitals of foreign-invested enterprises in 16 pilot areas.
According to the SAFE Notice 36, an ordinary foreign-invested enterprise with a business scope containing “investment”
in the pilot areas is permitted to use Renminbi converted from its foreign-currency registered capital to make equity investments
in the PRC, subject to certain registration and settlement procedure as set forth in the SAFE Notice 36.
On November 19, 2012, SAFE promulgated
the
Circular on Further Improving and Adjusting the Policies on Administration of Foreign Exchange under Direct Investment
,
or Circular 59, which came into force on December 17, 2012. Circular 59 relaxes the foreign exchange controls over inbound
and outbound investments by PRC companies and simplifies the current administrative system, especially in foreign currency capital
settlement and foreign exchange registration procedures of foreign invested enterprises. On November 9, 2011, SAFE also promulgated
a Circular 45, which, among other things, restricts a foreign-invested enterprise from using RMB converted from its registered
capital to provide entrusted loans or repay loans between non-financial enterprises.
The SAFE Notice 142 and SAFE Notice 36
were replaced by SAFE Notice 19 on June 1, 2015. The SAFE Notice 19 expands the reform of administration regarding conversion of
foreign currency registered capitals of foreign-invested enterprises pursuant to the SAFE Notice 36 to a nationwide scope. According
to the SAFE Notice 19, the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may
be used for purposes within the business scope, make payment of equity investment and may not be used to repay inter-enterprise
loans or RMB loans already refinanced to any third party.
However, as the restrictions imposed by
the SAFE Notice 142, Circular 59 and Circular 45 are still effective and may significantly limit our ability to transfer the net
proceeds from our financings to our PRC subsidiaries, the business expansions of our PRC subsidiaries may be adversely affected.
In addition, considering that SAFE Notice 19 is lately promulgated and has not taken effective yet, it is unclear how it will be
implemented and there exist high uncertainties with respect to its interpretation and implementation by authorities.
All employee participants in our existing stock option
plans who are PRC citizens may be required to register with SAFE. We also may face regulatory uncertainties that could restrict
our ability to adopt additional option plans for our directors and employees under PRC law.
Pursuant to the
Implementation Rules of
the Administrative Measures on Individual Foreign Exchange
, or the Individual Foreign Exchange Rules, promulgated on January 5,
2007 by SAFE and the
Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Share Incentive Plans of Overseas-listed Companies
, or the Share Option Rules, promulgated in February 2012 by SAFE,
which terminated the
Operating Procedures on Administration of Foreign Exchange for Domestic Individuals Participating in Employee
Share Ownership Plans and Share Option Plans of Overseas-listed Companies
issued by SAFE in March 2007, PRC citizens or
residents habitually residing in the PRC continuously for over one year, who are granted shares or share options by an overseas-listed
company according to its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas-listed
company or qualified PRC agents, to register with SAFE and complete certain other procedures related to the shareholding plan,
share option plan or other similar share incentive plans. Concurrent with the registration with SAFE, the PRC subsidiary or qualified
PRC agent shall obtain approval for an annual foreign exchange allowance in connection with potential exercises under the shareholding
or share option plan as well as an approval for opening a special foreign exchange account in a domestic PRC bank to hold the funds
required to exercise such share purchase or share option right, returned principal or profits upon sale of shares, dividends issued
on the stock, and any other income or expenditures approved by SAFE. Currently, participating PRC residents’ foreign exchange
income received from the sale of shares or dividends distributed by an overseas-listed company must be fully remitted into the
domestic foreign currency account before being distributed to such participants. In addition, the PRC agents are required to amend
or deregister the registrations with SAFE in case of any material change in, or termination of, the share incentive plans, within
the time periods provided by the Share Option Rules. Any failure to comply with such provisions may subject us and the participants
of our employee stock option plan who are PRC citizens to fines and legal sanctions and prevent us from further granting options
under our employee stock option plan to our employees, which could adversely affect our business operations.
We face risks related to health epidemics and other outbreaks
of contagious diseases.
Our business could be adversely affected
by the effects of Severe Acute Respiratory Syndrome, or SARS, avian flu, or another epidemic or outbreak. In 2005 and 2006, there
were reports on occurrences of avian flu in various parts of China, including a few confirmed human cases. During 2007 and early
2008, there were reports of outbreaks of a highly pathogenic avian flu, caused by the H5N1 virus, in certain regions of Asia and
Europe. In 2009 and 2010, there were reports on occurrences of swine flu, caused by the H1N1 virus, in Mexico, the United States,
China and certain other countries and regions around the world. In 2013, there were reports on occurrences of avian flu, caused
by the H7N9 virus, in certain regions in China. An outbreak of avian flu or swine flu in the human population could result in a
widespread health crisis that could adversely affect the economies and financial markets of many countries, particularly in Asia.
Additionally, any recurrence of SARS, a highly contagious form of atypical pneumonia, similar to the occurrence in 2003 which affected
China, Hong Kong, Taiwan, Singapore, Vietnam and certain other countries, also would have similar adverse effects. The Ebola virus
outbreak in West Africa that began in March 2014 was the largest and most complex Ebola outbreak since the Ebola virus was first
discovered in 1976. This Ebola outbreak was declared a Public Health Emergency of International Concern by the World Health Organization
(“WHO”) on August 8, 2014. In January 2016, WHO declared the end of Ebola outbreak in West Africa since in March 2014.
These outbreaks of contagious diseases, and other adverse public health developments in China, would have a material and adverse
effect on our business operations. These could include restrictions on our ability to travel or to ship our products outside of
China, as well as cause temporary closure of our manufacturing facilities. Such closures or travel or shipment restrictions would
severely disrupt our business operations and adversely affect our financial condition and results of operations. We have not adopted
any written preventive measures or contingency plans to combat any future outbreak of avian flu, swine flu, SARS or any other epidemic.
Risks Related to our ADSs
The market price for our ADSs has been volatile.
The market price for our ADSs has been
and will continue to be highly volatile. Since the ADSs became listed on the NYSE on June 8, 2007, the trading prices of the ADSs,
after retroactively adjusted to reflect the current ADS-to-ordinary share ratio of one ADS to ten ordinary shares, had ranged from
US$3.02 to US$414.0 per ADS. On August 13, 2015, we received a notice from the New York Stock Exchange, or the NYSE, stating that
we were not in compliance with the NYSE’s price criteria for continued listing because, as of August 12, 2015, the average
closing price of the ADSs was less than $1.00 per ADS over a consecutive 30 trading-day period. Thus, on December 28, 2015, we
announced a plan to change the ratio of ADSs to ordinary shares from a ratio of one (1) ADS to one (1) ordinary shares to a ratio
of one (1) ADS to ten (10) ordinary shares, which ratio change became effective on December 28, 2015. The corresponding effect
on the price of the ADSs also took place on December 28, 2015.
On January 6, 2016, we were notified by
the NYSE that we had regained compliance with NYSE’s continued listing criteria regarding the price of the ADSs since the
average closing price of the ADSs for the consecutive 30 trading days ended December 31, 2015 and the closing price of the ADSs
on December 31, 2015 both exceeded US$1.00. The last reported trading price of our ADSs on May 11, 2017 was US$2.4 per ADS.
The price of our ADSs may continue
to fluctuate in response to factors including the following:
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announcements of any significant change in our business, financial condition and results of operations;
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announcements of technological or competitive developments;
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regulatory developments in our target markets affecting us, our customers or our competitors;
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announcements regarding patent litigation or the issuance of patents to us or our competitors;
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announcements of studies and reports relating to the conversion efficiencies of our products or those of our competitors;
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actual or anticipated fluctuations in our quarterly results of operations;
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changes in financial projections or estimates about our financial or operational performance by securities research analysts;
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changes in the economic performance or market valuations of other PV technology companies;
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addition or departure of our executive officers and key research personnel;
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release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and
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sales or perceived sales of additional ordinary shares or ADSs.
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In addition, the securities market has
from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular
companies. These market fluctuations also may have a material and adverse effect on the market price of our ADSs.
Substantial future sales or perceived sales of our ADSs
in the public market could cause the price of our ADSs to decline.
As of the date of this annual report,
we had 181,763,770 ordinary shares outstanding, including 128,933,690 ordinary shares represented by ADSs. All ADSs sold in
our public offerings are freely transferable without restriction or additional registration under the Securities Act of 1933,
as amended, or the Securities Act. All of the remaining ordinary shares outstanding are, subject to the applicable
requirements of Rule 144 under the Securities Act, available for sale. If our existing shareholders sell, or are
perceived as intending to sell, substantial amounts of our ordinary shares or ADSs, including those issued upon the exercise
of our outstanding stock options, the market price of our ADSs could fall. Such sales, or perceived potential sales, by our
existing shareholders might make it more difficult for us to issue new equity or equity-related securities in the future at
such a time and place as we deem appropriate.
We have fallen below the continued listing requirements
of the New York Stock Exchange, and if we cannot regain compliance in time, our ADSs may be delisted and the liquidity and the
trading price of our ADSs could be materially and adversely affected.
We received notification from the New York
Stock Exchange, or NYSE, in February 2017 of our company’s non-compliance with the continued listing standards because our
average market capitalization had been less than US$50 million over a consecutive 30 trading-day period and our last reported shareholders’
equity was less than US$50 million. In order to maintain continued listing on the NYSE, our company has submitted a plan to the
NYSE demonstrating how we intend to regain compliance with the NYSE’s continued listing standards within eighteen months
of the notification from NYSE. The NYSE staff will then evaluate the plan to determine whether our company has made a reasonable
demonstration of an ability to come into conformity with the listing standard within eighteen months. Should our company not meet
the specified criteria within that period, our ADSs may be subject to trading suspension and possible delisting from the NYSE.
We also were notified by the NYSE on August
13, 2015, of our company’s non-compliance with the continued listing standard because the average closing price of our ADSs
was less than US$1.00 per ADS over a consecutive 30 trading-day period. In December 2015, we effected a ratio change in our ADS
program. Following that change, each ADS represents ten (10) ordinary shares, compared to each ADS representing one (1) ordinary
share prior to the ratio change. Consequently, since the date of the ratio change the trading price of our ADSs has been in excess
of US$1.00. However, the trading price of our ADSs has experienced further significant decline since the ratio change and it may
drop below US$1.00 again in the future, which may again cause our non-compliance with such continued listing standard.
Should we fail to regain compliance with
NYSE’s continued listing requirements or encounter any additional non-compliance, our ADSs may be delisted from the NYSE,
and the liquidity and the trading price of our ADSs could be materially and adversely affected.
Holders of ADSs have fewer rights than shareholders and
must act through the depositary to exercise those rights.
Holders of ADSs do not have the same rights
as our shareholders and may only exercise voting rights with respect to the underlying ordinary shares in accordance with the provisions
of the deposit agreement. As a holder of ADSs, you will not be treated as one of our shareholders and you will not have shareholder
rights. Instead, the depositary will be treated as the holder of the ordinary shares underlying your ADSs. While you may exercise
some shareholders’ rights through the depositary and you have the right to withdraw the ordinary shares underlying your ADSs
from the deposit facility, such rights are subject to various limitations and restrictions as set forth in the deposit agreement.
Under our current articles of association, the minimum notice period required to convene a general meeting is ten days. When a
general meeting is convened, you may not receive sufficient notice of a shareholders’ meeting to permit you to withdraw your
ordinary shares to allow you to cast your vote with respect to any specific matter. In addition, the depositary and its agents
may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We plan to make reasonable
efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive
the voting materials in time to ensure that you can instruct the depositary to vote your ADSs. Furthermore, the depositary and
its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast
or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if
your ADSs are not voted as you had requested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholder
meeting.
The depositary for the ADSs will give us a discretionary
proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, except in limited circumstances,
which could adversely affect your interests.
Under the deposit agreement for the ADSs,
the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders’ meetings
if you do not vote, unless:
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we have failed to provide the depositary with notice of the meeting at least 45 days prior to the date of such shareholders’ meeting;
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we have informed the depositary in writing that (i) we do not wish a discretionary proxy to be given; (ii) substantial opposition exists with respect to any agenda item for which the proxy would be given; or (iii) the agenda item in question, if approved, would materially or adversely affect the rights of holders of ordinary shares;
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we have failed to provide the depositary with an opinion of our counsel in form and substance satisfactory to the depositary to the effect that (a) the granting of such discretionary proxy does not subject the depositary to any reporting obligations in the Cayman Islands, (b) the granting of such proxy will not result in a violation of Cayman Islands law, rule, regulation or permit, (c) the voting arrangement and deemed instruction as contemplated in the deposit agreement will be given effect under Cayman Islands law, and (d) the granting of such discretionary proxy will not under any circumstances result in the ordinary shares represented by the ADSs being treated as assets of the depositary under Cayman Islands law; or
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voting at the meeting is made on a show of hands.
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The effect of this discretionary proxy
is that you cannot prevent the ordinary shares underlying your ADSs from being voted, absent the situations described above, and
it may make it more difficult for shareholders to influence our management. Holders of our ordinary shares are not subject to this
discretionary proxy.
You may not receive distributions on our ordinary shares
or any value for them if it is illegal or impractical to make them available to you.
The depositary of the ADSs has agreed to
pay you the cash dividends or other distributions it or the custodian for the ADSs receives on our ordinary shares or other deposited
securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary
shares which your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to
make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs
if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed
pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to
any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable
efforts are made by the depositary. The depositary may also determine that it is not feasible to distribute certain property through
the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary
may determine not to distribute such property. We have no obligation to register under Securities Act any ADSs, ordinary shares,
rights or other securities received through such distributions. We have no obligation to take any other action to permit the distribution
of the ADSs, ordinary shares, rights or anything else to holders of the ADSs either. This means that you may not receive the distributions
we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These
restrictions may have a material and adverse effect on the value of your ADSs.
You may be subject to limitations on transfers of your
ADSs.
Your ADSs are transferable on the books
of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient.
In addition, subject to the limitations and requirements under Form F-6 of the SEC, the depositary may refuse to deliver,
transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we
or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under
any provision of the deposit agreement, or for any other reason.
As a holder of the ADSs, your right to participate in
any future rights offerings may be limited, which may cause dilution to your holdings.
We may from time to time distribute rights
to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United
States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from
the registration requirements is available. Also, under the deposit agreement, the depositary will not make rights available to
you unless both the rights and the underlying securities to be distributed to ADS holders are registered under the Securities Act,
or the distribution of them to ADS holders is exempted from registration under the Securities Act with respect to all holders of
ADSs. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor
to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration
under the Securities Act to distribute such rights and securities. Accordingly, as a holder of the ADSs, you may not be able to
participate in our rights offerings and may experience dilution in your holdings.
We are a Cayman Islands company and, because judicial
precedent regarding the rights of shareholders is more limited under Cayman Islands law relative to U.S. law, you may have less
protection for your shareholder rights than you otherwise would under U.S. law.
Our corporate affairs are governed by our
memorandum and articles of association, the Cayman Islands Companies Law (as amended) and the common law of the Cayman Islands.
The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities
of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common
law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that
from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders
and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under
statutes or judicial precedent in some jurisdictions of the United States. In particular, the Cayman Islands have a body of securities
laws that is less developed than that of the United States. In addition, some U.S. states, such as Delaware, have bodies of corporate
law that are more fully developed and judicially interpreted than those of the Cayman Islands. As a result of all of the above,
shareholders of a Cayman Islands company may have more difficulty in protecting their interests in the face of actions taken by
management, members of the board of directors or controlling shareholders than they would as shareholders of a company incorporated
in a jurisdiction of the United States. For example, contrary to the general practice of most corporations incorporated in the
United States, Cayman Islands law does not require that shareholders approve sales of all or substantially all of a company’s
assets. The limitations described above also will apply to the depositary who is treated as the holder of the shares underlying
your ADSs.
You may have difficulty enforcing judgments obtained against
us.
We are a Cayman Islands company and a substantial
majority of our assets are located outside of the United States. A substantial majority of our current operations are conducted
in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States
and a substantial majority of the assets of these persons are located outside the United States. As a result, it may be difficult
for you to effect service of process within the United States upon these persons. It also may be difficult for you to enforce judgments
obtained in U.S. courts based on the civil liability provisions of U.S. federal securities laws against us and our officers and
directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside
of the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize
or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of securities laws
of the United States or any state thereof. In addition, it is uncertain whether such Cayman Islands or PRC courts would be competent
to hear original actions brought in the Cayman Islands or the PRC against us or such persons predicated upon securities laws of
the United States or any state thereof.
ITEM 4.
INFORMATION ON THE COMPANY
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History and Development
of the Company
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Our predecessor and one of our operating
subsidiaries, Tianwei Yingli, was established as a PRC limited liability company in August 1998. Through a series of equity
transfers among holders of Tianwei Yingli’s equity interests and additional equity contributions into Tianwei Yingli from
1998 to 2006, Yingli Group, a PRC company controlled by Mr. Liansheng Miao, and Tianwei Baobian, a PRC listed company, became
the only two holders of equity interests in Tianwei Yingli as of August 9, 2006 and held 51% and 49% equity interests in Tianwei
Yingli, respectively.
Yingli Green Energy was incorporated on
August 7, 2006 in the Cayman Islands as part of a restructuring of the equity interests in Tianwei Yingli in order to facilitate
investments by foreign financial investors in Tianwei Yingli and the listing of our shares on an overseas stock market to achieve
such investors’ investment goal and exit and liquidity strategies. On August 25, 2006, Yingli Green Energy entered into
a Sino-foreign equity joint venture company contract with Tianwei Baobian pursuant to which, among other things, we granted to
Tianwei Baobian a right to subscribe for newly issued ordinary shares of us in exchange for all but not part of the equity interest
in Tianwei Yingli held by Tianwei Baobian. Tianwei Baobian may exercise this subscription right only after certain conditions (as
described below) are satisfied. On September 5, 2006, Yingli Group transferred all of its 51% equity interest in Tianwei Yingli
to us in a transaction between entities under common control. As a result of such transfer, Tianwei Yingli became our subsidiary.
For financial statements reporting purposes, Tianwei Yingli is deemed to be our predecessor. Through a series of additional equity
contributions into Tianwei Yingli, we have increased our holdings to 74.01% of Tianwei Yingli’s equity interests.
In addition to Tianwei Yingli, we
also have established or acquired subsidiaries in strategic locations across the PRC, including Haikou, Tianjin, Hengshui, Lhasa,
Guangzhou, Beijing, Suzhou, Shandong, Guangxi and Shenzhen to manufacture, assemble or sell PV modules and systems and ancillary
materials. In December 2016, Yingli China entered into an agreement with Hainan NCI, the non-controlling interest holder of Hainan
Yingli, to acquire 4.25% equity interest of Hainan Yingli. Contemporaneously, Yingli China together with Hainan Yingli signed an
agreement with Hainan NCI to dispose all of their equity interest of 26.53% in Hainan Tianneng to Hainan NCI. In addition to the
two agreements mentioned above, Hainan NCI, Hainan Tianneng, Yingli China and Hainan Yingli also signed an agreement to net off
the payables and receivables among each other. As a result, Yingli China’s equity interests in Hainan Yingli increased from
95.75% to 100%.
In August 2007, we established Yingli
Green Energy (International) Holding Company Limited, or Yingli International, a British Virgin Islands company limited by shares,
as our wholly-owned subsidiary and the intermediate holding company primarily for the purpose of expanding our international and
domestic presence. Under Yingli International, we have established:
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Yingli Energy (China) Company Ltd., or Yingli China, a PRC limited liability company, as a wholly-owned subsidiary of Yingli International. Yingli China is engaged primarily in the research, manufacturing, sale and installation of renewable energy products.
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Yingli Green Energy Chile SpA, or Yingli Chile, a Chile limited liability company, as a wholly-owned subsidiary of Yingli international. Yingli Chile is primarily engaged in the sale and marketing of PV products and relevant accessories in Chile.
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Yingli Green Energy Americas, Inc. or Yingli Americas, a Delaware limited liability company, as a wholly-owned subsidiary of Yingli International. Yingli Americas is engaged principally in the production, sale and marketing of PV products and relevant accessories and investments in renewable energy projects.
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Yingli Green Energy Capital Holding (Hong Kong) Company Limited or Yingli Capital, a Hong Kong liability company, as a wholly-owned subsidiary of Yingli International. Yingli Capital is engaged principally in import and export trading and investments.
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Yingli Energy (Beijing) Co., Ltd., or Yingli Beijing, a PRC limited liability company, with Yingli International holding 90% equity interest in Yingli Beijing. Yingli Beijing is engaged primarily in the sale and manufacture of PV modules and PV systems.
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Yingli Green Energy Singapore Company Pte. Limited, or Yingli Singapore, a Singapore limited liability company, as a wholly-owned subsidiary of Yingli International. Yingli Singapore is engaged primarily in the research and experimental development of electronics.
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Yingli Green Energy Mexico, or Yingli Mexico, a Mexico liability company, with Yingli International holding 98% of the equity interest in Yingli Mexico. Yingli Mexico is engaged primarily in the sale and marketing of PV modules and PV systems.
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Our principal executive offices are located
at No. 3399 Chaoyang North Street, Baoding, Hebei Province, People’s Republic of China. Our telephone number at this
address is (86 312) 8929-787 and our fax number is (86 312) 8929-800. Our agent for service of process in the United States is
located at 33 Irving Place, 10
th
Floor, New York, NY 10017, USA. Our registered office in the Cayman Islands is located
at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
Investor inquiries should be directed to
us at the address and telephone number of our principal executive offices set forth above. Our website is
www.yinglisolar.com
.
The information contained on our website is not part of this annual report.
Our Initial Public Offering
On June 13, 2007, we completed our
initial public offering, in which we offered and sold 26,550,000 ordinary shares in the form of ADSs, raising US$274.5 million
in proceeds before expenses to us, and Yingli Power sold 2,450,000 ordinary shares in the form of ADSs. Upon the exercise of the
underwriters’ option to purchase additional ADSs, certain of our Series A and Series B shareholders sold an aggregate
of 500,000 ordinary shares in the form of ADSs.
Our Convertible Senior Notes Offering and Secondary Offering
In December 2007, we completed our
convertible senior notes offering and secondary offering, in which we offered and sold an aggregate principal amount of US$172.5
million zero coupon convertible senior notes due 2012 and raised an aggregate of US$168.2 million in proceeds, before expenses,
and several of our shareholders sold an aggregate of 6,440,000 ordinary shares in the form of ADSs. As of December 31, 2012,
the convertible senior notes due 2012 had been fully redeemed.
Our Guaranteed Senior Secured Convertible Notes
In January 2009, we entered into a
note purchase agreement with Trustbridge, under the terms of which we have issued an aggregate amount of US$49.4 million of senior
secured convertible notes due 2012 to Trustbridge or its affiliate. In June 2009, we issued 2,000,000 ordinary shares to Trustbridge
as a result of the conversion of US$8.7 million of the senior secured convertible notes. In the third quarter of 2010, we issued
6,000,688 ordinary shares to Trustbridge as a result of the conversion of US$26.2 million of the senior secured convertible notes.
In January 2012, we issued 3,588,025 ordinary shares to Trustbridge as a result of the conversion of the remaining US$14.6
million of the senior secured convertible notes. As a result, the senior secured convertible notes have been fully converted.
ADM Capital Warrants
In January 2009, Yingli China entered
into a credit agreement with ADM Capital for a three-year loan facility of up to US$80.0 million for expanding Yingli China’s
production capacity expansion and general corporate uses. In April 2009, Yingli China drew down US$50.0 million of the loan
facility and we entered into a warrant agreement whereby we issued to ADM Capital 4,125,000 warrants. Each warrant provides for
the right to acquire one ordinary share at an initial strike price of US$5.64, which was based on the 20-trading day volume weighted
average closing price per ADS on the NYSE for the period prior to the issuance of the warrant, subject to customary anti-dilution
and similar adjustments. In June 2009, we and ADM Capital revised the warrant agreement and modified the terms so that (i) the
initial strike price decreased from US$5.64 per share to US$5.06 per share, (ii) upon the exercise of the put option by the
warrant holders, we may, at our sole discretion, elect to settle the put price in (a) cash, (b) shares or (c) a combination
of cash and shares and (iii) the number of ordinary shares we are obligated to issue upon the exercise of the put option by
the warrant holders was capped. In May 2010, 498,612 ordinary shares in the form of ADSs were issued to ADM Capital in connection
with its exercise of 825,000 warrants. In November 2010, 511,599 ordinary shares in the form of ADSs were issued to ADM Capital
in connection with its exercise of 825,000 warrants. In May 2011, 1,444,060 ordinary shares in the form of ADSs were issued
to ADM Capital in connection with its exercise of 2,475,000 warrants. As a result, nil warrants remain outstanding as of the date
of this annual report.
Follow-on Offerings
In June 2009, we completed a follow-on
public offering in which we offered and sold an aggregate of 18,390,000 ordinary shares in the form of ADSs, raising a total of
US$227.3 million in net proceeds, and Yingli Power sold 3,000,000 ordinary shares of ADSs.
In April 2014, we completed a follow-on
public offering in which we offered and sold an aggregate of 25,000,000 ordinary shares in the form of ADSs, raising a total of
US$83.0 million in net proceeds.
Change of ADS-to-ordinary share ratio
We received a notice on August 13, 2015
from the New York Stock Exchange (the "NYSE") stating that we were not in compliance with the NYSE's price criteria for
continued listing standard because, as of August 12, 2015, the average closing price of our ADSs was less than $1.00 per ADS over
a consecutive 30 trading-day period.
In accordance with Section 802.01C of the
NYSE's Listed Company Manual, we were provided with a period of six months ("the Cure Period") following receipt of the
notice to regain compliance with the minimum share price requirement. Effective on December 28, 2015, we changed the ratio of our
ADSs to ordinary shares from one (1) ADS representing one (1) ordinary share to one (1) ADS representing ten (10) ordinary shares.
Pursuant to the ratio change, each shareholder of record at the close of business on December 28, 2015 was required to exchange
every ten ADSs then held for one new ADS. On January 6, 2016, we were notified by NYSE that we had regained compliance with NYSE's
continued listing criteria.
Joint Venture Contract with Tianwei Baobian
Tianwei Baobian was established under PRC
law in September 1999 and its common shares have been listed on the Shanghai Stock Exchange since January 2001. The principal
business of Tianwei Baobian is the manufacture of large electricity transformers. The controlling shareholder of Tianwei Baobian
is Baoding Tianwei Group Co., Ltd., or Tianwei Group, a wholly state-owned limited liability company established in the PRC
in January 1991. The controlling entity of Tianwei Group is China South. Tianwei Baobian became a shareholder of Tianwei Yingli
in April 2002. Revenue generated by Tianwei Yingli in 2014 represents a small portion of our total revenue in 2014.
We entered into a joint venture contract
(the “2006 Joint Venture Contract”) with Tianwei Baobian on August 25, 2006 and amended the 2006 Joint Venture
Contract on October 10, 2006, November 13, 2006, December 18, 2006, September 28, 2007, and November 15,
2012. Tianwei Baobian transferred a 7% equity interest in Tianwei Yingli to Tianwei Group in May 2014 and we entered into
a new joint venture contract (the “2014 Joint Venture Contract”) with Tianwei Baobian and Tianwei Group on May 30,
2014, which has replaced the 2006 Joint Venture Contract.
The 2014 Joint Venture Contract is governed by PRC law and sets
forth the respective rights and obligations of us, Tianwei Baobian and Tianwei Group, or the parties, relating to Tianwei Yingli.
The major provisions of the 2014 Joint Venture Contract include the following:
Tianwei Yingli’s Management Structure and Board
of Directors
The board of directors of Tianwei Yingli,
or the board, is its highest authority and has the power to decide all matters important to Tianwei Yingli.
The board consists of nine directors, six
of whom are appointed by us and three of whom are jointly appointed by Tianwei Baobian and Tianwei Group. Each director is appointed
for a term of three years and may serve consecutive terms if reappointed by the party which originally appointed such director.
Each director may be removed by its appointing party, at any time, with or without cause and may be replaced by a nominee appointed
by such party before the expiration of such director’s term of office.
The chairperson of the board is the legal
representative of Tianwei Yingli. The chairperson has the right to vote as any other director and does not possess the power to
cast a decisive or conclusive vote. We are entitled to appoint a director to serve as the chairperson of the board.
The board is required to meet at least
once each quarter. In addition to the regular meetings, the board may hold interim meetings. Each director has one vote at a meeting
of the board. Meetings of the board are convened and presided over by the chairperson or, in his or her absence, by the vice chairperson
or, in the absence of the vice chairperson, by a director elected by a majority of all of the directors. The board may adopt written
resolutions in lieu of a board meeting, as long as the resolutions to be adopted are delivered to all directors and affirmatively
signed and adopted by each director. Members of the board are required to act in accordance with board resolutions and may not
do anything to jeopardize the interests of Tianwei Yingli.
A quorum for a meeting of the board is
two thirds of the board members present, in person (including through telephone or video conference) or by proxy. If a meeting
has been duly called and a quorum in person or by proxy is not present, no resolutions made at the meeting will be valid, and the
director presiding over such meeting is required to postpone the meeting for no more than seven working days and to send written
notice of the postponement to all directors. Any director who fails to attend the postponed meeting in person or by proxy will
be deemed to be present at the meeting and be counted in the quorum, but such director will be deemed to have waived his or her
voting rights.
A unanimous approval of all directors present
in person or by proxy at the meeting of the board or, in the event of a written resolution, a unanimous approval of all directors,
is required for resolutions involving the following matters:
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·
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amendment to the articles of association of Tianwei Yingli;
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|
·
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merger of Tianwei Yingli with another entity;
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|
·
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division of Tianwei Yingli;
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|
·
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termination or dissolution of Tianwei Yingli; and
|
|
·
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increase, reduction or transfer of the registered capital of Tianwei Yingli.
|
Resolutions of the board involving any
other matter may be adopted by the affirmative vote of a simple majority of a quorum of directors present in person or by proxy
at a meeting of the board.
Supervisors
Tianwei Yingli is required to have two
supervisors, one of whom is appointed by us and one of whom is jointly appointed by Tianwei Baobian and Tianwei Group. Directors
and senior managers may not serve as supervisors. Each supervisor is appointed for a term of three years and may serve consecutive
terms if reappointed by the party which originally appointed such supervisor. The supervisors may attend board meetings as non-voting
members and make inquiries and suggestions as to matters submitted to board meetings for resolution. The major duties and powers
of the supervisors are as follows:
|
·
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inspect the financial affairs of Tianwei Yingli;
|
|
·
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monitor acts of directors and senior managers in the performance of their duties to Tianwei Yingli, and propose removal of directors or senior managers who have violated any laws, regulations, the articles of association of Tianwei Yingli or any board resolutions;
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·
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demand directors and senior managers to remedy any of their actions that harm Tianwei Yingli’s interests; and
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·
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propose interim meetings of the board.
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Senior Management
Tianwei Yingli is required to have one
chief executive officer, one chief financial officer and any number of departmental managers. We nominate the chief executive officer
to be appointed by the board. The chief executive officer serves a term of three years and may serve consecutive terms if re-nominated
by us and reappointed by the board. The chief executive officer has overall responsibility for the daily operation and management
of Tianwei Yingli and reports directly to the board. The chief executive officer nominates the chief financial officer for appointment
by the board. The chief financial officer is responsible for financial matters of Tianwei Yingli and reports to the chief executive
officer. The chief executive officer appoints the managers of Tianwei Yingli’s departments.
Subscription Right
Under the joint venture contract, Tianwei
Baobian and/or Tianwei Group is entitled to subscribe for ordinary shares newly issued by us in exchange for all but not part of
its or their equity interest in Tianwei Yingli, as applicable. Tianwei Baobian and/or Tianwei Group may exercise this subscription
right if, and only if Tianwei Baobian and/or Tianwei Group, or its or their affiliates, as applicable, obtains all of the approvals
from relevant PRC government authorities necessary for acquiring our ordinary shares as a result of exercising the subscription
right.
Subject to applicable laws in the PRC,
the Cayman Islands, any jurisdiction in which our ordinary shares are listed and any jurisdiction in which a qualified securities
exchange, including the NYSE, is located and further subject to the listing rules of such exchange, Tianwei Baobian and/or
Tianwei Group may exercise the subscription right by sending a written notice, or the subscription exercise notice, to us within
one month following the first date on which the condition above is satisfied, accompanied by copies of related approvals and opinion
of the PRC counsel.
Prior to exercising its or their subscription
right, as applicable, Tianwei Baobian and/or Tianwei Group is required to retain an asset valuation firm reasonably acceptable
to us to obtain a valuation of its or their equity interest in Tianwei Yingli in accordance with internationally accepted valuation
methods and the provisions of relevant PRC laws and regulations. The valuation report will need to be jointly acknowledged by each
of us and Tianwei Baobian and/or Tianwei Group, and complete all relevant procedures required by PRC law (if any). On the basis
of the valuation report, we need to agree with Tianwei Baobian and/or Tianwei Group upon the value of its or their equity interest
in Tianwei Yingli, as applicable, which equity interest will be exchanged for the subscribed shares.
The number of new ordinary shares that
we are obligated to issue to Tianwei Baobian and/or Tianwei Group upon its or their exercise of the subscription right, as applicable,
will be calculated according to the following formula:
Number of new shares to be
|
|
Total number of our shares
|
|
Percentage of Tianwei Baobian’s
and/or Tianwei Group’s
|
issued by us to Tianwei Baobian
|
=
|
immediately before the
|
|
equity interest in Tianwei Yingli
|
and/or Tianwei Group
|
|
exercise of the subscription
|
|
immediately before the exercise of the
|
|
|
right
|
X
|
subscription right
|
|
|
|
|
Percentage of our equity interest in
|
|
|
|
|
Tianwei Yingli immediately before
|
|
|
|
|
the exercise of the subscription
|
|
|
|
|
right
(1)
|
|
(1)
|
We, Tianwei Baobian and Tianwei
Group all have agreed that, following Tianwei Baobian’s and/or Tianwei Group’s exercise of its or their subscription
right, as applicable, Tianwei Baobian and/or Tianwei Group will hold indirectly, through its or their holding the newly subscribed
shares in us, such an effective equity interest percentage in Tianwei Yingli as shall equal the equity interest percentage which
it or they held in Tianwei Yingli, as applicable, immediately prior to the exercise of the subscription right.
|
In addition, upon Tianwei Baobian and/or
Tianwei Group issuing the subscription exercise notice, we and Tianwei Baobian and/or Tianwei Group must sign any and all documents
required (e.g. equity purchase agreement, share subscription agreement), take all steps necessary, and obtain all administrative
and regulatory approvals, consents, registrations and filings necessary, for Tianwei Baobian and/or Tianwei Group to become the
lawful holder and beneficial owner of the subscribed shares newly issued by us, and simultaneously for us to become the lawful
holder and beneficial owner of the equity interest in Tianwei Yingli exchanged for those subscribed shares. An equity purchase
agreement and/or a share subscription agreement timely executed by Tianwei Baobian and/or Tianwei Group and us will prevail as
to the specific terms on which Tianwei Baobian and/or Tianwei Group exercise its or their subscription right, as applicable. However,
the provisions of the share subscription agreement must be identical in principle with those set forth in the joint venture contract.
Once the necessary agreements have been executed, Tianwei Baobian and Tianwei Group will cooperate with us to complete relevant
procedures required by PRC law, including procedures necessary to convert Tianwei Yingli into a wholly foreign-owned enterprise.
Tianwei Yingli’s Registered Capital
Tianwei Yingli currently has a registered
capital of approximately RMB3,375 million. We currently hold a 74.01% equity interest in Tianwei Yingli, and Tianwei Baobian and
Tianwei Group currently hold the remaining 18.99% and 7%, respectively. The registered capital of a company refers to the total
amount of the capital subscribed by holders of such company’s equity interests, as registered with relevant authorities.
A shareholder of a company is entitled to the rights to and interests in such company in proportion to the fully paid amount of
the registered capital of such company for which such shareholder subscribes or as otherwise agreed by and among such company’s
shareholders. Such rights and interests include the rights to nominate directors to the board and to receive dividends in proportion
to the fully paid amount of the registered capital subscribed by such equity interest holders or as otherwise agreed among such
equity interest holders. Under PRC law, the rights and interests of a shareholder of a limited liability company are generally
referred to as “equity interest”.
Increase or Reduction of Tianwei Yingli’s
Registered Capital
Approval by the Board and the Relevant PRC Authority
Any increase or reduction of Tianwei Yingli’s
registered capital is subject to unanimous approval of all directors present in person or by proxy at a meeting of the board or,
in the event of a written resolution, the unanimous approval of all directors, as well as approval of the relevant PRC authority.
Preemptive Right
Each of the parties has the preemptive
right to make an additional contribution to the registered capital in proportion to its respective equity interests in Tianwei
Yingli as of the date of the board’s resolution to increase Tianwei Yingli’s registered capital. If any party elects
to make such an additional contribution, the additional contribution must be paid in full within 30 days after the relevant PRC
authority approves the increase of Tianwei Yingli’s registered capital.
If any party notifies the board in writing
of its decision to waive its right to make all or part of the additional contribution that it is entitled to make, or fails to
pay in full its additional contribution within 30 days after the approval by the relevant PRC authority (such party being the non-contributing
party), the other party has the right, but not the obligation, to make such an additional contribution as equals all or part of
the amount which the non-contributing party failed or elected not to contribute (such other party, if it so contributes, being
the contributing party). In this event, the board will retain an independent asset valuation firm to obtain a valuation of Tianwei
Yingli in accordance with internationally accepted valuation methods and provisions of relevant PRC laws and regulations. If the
non-contributing party does not make any additional contribution to Tianwei Yingli’s registered capital whereas the contributing
party does make such a contribution, the contributing party’s shareholding percentage in Tianwei Yingli immediately after
its contribution will be calculated as follows:
(1) Fair market value
means the expected value of Tianwei Yingli immediately following the additional contribution to Tianwei Yingli’s registered
capital made by the contributing party.
Transfer of Equity Interests in Tianwei Yingli
Each of the parties may transfer all or
part of its respective equity interests in Tianwei Yingli to a third party or to any of its affiliates, subject to the provisions
described below.
Right of First Refusal
Any party intending to transfer all or
part of its equity interest in Tianwei Yingli (such party being the transferring party) is required to send a written notice, or
the offer notice, to the other parties (such parties being the non-transferring parties) and to Tianwei Yingli’s board of
directors, notifying them of the transferring party’s intent to transfer such equity interest, or the offered interest; the
terms and conditions of the proposed transfer; and the identity of the proposed third-party transferee. The non-transferring parties
have a right of first refusal in respect of the proposed transfer. Any non-transferring party may exercise its right of first refusal
by sending a written notice, or the acceptance notice, to the transferring party within 30 days after receipt of the offer notice,
or the 30-day period, notifying the transferring party of such non-transferring party’s intent to acquire all, and not less
than all, of the offered interest.
If the transferring party has not received
an acceptance notice from either of the non-transferring parties before the expiry of the 30-day period, such non-transferring
parties will be deemed to have consented to the proposed transfer. In such an event, the transferring party may transfer the offered
interest to the third-party transferee within 60 days after expiration of the 30-day period as provided above and on terms no more
favorable than those specified in the offer notice, and the non-transferring parties are obligated to sign a statement indicating
their consent and waiver of their respective rights of first refusal.
Notwithstanding the right of first refusal
as described above, a party may transfer all or part of its equity interest in Tianwei Yingli to any of its affiliates, and the
other parties are obligated to consent to such transfer.
Approval by the Board and the Relevant PRC Authority
Any transfer of an equity interest in Tianwei
Yingli is subject to unanimous approval of all directors present in person or by proxy at a meeting of the board or, in the event
of a written resolution, the unanimous approval of all directors. Such transfer is also subject to approval by, and registration
with, relevant PRC authorities.
In the event of any transfer of an equity
interest in Tianwei Yingli to a non-transferring party that timely sends an acceptance notice, to a third party with deemed consent
of one or both of the non-transferring parties, or to a party’s affiliate, each as described above, each of the parties is
obligated to (i) cause each director appointed by it to vote in favor of board resolutions proposed to approve such transfer,
amendments to Tianwei Yingli’s articles of association, and relevant amendments to subordinate agreements and (ii) use
its best efforts to effect the transfer and to cause relevant PRC authorities to approve the transfer.
No Transfer to Tianwei Yingli’s Competitors
The parties agreed not to transfer any
portion of their respective equity interests in Tianwei Yingli to any third party that is engaged in a business that competes with
Tianwei Yingli’s business.
Encumbrance
No party may mortgage, pledge, charge or
otherwise encumber all or part of its equity interest in Tianwei Yingli without the prior written consent of the other parties.
Profit Distribution
The maximum dividend payable by Tianwei
Yingli to its equity interest holders is calculated based on its retained earnings as calculated under PRC accounting regulations.
Prior to any payment of dividends, Tianwei Yingli is required to pay income tax according to PRC laws and regulations and make
allocations of retained post-tax earnings to its reserve fund, enterprise development fund and employee bonus and welfare fund,
each such allocation to be made at a percentage decided by the board each fiscal year. Any dividend paid by Tianwei Yingli must
be distributed to each of the parties in proportion to its respective equity interest in Tianwei Yingli. Tianwei Yingli may not
distribute any profit to its equity interest holders until all losses incurred in previous fiscal years are fully recovered. Undistributed
profits accumulated in prior fiscal years may be distributed together with profits from the current fiscal year.
Unilateral Termination of the Joint Venture
Contract
Any party may unilaterally terminate the
joint venture contract if:
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Tianwei Yingli or its equity interest holder is bankrupt, enters into a liquidation or dissolution proceeding, ceases its business or becomes incapable of repaying debts that are due,
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an event of force majeure occurs and is continuing for over six months and the equity interest holders of Tianwei Yingli cannot find an equitable solution, or
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Tianwei Yingli’s business license, or the renewal or replacement thereof, is terminated, cancelled or revoked.
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Under the joint venture contract, force
majeure is defined as any event which (i) is beyond the control of the parties thereto, (ii) is not foreseeable, or if
foreseeable, unavoidable and (iii) prevents any of the parties from performing all or a material part of its respective obligations.
Under the Company Law and other relevant
PRC laws and regulations, the business license of a company may be terminated, cancelled or revoked by the relevant registration
authority if such company:
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·
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obtains its company registration by making a false statement in respect of registered capital, submitting false certificates or by concealing material facts through other fraudulent means, and the registration authority deems such activities to be a material noncompliance with applicable laws and regulations;
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fails to commence operation for more than six months without proper cause, or suspends operation on its own without proper cause for more than six consecutive months after having commenced operation;
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conducts illegal activities jeopardizing national security and social public interests;
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engages in relevant business activities which require special permits or approval without having obtained such permits or approval, and the registration authority deems such activities to be a material noncompliance with applicable laws and regulations;
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refuses to accept an annual inspection within the time limit, or conceals facts or resorted to deception during the annual inspection, and the registration authority deems such activities to be a material noncompliance with applicable laws and regulations; or
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forges, alters, leases, lends or transfers its business license, and the registration authority deems such activities to be a material noncompliance with applicable laws and regulations.
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Under relevant PRC laws and regulations,
Tianwei Yingli’s board is required to establish a liquidation committee to carry out the liquidation of Tianwei Yingli upon
the expiration or termination of the joint venture contract. The liquidation committee must conduct a thorough examination of Tianwei
Yingli’s assets and liabilities. During the course of the liquidation proceedings, Tianwei Yingli may continue its existence,
but may not conduct any business activities unrelated to the liquidation process. The proceeds from the liquidation of Tianwei
Yingli’s assets must be used first to settle any and all of its outstanding debts, salaries, labor insurance and liquidation-related
fees and taxes, and the balance of the proceeds must be distributed to Tianwei Yingli’s equity interest holders in proportion
to their respective contributions to Tianwei Yingli’s registered capital. Upon completion of the liquidation, the liquidation
committee must submit a liquidation report to relevant PRC authorities to effect deregistration and make a public announcement
of the termination of the joint venture contract.
Dispute Resolution
All disputes arising from or in connection
with the existence, interpretation, validity, termination or performance of the joint venture contract are required to be submitted
to the Hong Kong International Arbitration Centre for final and binding arbitration in accordance with the arbitration rules of
the United Nations Commission on International Trade Law, or UNCITRAL, then prevailing. Before an arbitration proceeding may be
commenced, (i) the party seeking arbitration must send a written notice to the other parties requesting arbitration and describing
the nature of the dispute and (ii) within 90 days of such notice, the parties must have engaged in efforts to resolve the
dispute amicably, but such efforts have failed.
Governing Law
The execution, validity, interpretation
and performance of the joint venture contract, as well as resolution of disputes under such contract, are governed by PRC law.
Overview
We are one of the world’s leading
solar panel manufacturers, and our manufacturing covers the photovoltaic value chain from ingot casting and wafering through solar
cell production and solar panel assembly. As of the date of this annual report, we currently have an annual manufacturing
capacity of approximately 3,000 megawatts for ingot and wafer, 3,200 megawatt for PV cells and 4,000 megawatts for PV modules.
Our products and services substantially cover the entire PV industry value chain, ranging from crystalline polysilicon ingots and
wafers, PV cells and PV modules to the manufacture and installation of PV systems, and starting from 2012, to the development and
operation of solar projects. We believe that we are one of the leading PV companies in the world to have adopted a vertically integrated
business model. Our end-products include PV modules and PV systems of different sizes and power output. We sell PV modules under
our own brand names, Yingli and Yingli Solar, to PV system integrators and distributors located in various markets around the world,
including China, Japan, the United States, Europe, South Africa, Turkey, South Asia, Australia, Latin Americas and Middle East,
etc.
Our Products and Services
Our products and services include the manufacture
of polysilicon ingots and wafers, PV cells, PV modules and integrated PV systems and the development and operation of solar projects,
which encompass substantially the entire PV industry value chain, with the manufacture of polysilicon feedstock being the only
significant exception.
Polysilicon Ingots and Wafers
A polysilicon ingot is formed by melting,
purifying and solidifying polysilicon feedstock into a brick-shaped ingot. The polysilicon ingots are then cut into blocks. The
polysilicon blocks are then sliced into wafers. Thinner wafers enable a more efficient use of polysilicon, and lower the cost per
watt of power produced.
Since the middle of 2015, we have experienced
lower-than-expected utilization of our production capacity because we did not have sufficient working capital to maintain the full
utilization of production facilities as a result of the tight cash flow. This tight cash flow is partially due to our repayment
of three-year unsecured medium-term notes in the principal amount of RMB1.2 billion when they matured in May 2015, and our repayment
of 70%, or RMB700 million, of five-year unsecured medium-term notes in the principal amount of RMB1.0 billion when they matured
in October 2015. As a measure to reduce our operating cash requirements in 2015 and 2016, we have contracted with third parties
to allow them operate more than half of our polysilicon ingot and wafer production facilities. These third parties pay us a monthly
fee to operate these production facilities, pay the salaries of our staff members employed and utility expenses incurred at such
facilities, produce fixed volumes of polysilicon ingots and wafers on a monthly basis, and cover all other manner of operating,
ancillary, and raw material expenses of such production. As part of the arrangement, we agree to purchase all or part of the wafers
so produced by said third parties based on our needs at designated prices, subject to certain adjustments under the relevant agreements.
As these third parties would provide all the working capital required for production of the polysilicon ingots and wafers, these
arrangements effectively help us finance our production value chain, reduce our working capital requirements, and increase the
utilization of our polysilicon ingot and wafer production facilities. Our agreements with these third parties typically have a
term of one year. We cannot assure you that we will be able to renew these agreements when they expire or that these third parties
will not breach or early terminate the agreements.
PV Cells
A PV cell is a device made from a polysilicon
wafer that converts sunlight into electricity by a process known as the photovoltaic effect. The conversion efficiency of a PV
cell is the ratio of electrical energy produced by the cell to the energy from sunlight that reaches the cell. The conversion efficiency
of PV cells is determined to a large extent by the quality of wafers used to produce the PV cells, which is, in turn, determined
by the mix of different types of polysilicon raw materials used in the ingot casting process.
In addition, we have commercialized 600
megawatts of monocrystalline production capacity for each of monocrystalline ingots and wafers, cells and modules in Baoding, Hebei
Province. These production lines are designed to produce next-generation high efficiency monocrystalline PV cells based on the
technology developed through Project PANDA, a collaboration project among us, the Energy Research Centre of the Netherlands, a
leading solar research center in Europe, and Tempress Systems, a wholly-owned subsidiary of Amtech Systems, Inc., a global
supplier of production and automation systems and related supplies for the manufacture of PV cells. We achieved an average cell
conversion efficiency rate of 20.8% on the PANDA commercial production lines in 2016.
We generally use all of our PV cells (except
certain low efficiency PV cells) in the production of our PV modules. However, in 2015 and 2016, we entered into agreements to
process PV cells for third parties as an Original Equipment Manufacturer (OEM) in order to improve the utilization rate of our
production capacities. In 2015 and 2016, we generated RMB389.5 million and RMB308.4 million, or 3.9% and 3.7% respectively of our
total revenue, from our cells and PV module processing services.
PV Modules
A PV module is an assembly of PV cells
that are electrically interconnected, laminated and framed in a durable and weatherproof package. In 2015 and 2016, in order to
improve the utilization rate of our production capacities, we entered into agreements to process PV modules for third parties as
OEM. Our own PV modules are generally made with a frame design. However, in 2016, we commercialized the frameless PANDA Bifacial
module, which integrates the technology of PANDA n-type monocrystalline PV cells and is made of two layers of 2.5mm thick low-iron
tempered glass, replacing the conventional back sheet and glass structure. In addition, the PANDA Bifacial module can generate
power not only from the front side, but also from the rear side by making use of the reflected photons that hit the module on the
back side, depending on the environmental condition of installation. The PANDA Bifacial module has received China General Certification
Centre’s (“CGC”) Top Runner Program certification in the end of 2016, which was the first Top Runner Program
certification to module that can generate power by both the front and rear sides in China. In early 2017, we also launched our
Hotspot Free module, which can eliminate potential safety risks such as fire and material degradation and ensure better safety,
module reliability and higher returns.
A majority of our own PV modules are made
with PV cells produced by us and have output ranging from 250 to 340 watts. The following table sets forth the major types of modules
produced by us:
Dimensions
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Weight
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|
Maximum Power
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|
Optimum Operating
Voltage
|
(mm x mm)
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(Kilograms)
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|
(Watts)
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(Volts)
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1640 x 990
|
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18.5
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250 - 275
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29
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1640 x 990
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18.5
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270 - 290
|
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30
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1640 x 990
|
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18.5
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275 - 300
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30
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1960 x 990
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25.5
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300 - 325
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35
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1960 x 990
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25.5
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315 - 340
|
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36
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1660 x 992
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23.0
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310 - 330
|
|
35
|
1986
×
998
|
|
29.5
|
|
325 - 350
|
|
36
|
Integrated PV Systems
A PV system consists of one or more PV
modules that are physically mounted and electrically interconnected with system components such as batteries and power electronics,
to produce and store electricity. We produce PV systems and also design, assemble, sell and install stand-alone PV systems for
lighting systems, mobile communication base stations and residential applications. In order to focus on our core PV products and
their components, we no longer produce controllers, inverters and other components used in our PV systems but instead source them
from third-party manufacturers and sell them to our customers as part of our PV systems. We typically install these systems on-site
for our customers. For our larger PV systems, we work with the customers on-site to design, install, test and oversee the system
start-up.
Manufacturing
We started producing PV modules in 2002
and started producing polysilicon ingots and wafers in October 2003 and PV cells in March 2004. Currently, we have an
annual manufacturing capacity of approximately 3,000 megawatts for ingots and wafers, 3,200 megawatts for PV cells and 4,000 for
PV modules. We generally use our polysilicon wafers and PV cells as materials in the production of our own PV modules. However,
since mid- 2015, we have experienced lower-than-expected utilization of our production capacity due to tight cash flow, and accordingly,
we have contracted with third parties to allow them operate more than half of our polysilicon ingot and wafer production facilities
and purchase all or part of the wafers so produced by said third parties based on our needs at designated prices, subject to certain
adjustments under the relevant agreements. In addition, in 2015 and 2016, we entered into agreements to process PV cells and PV
modules for third parties as an Original Equipment Manufacturer (OEM). These collective efforts have led to increases in capacity
utilization rate of 55% in the second quarter of 2015 to more than 80% in the fourth quarter of 2015, and helped our company maintain
an overall capacity utilization rate of approximately 60% in the fourth quarter of 2016 despite more challenging cash conditions.
Manufacturing Process
Polysilicon Ingots
. The quality
of polysilicon ingots determines, to a large extent, the quality of our final PV products. To produce polysilicon ingots, polysilicon
is melted in a quartz crucible within a furnace. The melted polysilicon then undergoes a crystal growing process, gradually anneals
and forms an ingot. To reduce the cost of polysilicon, we use a mix of high-purity polysilicon and lower-purity polysilicon, including
polysilicon scraps such as the discarded tops and tails of ingots, pot scraps and broken or unused silicon wafers. Our employees
undertake the labor-intensive process of sorting through the polysilicon feedstock to separate polysilicon that meets our specified
standards for the production of ingots. The polysilicon feedstock used in the production of multicrystalline polysilicon ingots
is not required to have the same level of purity as that used to produce monocrystalline silicon ingots. Nonetheless, impurities
in polysilicon feedstock present a challenge to the production of polysilicon ingots because impurities are difficult to separate
in the casting process.
Blocks and Wafers
. Polysilicon ingots
are cut into polysilicon blocks, which are edge-ground to avoid breakage during the wafer-slicing process. Polysilicon blocks are
then sliced into polysilicon wafers.
PV Cells
. The silicon wafers undergo
an ultrasonic cleaning process to remove oil and surface particles, followed by a chemical cleaning process to remove the impurities
and create a suede-like structure on the wafer surface, which reduces the PV cell’s reflection of sunlight and increases
the PV cell’s absorption of solar energy. Through a diffusion process, we then introduce certain impurities into the silicon
wafers and form an electrical field within the PV cell. We achieve the electrical isolation between the front and back surfaces
of the silicon wafer by edge isolation, or removing a very thin layer of silicon around the edge. We then apply an anti-reflection
coating to the front surface of the wafer to enhance its absorption of sunlight. We screen-print negative and positive metal contacts,
or electrodes, on the front and back surfaces of the PV cell, respectively, with the front contact in a grid pattern to collect
the electrical current. Silicon and metal electrodes are then connected through an electrode firing process in a conveyor belt
furnace at a high temperature. Testing and sorting complete the manufacturing process for PV cells.
The diagram below illustrates the PV cell
manufacturing process:
PV Modules
. PV modules are formed
by using welding to interconnect multiple PV cells into desired electrical configurations. The interconnected cells are laid out
and laminated in a vacuum. Through these processes, the PV modules are weather-sealed, and thus are able to withstand high levels
of ultraviolet radiation, moisture, wind and sand. Assembled PV modules are packaged in a protective aluminum frame prior to testing.
The following diagram illustrates the PV
module manufacturing process:
PV Systems
. PV system production
involves the design, manufacture, installation and testing of PV systems. We design PV systems according to our customers’
requirements. We integrate PV modules and other system components into PV systems by electronically interconnecting PV modules
with system components such as inverters, storage batteries and electronic circuitry to produce, store and deliver electricity.
For small PV systems such as portable electricity supply systems used for transmitter-receivers, we complete the integration and
testing procedures in our facilities in Baoding before such systems are sold to end-customers. For midsized PV systems such as
PV lighting systems, we complete the integration process in Baoding, but install and test the systems for our customers on-site.
For large PV systems, such as on-grid solar power stations and stand-alone PV systems, we work with our customers on-site to design,
install, test and oversee the system startup.
Manufacturing Capacity
Currently, we have an annual manufacturing
capacity of approximately 3,000 megawatts for ingots and wafers, 3,200 megawatts for PV cells and 4,000 megawatts for PV modules.
Our production facilities are located in Baoding and Hengshui, Hebei Province, Haikou, Hainan Province and Tianjin.
Solar Project Development and Operation
We started our solar project development
and operation business on a small scale in China in 2012. As of September 2015, we had engaged in the construction of approximately
600 megawatts of PV projects in China and connected approximately 200 megawatts of them to the grid. However, due to China’s
nationwide delay in allocating subsidies, the long-term operation of large ground-mounted PV stations would require significant
capital. With due consideration of our cash flow challenges, we decided to suspend new downstream development business in China
from September 2015 until we regain a healthier financial position. Accordingly, we continued to accelerate the disposition of
our downstream PV projects in China in order to collect funds related to our downstream business.
In addition, given our current situation,
we are currently in the process of restructuring our overseas business and disposing our downstream development business in Europe,
Africa, and other markets outside of China with the aim of focusing on module sales.
Raw Materials
Raw materials required in our manufacturing
process include polysilicon, polysilicon scraps crucibles, silicon carbides, cutting fluid, steel cutting wires, metallic pastes,
laminate materials, tempered glass, aluminum frames, solder, batteries and other chemical agents and electronic components. We
generally use vendors who have demonstrated quality control and reliability and maintain multiple supply sources for each of our
key raw materials and other consumables so as to minimize any potential disruption of our operations from supply problems with
any one vendor. We generally evaluate the quality and delivery performance of each vendor periodically and adjust quantity allocations
accordingly. We maintain an adequate supply of raw materials and other consumables based upon periodic estimates of our outstanding
customer orders.
In 2016, we purchased the substantial majority
of our raw materials and other consumables (other than polysilicon) from Chinese suppliers. Where possible, we seek to procure
raw materials and other consumables from suppliers with proven quality and cost advantages. To more effectively control the purchasing
cost of raw materials, in 2016 we implemented a public bidding system in selecting qualified suppliers who meet our requirements.
Polysilicon is the most important raw material
used in our production process. Due to growing global demand for polysilicon, polysilicon prices had increased substantially over
the past few years until the fourth quarter of 2008. From the fourth quarter of 2008 to the second quarter of 2009, as the result
of increased polysilicon manufacturing capacity and decreased demand for polysilicon due to the global financial crisis in 2008
and 2009, the price of polysilicon decreased significantly. Although the polysilicon price rebounded between the third quarter
of 2010 and first quarter of 2011 due to the recovery of demand for PV products in certain markets, the polysilicon price has decreased
significantly starting from the second quarter of 2011 as the result of increased polysilicon manufacturing capacity for polysilicon
and downward price pressure from the decreasing average selling prices of PV modules. In 2012, polysilicon prices continued to
decline and reached a historical low of approximately US$14 per kilogram in November 2012. Partly due to China’s anti-dumping
and anti-subsidy investigations against U.S., South Korean and European polysilicon manufacturers, polysilicon prices rebounded
slightly since December 2012. Since June 2013, polysilicon price has begun to increase and reached approximately US$22 until
the first half of 2014. From the second half of 2014, polysilicon price began to decrease significantly and the spot market price
fluctuated under US$20 per kilogram as of the date of this annual report with a historically low level close to US$12 per kilogram
at the end of 2016. However, any significant increase in the price for polysilicon in the future would materially and adversely
affect our profitability and results of operations.
Historically, we relied on spot market
purchases to meet a significant portion of our polysilicon needs. In order to secure adequate and timely supplies of polysilicon,
we are actively seeking to further strengthen our relationships with our polysilicon suppliers and establish strategic relationships
with them. We have entered into various purchase agreements and memorandums of understanding with local and foreign suppliers,
including some of the world’s major polysilicon suppliers. Supplies under these purchase agreements began to be provided
in early 2009. However, we cannot assure you that we will be able to secure sufficient quantities of polysilicon to meet the requirements
of our existing production capacity or support future expansion of our manufacturing capacity, if any.
Between 2006 and 2010, we entered into
seven long-term supply contracts with Wacker Chemie AG, or Wacker, a German polysilicon supplier, to provide supplies of polysilicon
from 2009 through 2013, from 2009 through 2017, from 2010 through 2018, from 2009 through 2011, from 2010 through 2017, from 2011
through 2013 and from 2011 through 2018, respectively. In addition, in February 2008 we entered into one long-term supply agreement
with OCI Company Ltd., or OCI, formerly known as DC Chemical, to provide supplies of polysilicon for the period from 2009 through
2013. From 2009 to 2013, we entered into another two long-term supply contracts with OCI, to provide supplies of polysilicon from
2011 through 2015 and from 2012 through 2018, respectively. We also entered into a polysilicon supply contract with Daqo New Energy
Corp., or Daqo, formerly known as Sailing, for supplies of polysilicon from the fourth quarter of 2008 through the end of 2010.
In August 2010, we entered into another polysilicon supply agreement with Daqo for supplies of polysilicon from 2011 through
2012. In March 2011, we entered into a long-term polysilicon supply agreement with Hemlock Semiconductor Pte. Ltd., or Hemlock,
to provide supplies of polysilicon from 2013 through 2020. In November 2011, we and Hemlock agreed to amend this long-term
supply agreement to purchase polysilicon starting from 2012 through 2020 instead of 2013 through 2020. In October 2013,
we also entered into an agreement with a certain vendor to amend our long-term supply contracts with the vendor to include a price
adjustment mechanism that allows the vendor and us to renegotiate the purchase price on a quarterly basis within a specified price
range based on prices then prevailing in the open market. Due to fluctuations in polysilicon prices, we successfully negotiated
and executed amendments for current purchases on a quarterly or monthly basis with some of these vendors that amended certain commercial
terms such as total contract quantity, advance payment arrangements and unit prices for the relevant quarter or month several times
in 2014, 2015 and 2016. See “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry — Our polysilicon
cost may be higher than the market level as a result of our long-term polysilicon purchase commitment with fixed prices, and we
have failed to perform certain of our long-term polysilicon supply contracts according to their original terms”.
Quality Control
We employ quality assurance procedures
at key stages of our manufacturing process to identify and address any problems related to the quality of products being produced.
Our quality assurance procedures start with assuring the quality of raw materials, which includes our major suppliers of raw materials
on an annual basis and inspecting all raw materials upon their arrival at our factory. We also have quality control procedures
in place at all key stages of our wafer, PV cell and PV module production processes. In addition, all of our wafers, PV cells and
PV modules are tested before they are used in the next step of manufacturing or sent to our warehouse for sale. If a problem is
detected, a failure analysis is performed to determine the cause of the problem. To ensure the accuracy and effectiveness of our
quality assurance procedures, we provide ongoing training to our production line employees. Our senior management team is actively
involved in establishing quality assurance policies and managing the implementation and performance of those policies on a continuous
basis.
We have received many types of international
certifications for our products and quality assurance programs, which we believe demonstrates our technological capabilities and
foster the confidence of our customers. The following table sets forth the major certifications we have received and major test
standards our products have met as of the date of this annual report:
Certification or Test Dates
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|
Certification or Test Standard
|
|
Relevant Products
|
February 2004, and renewed in February 2016
|
|
ISO 9001:2000 (renewed as ISO 9001:2008) quality system certification, established by the International Organization for Standardization, an organization formed by delegates from member countries to establish international quality assurance standards for products and manufacturing processes.
|
|
The design and manufacture of crystalline silicon solar modules, solar cells, multi-crystalline silicon wafers and multi-crystalline silicon ingots
|
|
|
|
|
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April 2004, December 2010 and renewed in February 2012, September 2012 and January 2016
|
|
UL certification, authorized by Underwriters Laboratories Inc., an independent, not-for-profit product-safety testing and certification organization in the United States; evaluated in accordance with USL (Standard for Safety, Flat-Plate Photovoltaic Modules and Panels, UL 1703) and CNL (Canadian Other Recognized Document, ULC/ORD-C1703-01, Flat-Plate Photovoltaic Modules and Panels).
|
|
Certain models of PV modules
|
|
|
|
|
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August 2004, July 2005, January 2006, February 2007, May 2007, July 2007, June 2008, May 2009, November 2009, February 2010, August 2010, November 2010, March 2011, April 2011, June 2011, November 2011, December 2011, April 2012, May 2012, March 2014, April 2015
|
|
TÜV certification, conducted by TÜV Immissionsschutz und Energiesysteme GmbH, an independent approval agency in Germany, against the requirements of Safety Class II Test (Crystalline terrestrial Photovoltaic (PV) Modules — Design qualification and type approval, IEC61215:2005, Photovoltaic (PV) module safety qualification, IEC61730
·
:2004, factory inspection certification, IEC 61215:2005 and IEC 61730:2004, salt mist corrosion testing, IEC 61701:2011, and ammonia corrosion testing, IEC EN 61215 on PV modules.
|
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Certain models of PV modules
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|
|
|
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January 2007 and renewed in February 2016
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ISO 14001: 2004 certification for environment management system.
|
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The design and manufacture of crystalline silicon solar modules, solar cells, multi-crystalline silicon wafers and multi-crystalline silicon ingots
|
|
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November 2009
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CEC-California, conducted by UL, against UL and IEC standard.
|
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Certain models of our PV modules
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|
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July 2010 and renewed in June 2012
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“Golden Solar” certification by CGC, against the requirements of IEC61215:2005.
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Certain models of our PV modules
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|
|
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March 2011
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“Golden Solar” certification by CGC, against the requirements of IEC61215:2005.
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PANDA series modules
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|
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August 2011 and August 2012
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JET certification, conducted by Japan Electrical Safety & Environment Technology Laboratories, an independent approval agency in Japan, against the requirement of IEC61215:2005 and IEC61730:2004
|
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Certain models of our PV modules
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August 2011
|
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MCS certification authorized by United Kingdom Accreditation Service (UKAS), a non-profit independent certification company, against the requirements of MSC 010-1.5 and MSC 005-2.3.
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Certain models of our PV modules
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|
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September 2011
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KEMCO certification, conducted by South Korea Energy Management Corporation in South Korea, against the requirements of IEC61215:2005 and IEC61730:2004.
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PANDA series modules
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|
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October 2011
|
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Inmetro certification, conducted by Inmetro in Brazil, against IEC or UL standard.
|
|
Certain models of our PV modules
|
|
|
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July 2012 and renewed in August 2014
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PCCC certification, conducted by Power (Beijing) Product Certification Center Co., Ltd, against IEC 61215:2005 and IEC 61730:2004.
|
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Certain models of our PV modules
|
|
|
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August 2012
|
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TÜV certification, conducted by TÜV Rheinland Japan Ltd, against the requirement of JIS Q 8901:2012.
|
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PV modules requirement for reliability assurance system (design, production and performance guarantee)
|
|
|
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May 2013
|
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CEC-Australian certification, conducted by Clean Energy Council Limited, against IEC 61215:2005 and IEC 61730:2004.
|
|
Certain models of our PV modules
|
|
|
|
|
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May 2013
|
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SGS certification, conducted by SGS-CSTC Standard Technical Service (Shanghai) Co., Ltd, against IEC 61215:2005, IEC 61730:2004 and IEC 60068-2-68 blowing sand test.
|
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Certain models of our PV modules
|
|
|
|
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June 2013 and renewed in April 2015
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TÜV certification, conducted by TÜV SUD Product Service GmbH, against the requirements of IEC 61215:2005, IEC 61730:2004 and IEC 82/685/NP PID-free.
|
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Certain models of our PV modules
|
|
|
|
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June 2013 and renewed in April 2015
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FRONTRUNNER certification, conducted by the China General Certification Centre (“CGC”), against the requirements of CGC/GF063 and CGC-R46076
|
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PANDA Bifacial modules
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Markets and Customers
Our products are sold in China’s
domestic market and in various international markets, including, among others, Japan, the United States, Turkey, France, Germany
and the United Kingdom. The following table sets forth the revenues generated from our major markets as percentages of our net
revenues for the periods indicated.
|
|
Year Ended December 31,
|
|
|
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2014
|
|
|
2015
|
|
|
2016
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|
PRC
|
|
|
35.2
|
|
|
|
40.9
|
|
|
|
58.9
|
|
Japan
|
|
|
19.3
|
|
|
|
27.3
|
|
|
|
28.2
|
|
United States
|
|
|
17.8
|
|
|
|
12.5
|
|
|
|
6.1
|
|
United Kingdom
|
|
|
7.7
|
|
|
|
0.8
|
|
|
|
1.1
|
|
Turkey
|
|
|
0.9
|
|
|
|
5.5
|
|
|
|
0.8
|
|
France
|
|
|
1.5
|
|
|
|
3.6
|
|
|
|
0.0
|
|
Germany
|
|
|
5.2
|
|
|
|
1.7
|
|
|
|
0.0
|
|
For a breakdown of our net revenue by geographic
regions for 2014, 2015 and 2016, see Note (27) to our audited consolidated financial statements included elsewhere in this annual
report.
The products that we sell are primarily
PV modules. These modules are sold primarily to installers, PV system integrators, property developers and other value-added resellers,
who incorporate our PV modules into large on-grid integrated PV systems with batteries, inverters, mounting structures and wiring
systems.
We sell our PV modules typically through
supply contracts with a term of less than one year and are obligated to deliver PV modules according to pre-agreed prices and schedules.
Sales and Marketing
We currently sell our PV modules primarily
to distributors, wholesalers, power plant developers and operators and PV system integrators. Our focus on specific types of customers
depends largely on the demand in specific markets. Distributors and wholesalers tend to be large volume purchasers. We also work
with solar power plant developers and operators by supplying solar modules for select downstream projects. PV system integrators
typically design and sell integrated systems that include our branded PV modules along with other system components. Some of the
PV system integrators also resell our modules to other system integrators.
Over the last two years, our company has
been adjusting and pursuing more flexible market strategies. For example, we have granted priority to orders with higher prices
and better payment terms in China. Through collaboration with premium Chinese clients, we have secured approximately 700MW of full
payment orders in 2015 and 2016 in China, effectively accelerating our cash collection. In addition, we have also prioritized sales
of PV modules to markets with higher average selling prices of PV modules such as Japan, in order to improve cash flow and increase
our profit margins per watt.
We employ a total of approximately 45 marketing
and sales personnel at our headquarters in Baoding and Beijing. We believe that the adoption of China’s Renewable Energy
Law and the PRC government’s commitment to developing sources of renewable energy will contribute to rapid growth of the
PV market in China. We plan to leverage our existing relationships with end-users to further increase our sales in China. As part
of our efforts to expand overseas, we have built an international sales team of 143 representatives located in China, the United
States, Japan, Germany, Spain, South Africa, Australia and Singapore and expect to further expand our overseas sales force
in the future.
In order to build more direct relationships
with our customers, we have actively promoted our brand name by participating in trade shows and exhibitions, advertising in newspapers
and trade magazines, and securing various sponsorships. For example, to strengthen our leadership position in our existing markets
and to establish our presence in emerging markets, we became an official sponsor of the 2014 FIFA World Cup Brazil
TM
in June 2011. Our sponsorship rights included ticketing and hospitality rights, perimeter-board advertising, as well as the
right to use the FIFA World Cup
TM
emblems and logo. We expect our sponsorship activities to increase business opportunities
in Brazil and other regions in Latin America. On December 10, 2013, we launched the 2014 FIFA World Cup™ official campaign
“All under One Sun”. With the theme of “All under One Sun”, we promoted solar and the concept of sustainability
to every corner of the world. We also were an official sponsor of the 2010 FIFA World Cup
TM
in South Africa. In August 2011,
we became the first official renewable energy partner of U.S. Soccer. Through the end of 2014, we supported U.S. Soccer’s
ongoing efforts to develop the game of soccer at all levels, as well as working with U.S. Soccer to provide solar energy for local
athletic centers in disadvantaged communities across the U.S. On January 22, 2011, we became an Official Premium Partner of
FC Bayern München, or FCB, one of the most successful and popular football clubs in the world. Under this sponsorship, we
have a series of marketing rights, including ticketing and hospitality, advertising and media/public relations, as well as the
right to market and sell our solar products in official FCB fan shops. In 2012, we hosted the first “Yingli Cup” in
Beijing, China, which was a match between FC Bayern München, one of the most successful football clubs in the world, and Beijing
Guoan, one of the most popular football clubs in China. “Yingli Cup” was appointed as part of the official activities
for the Fortieth Anniversary of Sino-German Diplomatic Relations. In 2014 and 2015, we sponsored junior football players from China,
Japan and Thailand to compete with other talented young football players from all over the world in the final tournament of the
FC Bayern Youth Cup at FC Bayern’s home stadium in Munich, Germany. The “Youth Cup” is an international charity
youth competition initiated by the FCB with support from several sponsors around the world including us.
Customer Support and Services
We provide customer support and services
in China through dedicated teams of technical service personnel in different locations including Baoding, Beijing, Shenzhen, Tianjin,
Hainan, Shandong and Tibet. Our customer support and services teams coordinate their activities with our marketing, technology,
quality and manufacturing departments.
We provide customer support and service
to overseas customers through our overseas subsidiaries and regional headquarters located in our major markets, such as the United
States, Japan, Germany, Spain, South Africa, Australia and Singapore etc. In addition, we are currently in the process of
restructuring our business in Europe in order to focus on module sales. Before September 30, 2011, our PV modules were typically
sold with a two- or five-year limited warranty for defects in materials and workmanship, and a 10-year and 25-year warranty against
declines of more than 10% and 20% of initial power generation capacity, respectively. From October 1, 2011, we implemented a new
and improved warranty term that guarantees 91.2% of nominal power output for 10 years, and 80.7% of nominal power output for a
period of 25 years for multicrystalline PV modules and 98.0% of nominal power output for the first year, 92.0% of nominal power
output for 10 years, and 82.0% of nominal power output for a period of 25 years for monocrystalline Panda PV modules. From September
1, 2014, we updated our warranty terms to guarantee 91.2% of nominal power output for 10 years and 80.7% of nominal power output
for 25 years for multicrystalline PV modules, and to guarantee 98.0% of nominal power output for the first year, 92.2% of nominal
power output for 10 years, and 82.4% of nominal power output for 25 years for monocrystalline Panda PV modules. In addition, based
on customers’ specific requirements, we also provide our multicrystalline PV modules with a linear-based warranty which guarantees
each year of power output during the twenty-five-year warranty period. In 2012, we entered into a module performance warranty insurance
agreement with Munich Re’s specialty primary insurers. According to the agreement, both of us will provide additional economic
security for large-scale commercial and utility project developers, investors and debt providers during the period from October 1,
2012 to September 30, 2013. In December 2013, we entered into a similar module performance warranty insurance agreement
with another insurance company for the same scope of beneficiaries for the period from January 1, 2014 to December 31,
2014, and renewed the agreement in March 2015, January 2016, and January 2017 for the period from January 1, 2015 to December 31,
2015, from January 1, 2016 to December 31, 2016, and from January 1, 2017 to December 31, 2017 respectively. In 2014, we launched
the new comprehensive warranty, and the PV modules achieved PID resistance identification according to the IEC standard. Nevertheless,
we bear the risk of warranty claims long after we have sold our products and recognized revenues. Because our products have only
been in use for a relatively short period of time, our assumptions regarding the durability and reliability of our products may
not be accurate, and because our products have relatively long warranty periods, we cannot assure you that the amount of accrued
warranty provided by us for our products will be adequate in light of the actual performance of our products. See “Item 3.D.
Risk Factors — Risks Related to Us and the PV Industry — Unsatisfactory performance of or defects in our products may
cause us to incur additional warranty expenses, damage our reputation and cause our sales to decline”.
Intellectual Property
We have registered our trademarks “Yingli”
and “Yingli Solar” in China. We have full rights to use “Yingli Solar” in a number of foreign jurisdictions
where we sell or plan to sell our products, including all members of the European Union, the United States and Canada. As of the
date of this annual report, we have been granted 1,602 patents and are applying for 90 patents. We rely on a combination of patent,
trademark, anti-unfair competition and trade secret laws, as well as nondisclosure agreements and other methods to protect our
intellectual property rights. Aside from the know-how available in the public domain, we have developed in-house unpatented technical
know-how that we use to manufacture our products. Many elements of our manufacturing processes involve proprietary know-how, technology
or data, either developed by us in-house or transferred to us by our equipment suppliers, which are not covered by patents or patent
applications, including manufacturing technologies and processes and production line and equipment designs. We have taken security
measures to protect these elements. Substantially all of our research and development personnel are parties to confidentiality,
non-compete and proprietary information agreements with us. These agreements address intellectual property protection issues and
require our employees to assign to us all of the inventions, designs and technologies that they develop during the terms of their
employment with us. We also take other precautions, such as internal document and network assurance and using a separate dedicated
server for technical data. Since our inception we have not had any material intellectual property claims brought against us. See
“Item 3.D. Risk Factors — Risks Related to Us and the PV Industry —Our limited intellectual property protection
both within and outside of China may undermine our competitive position and subject us to intellectual property disputes with third
parties, either of which may have a material and adverse effect on our business, results of operations and financial condition”.
Competition
The PV market
is intensely competitive and rapidly evolving. The supply of PV products has rapidly increased due to the growth of actual and
forecasted demand for PV products and relatively low barriers to entry. The weakened demand for PV modules due to weakened macroeconomic
conditions and tightened credit for PV project financing, combined with the increased supply of PV modules in recent years, have
caused the price of PV modules to decline since the beginning of the fourth quarter of 2008. Since the last quarter of 2012, the
price of PV modules has remained relatively stable primarily due to the shake-out of certain uncompetitive production capacity
and increased demand worldwide. Demand started to increase from the second half of 2013 and the prices of PV modules slightly increased
at the same time. However, prices of PV modules slightly declined again in 2015 and
continued to significantly decline in
the second half of 2016
mainly due to increased capacity and decreases in FIT in China. We
expect that the prices of PV products, including PV modules, may continue to slightly decrease due to continued reductions in the
cost of their manufacture and increasing competitive on markets worldwide. If we fail to attract and retain customers in our
target markets for our current and future core products, namely PV modules and PV systems, we will be unable to increase our revenues
and market share.
In 2014, 2015 and 2016, portions of our
revenues have derived from overseas markets, including in Japan, the United States, Europe, South Africa, Turkey, South Asia, Australia,
Latin Americas and Middle East, etc. In these markets, we compete with both local and international producers of solar products,
including PV module manufacturers such as SunPower Corporation, thin film solar module manufacturers such as First Solar, Inc.,
and integrated PV product manufacturers such as SolarWorld AG, Renewable Energy Corporation and Trina Solar Limited. In 2016, sales
in China accounted for approximately 58.9% of our total revenues, compared to approximately 35.2% in 2014 and approximately 40.9%
in 2015. We expect more competition from local PV module manufacturers in China as we continue to expand in the China market.
We may also face competition from new entrants
to the PV market, including those that offer more advanced technological solutions or that have greater financial resources, such
as semiconductor manufacturers, several of which have announced their intention to start producing PV cells and PV modules. A significant
number of our competitors are developing or currently producing products based on PV technologies which may be believed to be more
advanced, including amorphous silicon, string ribbon and nano technologies, which eventually may offer cost advantages over the
crystalline polysilicon technologies which we currently use. Widespread adoption of any of these technologies could result in a
rapid decline in demand for our products and a resulting decrease in our revenues if we fail to adopt such technologies. In addition,
some of our competitors have become, or are becoming, vertically integrated in the PV industry value chain, as we already have
become, from silicon ingot manufacturing to PV system sales and installation. Our competitive advantage as a vertically integrated
PV product manufacturer could be further eroded if more of our competitors were to become vertically integrated in the PV industry
value chain. In addition, our competitors may also enter into the polysilicon manufacturing business, which may provide them with
cost advantages. Furthermore, the entire PV industry also faces competition from conventional energy and non-solar renewable energy
providers.
With respect to PV modules, we compete
primarily in terms of price, reliability of delivery, consistency in the average wattage of our PV modules, durability, appearance
and the quality of our after-sale services. We believe that our highly reliable and cost-effective products, strong brand name,
well-established reputation and integrated service model make our PV modules competitive.
With respect to large integrated PV system
projects, we compete primarily in terms of price, design and construction experience, aesthetics and conversion efficiency. We
face competition from other providers of renewable energy solutions, including developers of PV, solar thermal and concentrated
solar power systems, and developers of other forms of renewable energy projects, including wind, hydropower, geothermal, biomass,
and tidal. In particular, to the extent other solar module manufacturers become more vertically integrated, we expect to face increased
competition from such companies in the PV system project market. We also face competition from other EPC companies and joint venture
type arrangements between EPC companies and solar companies. While the decline in PV modules prices over the last several years
has led to increased demand for solar electricity worldwide, competition at the systems level can be intense, thereby exerting
downward pressure on systems level profit margins across the industry, to the extent that competitors are willing and able to bid
aggressively low prices for new projects and power purchase agreements, or PPAs, using low cost assumptions for modules, Balance
of System components, installation, maintenance and other costs. See “Item 3.D. Risk Factors — Risks Related to Us
and the PV Industry —We face intense competition in the PV modules and PV system markets. Our PV products compete with different
solar energy systems, as well as with other sources of renewable energy in the alternative energy market. We cannot guarantee that
we will continue to compete effectively in the markets in which we operate. Our failure to adapt to changing market conditions
and to compete successfully with existing or future competitors would have a material and adverse effect on our business, prospects
and results of operations”.
Environmental Matters
Our manufacturing processes generate noise,
waste water, gaseous byproducts and other industrial waste. We have installed various types of anti-pollution equipment in our
facilities to reduce, treat, and where feasible, recycle the wastes generated by our manufacturing processes. The most significant
environmental contaminant we generate is waste water. We have built special facilities to filter and treat waste water generated
by our production processes and recycle the water back into our production processes. The other major environmental contaminant
we generate is gaseous byproducts. We treat such gas in our special facilities to reduce the contaminant level to below the applicable
environmental protection standard before discharging the gas into the atmosphere. Our operations are subject to regulation and
periodic monitoring by local environmental protection authorities. The Chinese national and local environmental laws and regulations
impose fees for the discharge of waste substances above prescribed levels, impose fines for serious violations and provide that
the Chinese national and local governments may, in their discretion close or suspend the operation of any facility that fails to
comply with orders requiring it to cease or remedy its operations causing damage to the environment.
We have devoted
significant efforts to technological innovation and progressive equipment upgrades in some of our manufacturing facilities to improve
our production efficiency. Due to these technological innovations and equipment upgrades, our utilization rate in these manufacturing
facilities was increased. Actual production capacity of HainanYingli’s manufacturing facilities even exceeded the original
capacity permitted by its existing environmental assessment approvals. On March 6 and March 12, 2014, Hainan Yingli received
notices from the Department of Land, Environment and Resources of Hainan Province, or the Hainan LER Department, and the Haikou
Municipal Environmental Protection Bureau, respectively, requesting Hainan Yingli to (i) suspend partially its production
lines, and (ii) apply for new environmental impact assessments for its increased production capacity due to equipment upgrades.
In addition, three fines were levied against Hainan Yingli in a total amount of approximately RMB0.27 million. Hainan Yingli worked
closely with the relevant local governmental authorities for the new environmental impact assessments and to re-obtain the trial
production permits. On May 16, 2014, Hainan Yingli obtained trial production permits from the Hainan LER Department and on October
29, 2014, the Hainan LER Department approved Hainan Yingli’s environmental impact assessment. On December 12, 2014, Hainan
Yingli obtained a Pollutant Discharge Permit from Hainan LER Department, which was valid until December 12, 2015. On March 26,
2015, Hainan Yingli received a notice from the Haikou Municipal Environmental Protection Bureau, demanding payment of an environmental
penalty in an amount of RMB62,630.40, and Hainan Yingli paid the penalty amount in full in April of 2015. On December 12, 2015,
Hainan Yingli obtained a renewed Pollutant Discharge Permit from Hainan LER Department, which Permit is valid until December 22,
2017.
On November 2016, Hainan Yingli received notices from the Department of Ecology and
Environment Protection of Hainan Province and Haikou Municipal Environmental Protection Bureau for its failure to meet the requirements
for waste acid and pollutant discharge, demanding payment of environmental penalties in the total amount of RMB0.4 million and
Hainan Yingli paid the penalty amount in full in December 2016. Meantime, Hainan Yingli has adopted a series of measures, such
as strengthening management and upgrading facilities, to avoid the recurrence of similar incidents in the future.
Except as disclosed above, no such penalties
have been imposed on us or our subsidiaries, and we believe that we are currently in compliance with current environmental protection
requirements in all material respects, and have obtained or are in the process of obtaining all necessary environmental permits
for all of our production expansion projects. We are not aware of any other pending or threatened environmental investigation proceeding
or action by any governmental agency or third party.
Insurance
We maintain an insurance policy covering
losses due to fire, earthquake, flood and a wide range of other natural disasters. Insurance coverage for our inventory, fixed
assets and ongoing projects amounted to approximately RMB9,870 million as of the date of this annual report. We also maintain insurance
policies in respect of marine, air and inland transit risks of our products. In addition, we have obtained product liability insurance
coverage. The insurance policy covers bodily injuries and property damage caused by products we have sold, supplied or distributed
up, to specified limits. We do not maintain any insurance coverage for business interruption or key-person life insurance for our
executive officers. We consider our insurance coverage to be adequate. However, significant damage to any of our manufacturing
facilities and buildings, whether as a result of fire or other causes, could have a material and adverse effect on our results
of operations. See “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry — We have limited insurance
coverage and may incur uncovered losses resulting from business interruption or natural disasters”.
PRC Governmental Regulations
This section sets forth a summary of the
most significant regulations or requirements that affect our business activities in China. Certain of these regulations and requirements,
such as those relating to tax, equity joint ventures, foreign currency exchange, dividend distribution, regulation of foreign exchange
in certain onshore and offshore transactions, and regulations of overseas listings, may affect our shareholders’ right to
receive dividends and other distributions from us.
Renewable Energy Law and Other Government Directives
In February 2005, China enacted its
Renewable Energy Law, which became effective on January 1, 2006, or the 2006 Renewable Energy Law. The 2006 Renewable Energy
Law sets forth the national policy to encourage and support the use of solar and other sources of renewable energy and the use
of on-grid generation. On December 26, 2009, the Standing Committee of the National People’s Congress adopted an amendment
to the 2006 Renewable Energy Law, or the Amended Renewable Energy Law, which became effective on April 1, 2010. While the
2006 Renewable Energy Law has laid the legal foundation for developing renewable energy in China, the Amended Renewable Energy
Law has introduced practical implementation measures to enhance such development.
The Amended Renewable Energy Law details
the principles, main content and key issues of the plans to develop and utilize renewable energy, further elaborates on the requirements
for grid companies to purchase the full amount of electricity generated from renewable energy sources by setting out the responsibilities
and obligations of the government, the power companies and the grid companies, respectively, and also clarifies that the state
will set up a special fund, referred to as the renewable energy development fund, to compensate the difference between the tariff
for electricity generated from renewable energy and that generated from conventional energy sources. The proceeds of the renewable
energy development fund may also be used to support renewable energy scientific research, finance rural clean energy projects,
build independent power systems in remote areas and islands, and build information networks to exploit renewable energy. It is
anticipated that China will publish more detailed implementing rules for the Amended Renewable Energy Law and make corresponding
changes to those existing implementing rules relating to renewable energy.
China’s Ministry of Construction
issued a directive in June of 2005, which seeks to expand the use of solar energy in residential and commercial buildings
and encourages the increased application of solar energy in townships. In addition, China’s State Council promulgated a directive
in June of 2005, which sets forth specific measures to conserve energy resources and encourage exploration, development and
use of solar energy in China’s western areas, which are not fully connected to electricity transmission grids, and other
rural areas.
In July 2007, the PRC State Electricity
Regulatory Commission issued the Supervision Regulations on the Purchase of All Renewable Energy by Power Grid Enterprises which
became effective on September 1, 2007. To promote the use of renewable energy for power generation, the regulations require
that electricity grid enterprises must in a timely manner set up connections between the grids and renewable power generation systems
and purchase all the electricity generated by renewable power generation systems. The regulations also provide that power dispatch
institutions shall give priority to renewable power generation companies in respect of power dispatch services provision.
On August 31, 2007, the NDRC implemented
the National Medium- and Long-Term Programs for Renewable Energy, or MLPRE, which highlights the government’s long-term commitment
to the development of renewable energy.
On April 1, 2008, the PRC Energy Conservation
Law came into effect. Among other objectives, this law encourages the utilization and installation of solar power facilities in
buildings for energy-efficiency purposes.
On March 23, 2009, the MOF issued
the Provisional Measures for Administration of Government Subsidy Funds for Application of Solar Photovoltaic Technology in Building
Construction, which outlined a subsidy program dedicated to rooftop PV systems with a minimum peak capacity of 50 kilowatt-peak.
On July 1, 2010, the Ministry of Housing
and Urban-Rural Development issued the “City Illumination Administration Provisions” or the Illumination Provision.
The Illumination Provisions encourage the installation and use of renewable energy system such as PV systems in the process of
construction and re-construction of city illumination projects.
On July 24, 2011, the NDRC issued the
Notice on Improving the On-grid Tariff Policy for Photovoltaic Generation. Under this Notice, it is required that a uniform national
benchmark on-grid tariff for solar energy photovoltaic generation be formulated. Furthermore, for PV projects that had been approved
before July 1, 2011 and would be completed by December 31, 2011, the feed-in tariff would be RMB1.15/kWh, including value-added
tax, or VAT. Except for PV projects that are constructed in Tibet, for PV projects that are approved after July 1, 2011 and
PV projects that had been approved before July 1, 2011 but would not be completed by December 31, 2011, the feed-in tariff
including VAT would be RMB1/kWh.
On November 29, 2011, the MOF, the NDRC
and the National Energy Administration, or the NEA, jointly issued the Interim Measures for the Administration of Levy and Use
of Renewable Energy Development Fund, which provides that development funds for renewable energy include designated funds arranged
by the public budget of national finance, and renewable energy tariff surcharge collected from electricity consumers. Solar power
projects can only receive central government subsidies after completing certain administrative and perfunctory procedures with
the relevant authorities of finance, price and energy to be qualified for such subsidy.
In order to be qualified for such subsidy,
ground-mounted projects submit applications to the relevant provincial authorities; and in accordance with the Circular on Issues
Concerning Implementing Electric Quantity-based Subsidy Policy for Distributed Generation Projects issued by the MOF on July 24,
2013, rooftop DG projects submit applications to the grid enterprises in the area where the projects are located. After preliminary
review of the applications, the provincial authorities will jointly report to the MOF, the NDRC and the NEA, and the MOF, the NDRC
and the NEA will have final review on such applications to decide whether to list in the subsidy catalog.
On March 14, 2012, the MOF, the NDRC
and the NEA jointly issued interim measures for the management of additional subsidies for renewable-energy power prices, according
to which relevant renewable-energy power generation enterprises are entitled to apply for subsidies for their renewable power generation
projects that satisfy relevant requirements set forth in the measures.
On January 1, 2013, the State Council
adopted a Circular on the Twelfth Five-Year Plan for Energy Development, which sets out key development objectives for the industry
during the PRC’s 12th Five-Year Plan. In accordance with this plan, to optimize the structure of energy consumption, the
proportion of non-fossil energy consumption is to be increased to 11.4 percent of total energy consumption by 2015.
In March 2013, the NDRC issued the
Notice on Improving the Pricing Scheme for Photovoltaic Power Generation. According to this notice, the NDRC proposed to reduce
the feed-in tariff for utility scale PV projects from RMB1/kWh to RMB0.75/kWh, RMB0.85/kWh and RMB0.95/kWh, depending on the project’s
location. The feed-in tariff for PV projects constructed in specific regions would remain at RMB1/kWh. In addition, the NDRC proposed
a subsidy of RMB0.35/kWh for distributed PV generation projects and the purchase price of electricity generated to be in line with
existing tariffs for electricity generated from coal.
In March 2013, the NDRC, the NEA and
the MOF jointly issued measures to standardize settlement of feed-in tariffs, which are believed to help address delays in payment
of solar subsidies and settlement of accounts payable experienced by solar project developers. In addition, pursuant to a July 2013
MOF notice, starting from August 2013, subsidies for distributed PV power generation stations (excluding distributed PV power
generation projects) are required to be paid directly from the MOF to the State Grid Corporation of China and the China Southern
Power Grid Co., Ltd., rather than through the MOF’s provincial counterparts. As a result of such measures, the collection
period for feed-in-tariffs is expected to be significantly shortened.
The MOF has proposed to almost double the
renewable energy surcharge for end-users of electricity from RMB0.008/kWh to RMB0.015/kWh, effective from September 25, 2013.
On August 26, 2013, the Department
of Price Supervision of the NDRC released subsidy details for PV projects. Transmission-grid-connected projects will receive a
feed-in-tariff of RMB0.90/kWh to RMB1.00/kWh, and distribution-grid-connected projects will receive a premium of RMB0.42/kWh in
addition to the desulphurized coal benchmark price. Distribution-grid-connected projects are expected to represent the majority
of China’s new PV installations over the next few years. Unlike the rest of the world, capital expenditures for distribution-grid-connected
projects are higher than transmission-grid-connected projects, since labor costs for scaffolding and work on rooftops are low in
China and rooftop space is currently free. Meanwhile, the NDRC announced that the feed-in tariff will be valid, in principle, for
20 years.
On September 23, 2013, the MOF and the
State Administration of Taxation jointly issued a notice that ordered a 50% refund of value-added tax on sales by PV manufacturers
of their PV products. This VAT refund will be effective from October 1, 2013 through December 31, 2015.
On November 26, 2013, the MOF announced
that electricity generated by distributed PV systems for their own use is exempted from paying governmental charges of additional
renewable energy tariffs, funding of major national water conservancy construction projects, large and medium-sized reservoir settlement
support and rural loans. On the same date, the NEA promulgated the “Interim Measures for the Administration of PV Power Generation”,
which clarify that the state department in charge of energy and its local counterparts are responsible for supervising PV projects.
On February 12, 2014, the NEA circulated
the target for national solar installations in 2014 to be 14 gigawatts, 6 gigawatts of which would be targeted for utility scale,
8 gigawatts for distributed generation. The NEA revised this installations target to 13 gigawatts in August due to slower
than expected growth in the first half of 2014.
Also on February 12, 2014, the NEA released
a list of 81 “New Energy Demonstration Cities” and eight “industrial demonstration parks” in 28
cities and 8 provinces respectively. These cities and zones are required to achieve their respective mandatory targets in terms
of solar PV installations and the percentage of installed renewable energy power generation capacities by the end of 2015,
or the end of the 12th Five-Year Plan.
In February 2014, the Certification
and Accreditation Administration and the NEA jointly issued the “Implementation Opinions on Strengthening the Testing and
Certification of PV Products”. The implementation opinions specify that only certified PV products may be connected to the
power grid or receive government subsidies. The institutions that certify PV products must be approved by the Certification and
Accreditation Administration. According to the implementation opinions, PV products that are subject to certification include PV
battery parts, inverters, control devices, confluence devices, energy storage devices and independent PV systems.
On September 2, 2014, the NEA of China
issued new policies to accelerate the development of distributed generation and simplify the relevant approval process. In addition,
the new policy encouraged the development of more innovative financing structures for distributed generation projects, with potential
options such as loan guarantees, leasing models, strategic partnerships between banks and PV installers, and increased support
for personal and business loans.
In March 2015, the NEA promulgated the
Circular on Implementing Plans of PV Generation Construction for 2015, which announced that the total target increase in PV power
generation capacity of ground-mounted projects for 2015 will be 17.8 gigawatts and indicated that rooftop distributed solar projects
and ground-mounted projects intended for self-use would no longer be subject to quota requirement.
On March 20, 2015, the NDRC and the NEA
issued a directive opinion emphasizing that the relevant provincial authorities must strengthen implementation of provisions regarding
the purchase of the full amount of electricity generated by renewable energy and avoid any curtailment of solar power projects.
In addition, the directive opinion also stated that electricity generated by clean energy is encouraged to be sold directly to
consumers in regions having an ample supply of clean energy, and the relevant parities must coordinate the trans-provincial supply
of electricity and power transmission capability, in order to maximize the utilization of clean energy.
On June 1, 2015, the NEA, the MIIT and
the Certification and Accreditation Administration of the People’s Republic of China (CNCA) issued the Directive Opinions
on Promoting the Advanced PV Applications and PV Industry Upgrading, which signaled strict implementation of market access for
PV products. For example, the conversion rate of multicrystalline PV modules and monocrystalline PV modules should be no less than
15.5% and 16%, respectively. The NEA also launched a “Top Runner” program to promote advanced PV products, which program
requires that the conversion rate of multicrystalline PV modules and monocrystalline PV modules should be more than 16.5% and 17%,
respectively.
In September 2015, the NEA issued a notice
to raise China’s PV installation target to 23.1 gigawatts from 17.8 gigawatts for 2015.
On November 27, 2015, the State Forestry
Administration released a notice to specify the scope of forest land that can be used for the construction of PV power stations.
On December 2, 2015, the Ministry of Land and Resources also issued a notice to standardize the approval and use of land during
the development of PV projects.
On December 22, 2015, the People’s
Bank of China (PBOC) issued the Project Catalog Supported by Green Bonds, in which the PBOC encouraged financial institutions to
issue bonds supporting the development of PV and other green industries.
On December 24, 2015, the NDRC issued the
Notice on Improving Benchmark Price Policy of Onshore Wind Power and PV Power. According to this new policy, a new feed in tariff
of RMB0.8, RMB0.88, or RMB0.98 will apply to PV projects registered after January 1, 2016, with the specific feed in tariff rate
to vary according to the location of the PV project.
On March 3, 2016, the NEA announced the
guiding opinions on Renewable Portfolio Standard (RPS). Under the RPS, each province/city is required to consume a certain amount
of the renewable energy (mainly wind power & solar power) in total energy consumption, with a target national average of 9%,
as compared to the current national average of 4%.
On March 23, 2016, the NDRC, the NEA, the
Poverty Alleviation and Development Office of the State Council (PDOS), the China Development Bank (CDB) and the Agricultural Development
Bank of China (ADBC) jointly issued the Opinion on Implementing PV Power Generation for Alleviating Poverty, in which the government
requires developing PV power generation facilities in about 35 thousand villages to help alleviate poverty in these villages.
On March 24, 2016, the NDRC issued the
Notice on Issuing the Measures for the Administration of the Guaranteed Buyout of Electricity Generated by Renewable Energy Resources.
According to this notice, grid enterprises will buy all electricity generated by renewable energy resources within government plans.
On December 26, 2016, NDRC announced on
its website the solar power tariff revisions for 2017 as follows: (i) in 2017, for solar power plants in resource zones I, II and
III, the FIT shall be lowered from the 2016 rates of RMB0.80 per kWh, RMB0.88 per kWh and RMB0.98 per kWh, respectively, to RMB0.65
per kWh, RMB0.75 per kWh and RMB0.85 per kWh, respectively, representing decreases of 19%, 15% and 13%, respectively; (ii) the
subsidy for distributed solar power plants shall remain unchanged at RMB0.42 per kWh; (iii) for solar power projects registered
prior to 2017 and eligible for fiscal subsidies, the 2016 FIT rates shall remain applicable if they are connected to the grid and
in operation by June 30, 2017; and (iv) future solar power tariffs will be revised annually in accordance with cost changes.
In late 2016, the NEA announced that the
“Super Top Runner” program will be launched soon. The “Super Top Runner” program aims at advocating state-of-the-art
technologies prior to mass production, and this will greatly promote the R&D of high-efficiency modules. Instead of bidding,
a solar company with advanced technologies will collaborate with one or two investment companies to apply for the “Super
Top Runner” projects.
In February 2017, NDRC, MOF, and NEA announced
that a “green certificates” program for solar and wind power will be launched beginning on July 1, 2017. The green
certificates issued by the program will be similar to the Renewable Energy Credits issued in the United States, and will each represent
1MW of electricity output from solar or wind generation. Participation in the program will be voluntary at the outset, and is expected
to become mandatory in 2018.
Environmental Regulations
Our manufacturing processes generate noise,
waste water, gaseous byproducts and other industrial waste. We are subject to a variety of governmental regulations related to
the storage, use and disposal of hazardous materials. The major environmental regulations applicable to us include the PRC Environmental
Protection Law, the PRC Law on the Prevention and Control of Water Pollution and its implementation rules, the PRC Law on the Prevention
and Control of Air Pollution and its implementation rules, the PRC Law on the Prevention and Control of Solid Waste Pollution,
the PRC Law on the Prevention and Control of Noise Pollution and the PRC Law on Appraising Environment Impacts.
In addition, under the PRC Environmental
Protection Law, the Ministry of Environmental Protection sets national pollutant emissions standards. However, provincial governments
may set stricter local standards, which are required to be registered with the State Administration for Environmental Protection.
Enterprises are required to comply with the stricter of the two standards.
Relevant laws and regulations generally
impose discharge fees based on the level of pollutions emitted. These laws and regulations also impose fines for violations of
laws, regulations or decrees and provide for possible closure by the central or local government of any enterprise which fails
to comply with orders requiring it to remedy its activities causing damage to the environment.
Equity Joint Ventures
Tianwei Yingli, as a Sino-foreign equity
joint venture enterprise, is an equity joint venture subject to certain PRC laws and regulations. Equity joint ventures, as a form
of foreign investment permitted in China, are governed primarily by the following laws and regulations:
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the Company Law (1993), as
amended;
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the Law on Sino-Foreign Equity Joint Venture Enterprises (1979), as amended; and
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Rules on Implementation of the Law on Sino-Foreign Equity Joint Venture Enterprises (1983), as amended.
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An equity joint venture is a limited liability
company under PRC law and its establishment is subject to the approval of MOFCOM or its authorized local counterpart where such
equity joint venture is located. The board of directors is the highest authority of an equity joint venture and has the power to
decide all matters that are material to the equity joint venture. Each director is appointed for a term of no more than four years
and may serve consecutive terms if appointed by the party by which he or she was originally appointed. Each director may be removed
by its appointing party, at any time, with or without cause and may be replaced by a nominee appointed by such party before the
expiration of such director’s term of office.
Resolutions of the board of directors of
an equity joint venture involving any matters may be adopted by the affirmative vote of a simple majority of all directors present
in person or by proxy at a meeting of the board, except that resolutions involving the following matters require a unanimous approval
of all directors present in person or by proxy at the meeting of the board:
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amendment to the articles of association of the equity joint venture;
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merger of the equity joint venture with another entity;
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division of the equity joint venture;
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suspension or dissolution of the equity joint venture; and
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increase or reduction of the registered capital of the equity joint venture.
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Tax
Enterprise Income Tax
PRC enterprise income tax is calculated based
on taxable income determined under PRC GAAP and PRC tax laws and regulations.
On March 16,
2007, the National People’s Congress passed the Enterprise Income Tax Law, or the EIT Law, and adopted a uniform income tax
rate of 25% for most domestic enterprises and foreign investment enterprises. The EIT Law became effective on January 1, 2008.
The EIT Law provides a five-year transition period from its effective date for enterprises that were established before the promulgation
date of the EIT Law and which enterprises were entitled to preferential tax rates and treatments under the then effective tax laws
or regulations. On December 26, 2007, the PRC government issued detailed implementation rules regarding the transitional
preferential policies. Furthermore, under the EIT Law, entities that qualify as “high and new technology enterprises strongly
supported by the state” are entitled to a preferential enterprise income tax rate of 15%. The Ministry of Science and Technology,
the MOF and the State Administration of Taxation jointly issued the Administrative Regulations on the Recognition of High and New
Technology Enterprises (“HNTE”) on January 29, 2016 to replace the previous regulations issued on April 24, 2008, but
have yet to issue new guidelines to replace the Guidelines for the Recognition of High and New Technology Enterprises issued on
July 8, 2008.
In 2008, Tianwei Yingli was recognized by the Chinese government as a HNTE
under the new EIT law and its relevant regulations. In 2011, Tianwei Yingli renewed its HNTE qualification, which entitled it to
the preferential income tax rate of 15% for 2012 and 2013. In 2014, Tianwei Yingli renewed its HNTE qualification again, which
extended its entitlement to the preferential income tax rate of 15% to 2016. Yingli China was recognized by the Chinese government
as a HNTE under the new EIT law and its relevant regulations, which entitled it to the preferential income tax rate of 15% from
2011 to 2013. In 2014, Yingli China renewed its HNTE qualification, which entitled it to the preferential income tax rate of 15%
from 2014 to 2016. In 2011, Hainan Yingli was recognized by the Chinese government as a HNTE under the new EIT law and its relevant
regulations. Being a HNTE located in the Hainan Special Economic Zone, Hainan Yingli was entitled to a 2+3 tax holiday starting
from the year in which it first generated operating income. Hainan Yingli elected and was approved to commence its 2+3 tax holiday
in 2011. Therefore, Hainan Yingli was entitled to income tax exemption for 2011 and 2012 and subject to the reduced income tax
rate of 12.5% from 2013 to 2015. Since the tax holiday ended in 2015, Hainan Yingli has been subject to a preferential income tax
rate of 15% in 2016. In 2013, Yingli Tianjin, Yingli Lixian and Yingli Hengshui were recognized by the Chinese government as HNTEs
under the new EIT law and its relevant regulations, which entitled them to the preferential income tax rate of 15% from 2013 to
2015. In 2016, Yingli Tianjin, Yingli Lixian and Yingli Hengshui renewed their HNTE qualification, which entitled them to the preferential
income tax rate of 15% from 2016 to 2018.
Subject to reapplication or renewal, except
for Tianwei Yingli, the other subsidiaries including Yingli China, Hainan Yingli, Yingli Tianjin, Yingli Lixian and Yingli Hengshui’s
HNTE status will enable them to continue to enjoy the preferential income tax rate. Management believes that these subsidiaries,
except for Tianwei Yingli, meet all the criteria for the reapplication of HNTE status.
Domestic project assets in China are entitled
to a 3+3 tax holiday starting from the year in which they first generate operating income. The domestic project assets elected
and were approved to commence their 3+3 tax holiday. Therefore, the domestic project assets are entitled to income tax exemption
for the first three years starting from the year in which they first generate operating income and subject to a reduced income
tax rate of 12.5% in the following three years.
Moreover, the EIT Law and its implementation
rules impose a 10% withholding tax, unless reduced by a tax treaty or agreement, for distributions of dividends in respect
of earnings accumulated beginning on January 1, 2008 by a foreign investment enterprise to its immediate overseas holding
company, insofar as the latter is treated as a non-resident enterprise. See “Item 3.D. Risk Factors — Risks Related
to Doing Business in China — Dividends we may receive from our operating subsidiaries located in the PRC may be subject to
PRC withholding tax”.
The EIT Law also specifies that enterprises
established outside of China whose “de facto management bodies” are located in China are considered “resident
enterprises” and generally are subject to enterprise income tax on their worldwide income at the uniform 25% rate. Under
the implementation rules for the EIT Law issued by the State Council, a “de facto management body” is defined
as a body that has substantial and overall management and control over the manufacturing and business operations, personnel, accounting,
properties and other factors of an enterprise. On April 22, 2009, the State Administration of Taxation promulgated the Notice
Regarding Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of
De Facto Management Bodies, or SAT Circular 82, which sets out criteria for determining whether “de facto management bodies”
are located in China for overseas incorporated, domestically controlled enterprises. However, as this circular only applies to
enterprises incorporated under laws of foreign countries or regions that are controlled by PRC enterprises or groups of PRC enterprises,
it remains unclear how the tax authorities will determine the location of “de facto management bodies” for overseas
incorporated enterprises that are controlled by individual PRC residents like us and some of our subsidiaries. Therefore, although
substantially all of our management is currently located in the PRC, it remains unclear whether the PRC tax authorities would require
or permit our overseas registered entities to be treated as PRC resident enterprises. If the PRC tax authorities determine that
Yingli Green Energy and some of our subsidiaries, such as Yingli International, Yingli Capital, Yingli Hong Kong, Cyber Power and
Cyber Lighting, are PRC resident enterprises, we and such subsidiaries may be subject to enterprise income tax as to our global
income at the 25% rate. See “Item 3.D. Risk Factors — Risks Related to Doing Business in China — We and some
of our subsidiaries may be deemed resident enterprises under the EIT Law and be subject to PRC taxation as to our worldwide income”.
On February 3, 2015, the State Administration
of Taxation issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises,
or Bulletin 7, which replaced or supplemented previous rules under the Notice on Strengthening Administration of Enterprise Income
Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698, issued by the State Administration of Taxation, on December
10, 2009. Pursuant to this Bulletin, an “indirect transfer” of assets, including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if
such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise
income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin
7, “PRC taxable assets” include assets attributed to an establishment in China, immoveable properties located in China,
and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC
resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a “reasonable commercial
purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity
interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise
mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise
and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their
actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability
of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax
treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain
is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would
consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable
properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment
or place of business of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential
tax treatment under applicable tax treaties or similar arrangements, and the payer bears the withholding obligation. Where the
payer fails to withhold any or sufficient tax, the transferor shall declare and pay such the tax to the tax authority by itself
within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Bulletin 7 does
not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a
transaction through a public stock exchange.
There is uncertainty as to the application
of Bulletin 7 and the previous rules under Circular 698. Tax authorities may determine that Bulletin 7 is applicable to any
offshore transaction involving both us and a non-PRC resident enterprise. As a result, both transferors and transferees may be
subject to obligations to withhold, or make filings regarding, EIT, and one or more of our PRC subsidiaries may need to assist
with such filing. Furthermore, we and one or more of our non-PRC resident enterprises or PRC subsidiaries may need to spend valuable
resources in order to comply with Bulletin 7, or to establish that we and our non-PRC resident enterprises should not be taxed
under Bulletin 7. Any such expenditure of valuable resources may have a material and adverse effect on our financial condition
and results of operations.
Value Added Tax
Pursuant to the Provisional Regulation
of the PRC on Value Added Tax and its implementation rules, all entities and individuals that are engaged in the sale of goods,
the provision of repairs and replacement services and the importation of goods in China are generally required to pay Value Added
Tax at a rate of 17.0% of the gross sales proceeds received, less any creditable Value Added Tax already paid or borne by the taxpayer.
In addition, when exporting goods, the exporter is entitled to a portion of or all the refund of value added tax that it has already
paid or borne. Imported raw materials that are used by our operating subsidiaries for manufacturing products intended for export,
and are deposited in bonded warehouses are exempt from import Value Added Tax.
Foreign Currency Exchange
Foreign currency exchange in China is primarily
governed by the following rules:
|
·
|
Foreign Currency Administration
Rules (1996), as amended; and
|
|
·
|
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996).
|
Under the Foreign Currency Administration
Rules, the foreign exchange incomes of domestic entities and individuals can be remitted into China or deposited abroad, subject
to conditions and time limits to be issued by the PRC State Administration of Foreign Exchange, or SAFE. According to the Foreign
Currency Administration Rules, the Renminbi is convertible for current account items, including the distribution of dividends,
interest payments, trade and service-related foreign exchange transactions. However, conversion of Renminbi for capital account
items, such as direct investments, loans, securities investments, derivative transactions and repatriation of investments, is still
subject to approval by, and/or registration with, SAFE or its local branches.
Under the Administration Rules of the
Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises may only buy, sell and/or remit foreign currencies
at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital
account item transactions, obtaining approval from SAFE or its local branches. Capital investments by foreign-invested enterprises
outside of China are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and the National Development
and Reform Commission or their local counterparts. Currently, the PRC laws and regulations do not provide clear criteria as to
how to obtain approval from SAFE. SAFE and its local branches have broad discretion as to whether to issue an approval.
Dividend Distribution
The principal regulations governing distribution
of dividends paid by foreign invested enterprises include:
|
·
|
the Company Law (1993), as amended;
|
|
·
|
the Law on Sino-Foreign Equity Joint Venture Enterprises (1979), as amended;
|
|
·
|
the Rules on Implementation of the Law on Sino-Foreign Equity Joint Venture Enterprises (1983), as amended;
|
|
·
|
the Enterprise Income Tax Law (2007);
|
|
·
|
the Rules on Implementation of the Enterprise Income Tax Law (2007);
|
|
·
|
the Wholly Foreign Owned Enterprise Law (1986), as amended; and
|
|
·
|
the Administrative Rules under the Wholly Foreign Owned Enterprise Law (1990), as amended.
|
Under these regulations, Sino-foreign equity
joint venture enterprises and wholly foreign-owned enterprises in China may pay dividends only out of their retained earnings,
if any, determined in accordance with PRC GAAP. The board of directors of a Sino-foreign equity joint venture enterprise has the
discretion to allocate a portion of its after-tax profits to reserve funds, employee bonus and welfare funds and enterprise development
funds, which funds may not be distributed to equity owners as dividends. Wholly foreign owned enterprises in China are required
to allocate each year at least 10% of their after-tax profits, if any, to their reserve funds until the cumulative amount in such
reserve funds has reached 50% of the enterprise’s registered capital amount.
Furthermore, the State Administration of
Taxation promulgated the
Notice on How to Understand and Determine the Beneficial Owners in Tax Agreement
s in October 2009,
or Circular 601, which provides guidance on determining whether a resident of a contracting country is the “beneficial owner”
of an item of income under China’s tax treaties and tax arrangements. According to Circular 601, a beneficial owner generally
must be engaged in substantive business activities. An agent or conduit company will not be regarded as a beneficial owner and,
therefore, will not qualify for treaty benefits. The conduit company normally refers to a company that is set up for the purpose
of avoiding or reducing taxes or transferring or accumulating profits. It remains unclear whether any dividends to be distributed
by us to our non-PRC shareholders and ADS holders whose jurisdiction of incorporation has a tax treaty with China providing for
a different withholding arrangement will be entitled to the benefits under that withholding arrangement.
Regulation of Foreign Exchange
in Certain Onshore and Offshore Transactions
In October 2005, SAFE issued the Notice
on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents
Conducted via Offshore Special Purpose Companies, or SAFE Notice 75, which became effective on November 1, 2005. SAFE Notice
75 states that Chinese residents, whether natural or legal persons, must register with their relevant local SAFE branch prior to
establishing or taking control of an offshore entity established for the purpose of overseas equity financing involving onshore
assets or equity interests held by such Chinese resident. The term “Chinese legal person residents” as used in SAFE
Notice 75 refers to those entities with legal person status or other economic organizations established within the PRC. The term
“Chinese natural person residents” as used in SAFE Notice 75 includes all Chinese citizens and all other natural persons,
including foreigners, who habitually reside in China for economic benefit.
Chinese residents are required to complete
amended registrations with their local SAFE branch upon (i) injection of equity interests or assets of an onshore enterprise
to the offshore entity, or (ii) subsequent overseas equity financing by such offshore entity. Chinese residents are also required
to complete amended registrations or filings with their local SAFE branch within 30 days after the occurrence of any material change
in the shareholding or capital of the offshore entity, such as changes in share capital, share transfers and long-term equity or
debt investments, and providing security. Chinese residents who have already incorporated or gained control of offshore entities
that have made onshore investments in China before SAFE Notice 75 was promulgated must register their shareholding in the offshore
entities with their local SAFE branch on or before March 31, 2006.
Under SAFE Notice 75, Chinese residents are
further required to repatriate back into China all of their dividends, profits or capital gains obtained from their shareholdings
in the offshore entity within 180 days after receipt of such dividends, profits or capital gains. However, under the amended Foreign
Currency Administration Rules, the foreign exchange incomes of domestic entities and individuals can be remitted into China or
deposited abroad, subject to conditions and time limits to be issued by SAFE. The registration and filing procedures under SAFE
Notice 75 are prerequisites for other approval and registration procedures necessary for capital inflows from the offshore entity,
such as inbound investments or shareholders loans, or capital outflows to the offshore entity, such as the payment of profits or
dividends, liquidating distributions, equity sale proceeds, or the return of funds upon a capital reduction.
Failure to comply with the registration procedures
set forth in SAFE Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore
company, including the increase of its registered capital, the payment of dividends and other distributions to its offshore parent
or affiliate and the capital inflows from the offshore entity, and may also subject relevant Chinese residents to penalties under
PRC foreign exchange administration regulations and result in potential liability for our PRC subsidiaries and, in some instances,
for their legal representatives and other liable individuals.
SAFE promulgated SAFE Circular 37, on July
4, 2014, which replaced SAFE Notice 75 promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register
with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose
of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises
or offshore assets or interests, referred to in SAFE Circular 37 as a special purpose vehicle. SAFE Circular 37 further requires
amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase
or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In
the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration,
the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent
and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in
its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration
requirements described above could result in liability under PRC law for evasion of foreign exchange controls. On February 13,
2015, SAFE released the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct
Investment, or SAFE Circular 13, which has taken effective from June 1, 2015. According to this notice, local banks will examine
and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and
amendment registration, under SAFE Circular 37. However, since the notice has not yet come into force, there exist high uncertainties
with respect to its interpretation and implementation by governmental authorities and banks.
On August 29, 2008, SAFE promulgated
Circular 142, or SAFE Notice 142, a notice regulating the conversion by a foreign invested company of foreign currency into Renminbi
by restricting how the converted Renminbi may be used. The notice requires that the registered capital of a foreign-invested company
settled in Renminbi converted from foreign currencies may only be used for purposes within the business scope approved by the applicable
governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight
of the flow and use of the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies.
The use of such Renminbi capital may not be changed without SAFE’s approval, and may not in any case be used to repay Renminbi
loans if the proceeds of such loans have not been used. Violations of SAFE Notice 142 will result in severe penalties, such as
heavy fines. On November 19, 2012, SAFE promulgated Circular 59, which came into force on December 17, 2012. Circular
59 further relaxes the foreign exchange controls over inbound and outbound investments by PRC companies and simplifies the current
administrative system, especially in foreign currency capital settlement and foreign exchange registration procedures of foreign-invested
enterprises. In addition, SAFE promulgated the
Circular on Printing and Distributing the Provisions on Foreign Exchange Administration
over Domestic Direct Investment by Foreign Investors and the Supporting Documents
in May 2013, which specifies that the
administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of
registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration
information provided by SAFE and its branches.
The SAFE Notice 142 has been replaced by
the SAFE Notice 19, which was issued by SAFE on March 30, 2015 and became effective on June 1, 2015. According to the
SAFE Notice 19, a foreign invested enterprise is allowed to settle its foreign exchange capital on a discretionary basis according
to the actual needs of their business operation and provides the procedures for foreign invested enterprises to use Renminbi converted
from foreign-denominated registered capital of a foreign-invested enterprise for equity investment. Nevertheless, the SAFE Notice
19 also reiterates the principle that Renminbi converted from foreign currency-denominated registered capital may not be directly
or indirectly used for purposes beyond its business scope. There are still uncertainties on how the SAFE Notice 19 will be interpreted
and implemented in practice. Those restrictions may significantly limit our ability to transfer the net proceeds from our financings
to our PRC subsidiaries, which may adversely affect the business expansions of our PRC subsidiaries, and we may not be able to
convert net proceeds from our financings into Renminbi to invest in or acquire any other PRC companies.
Regulations of Employee
Share Options
In December 2006, the People’s
Bank of China promulgated the Administrative Measures on Individual Person Foreign Exchange, or the PBOC Regulation, setting forth
the respective requirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under current accounts
and capital accounts. In January 2007, SAFE issued the implementation rules for the PBOC Regulation, which, among other
things, specified the approval requirement for certain capital account transactions such as a PRC citizen’s participation
in the employee stock ownership plan or stock options plan of an overseas listed company. Consequently, in February 2012,
SAFE promulgated the Share Option Rules, under which PRC citizens or residents habitually residing in the PRC continuously for
over one year, who are granted shares or share options by an overseas-listed company according to its employee share option or
share incentive plan are required, through the PRC subsidiary of such overseas-listed company or qualified PRC agents, to register
with SAFE and complete certain other procedures related to the shareholding plan, share option plan or other similar share incentive
plans. Concurrent with the registration with SAFE, the PRC subsidiary or the qualified PRC agent shall obtain an approval
for an annual allowance of foreign exchange in connection with the exercise of any shareholding or share option as well as an approval
to open a special foreign exchange account at a PRC domestic bank to hold the funds required in connection with such exercise of
the share purchase or share option, returned principal or profits upon sale of shares, dividends issued on the stock and any other
income or expenditures approved by SAFE. Currently, participating PRC residents’ foreign exchange income received from the
sale of shares and dividends distributed by the overseas-listed company must be fully remitted into the domestic foreign currency
account before such income is distributed to such participants. In addition, the PRC agents are required to amend or deregister
the registrations with SAFE in case of any material change in, or termination of, the share incentive plans, within the time periods
provided by the Share Option Rules.
|
C.
|
Organizational Structure
|
The following diagram illustrates our company’s
organizational structure, and the place of formation, ownership interest and affiliation of each of our significant subsidiaries
as of the date of this annual report:
|
(1)
|
Indicates jurisdiction of
incorporation.
|
|
(2)
|
The principal business of
Tianwei Baobian is the manufacture of large electricity transformers. The common shares of Tianwei Baobian are listed on the Shanghai
Stock Exchange. Tianwei Baobian is controlled and 25.66% owned by Baoding Tianwei Group Co., Ltd., or Tianwei Group, a wholly
state-owned limited liability company established in the PRC, which is in turn controlled by China South Industries Group Corporation.
|
|
(3)
|
The principle business of
Baoding Tianwei Group is the production of transformers, CT and reactors applied on power distribution and power generation station.
|
|
(4)
|
Indicates the percentage
as of the date of this annual report.
|
|
(5)
|
The principal business of
Yingli International is the sale and marketing of PV products and relevant accessories and investments in renewable energy projects.
|
|
(6)
|
The principal business of
Tianwei Yingli is the design, manufacture and sale of PV modules and the design, assembly, sale and installation of PV systems.
|
|
(7)
|
The principal business of
Yingli China is the research, manufacture, sale and installation of renewable energy products.
|
|
(8)
|
The principal business of
Yingli Beijing is the sale and manufacture of PV modules and PV systems.
|
|
(9)
|
The principal business of
Yingli Green Energy Capital (Hong Kong) is import and export trading and investments holding.
|
|
(10)
|
The principal business of
Yingli Singapore is the research and experimental development on electronics.
|
|
(11)
|
The principal business of
Yingli Chile is the sale and marketing of PV products and relevant accessories in Chile.
|
|
(12)
|
The principal business of
Yingli Mexico is the sale and marketing of PV products and relevant accessories in Mexico.
|
|
(13)
|
The principal business of
Yingli Americas is the sale and marketing of PV products and relevant accessories and investments in renewable energy projects.
|
|
(14)
|
The principal business of
Hainan Yingli is the research, manufacture, sale and installation of renewable energy products.
|
|
(15)
|
The principal business of
Yingli Japan is the sale and marketing of PV products and relevant accessories in Japan.
|
|
(16)
|
The principal business of
Yingli South Africa is the sale and marketing of PV products and relevant accessories in South Africa.
|
|
(17)
|
The principal business of
Yingli Luxembourg is import and export trading and investments holding in Luxembourg.
|
|
(18)
|
The principal business of
Yingli Australia is the sale and marketing of PV products and relevant accessories in Australia.
|
|
(19)
|
The principal business of
Yingli Europe is the sale and marketing of PV products and relevant accessories in Europe.
|
|
(20)
|
The principal business of
Yingli South East Europe is the sale and marketing of PV products and relevant products in Greece, Cyprus, the Balkans and the
Middle East.
|
|
(21)
|
The principal business of Yingli Spain is the sale and
marketing of PV products, relevant accessories and investments in renewable energy projects, as well as after sales services.
|
*Note: In November 2012, a third party (“Party A”)
contributed RMB 100,000 to Hainan Yingli to acquire 5.825% equity interest of Hainan Yingli. Pursuant to the agreement between
Yingli China and the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount of
RMB 100,000 plus 5% annual interest in 5 years. As of December 31, 2015 and 2016, we recorded RMB 100,000 of this payment obligation
in “Long-term payables to non-controlling interest holders” and “Payables to non-controlling interest holders”,
respectively, in our Consolidated Balance Sheets. Under the payment schedule, RMB 100,000 of this payment obligation for sale and
repurchase of 5.825% equity interest of Hainan Yingli will become due in November 2017.
In December 2013, another third party (“Party B”)
contributed RMB 100,000 to Hainan Yingli to acquire 5.50% equity interest of Hainan Yingli. Pursuant to the agreement between Yingli
China and the investor, Yingli China is obligated to purchase such equity interest from the investor in the amount of RMB 100,000
plus 6.15% annual interest in 2 years. As of December 31, 2015 and 2016, we recorded RMB 100,000 of this payment obligation overdue
as “Payables to non-controlling interest holders” in our Consolidated Balance Sheet. We are still in negotiations with
the third party about the extension of the payment schedule under the relevant agreements.
In November 2015, Party B contributed a land use right with
fair value of RMB 728,116 to Hainan Yingli to acquire 21.84% equity interest of Hainan Yingli. Pursuant to the agreement between
Yingli China and the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount of
RMB 728,116 plus benchmark interest rate within 2 months to 10 years, among which, RMB 23,000 would be paid within two months,
RMB 82,000 would be paid within 3 years, and the remaining of 623,116 would be paid within 10 years. Because of Yingli China’s
contractual obligations to purchase the equity interests from these investors, the equity contributions made by the investors plus
accrued interest have been recorded as liabilities. This land use right was subsequently disposed by Hainan Yingli in December
2015 (refer to note 6). As in substance the whole arrangement is financing, proceeds received from the disposal were presented
as financing activities.
As of December 31, 2016, total current and non-current payables
to Party B was RMB 100,000 and RMB 705,116, respectively.
In January 2016, a third party (“Party C”) contributed
RMB 23,000 to Hainan Yingli to acquire 0.90% equity interest of Hainan Yingli. Pursuant to the agreement between Yingli China and
the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount of RMB 23,000 plus 19%
aggregate interest in 5 years.
Based on the above repurchase schedule, including principal
and interest, RMB 135,339 and RMB 233,135 (US$ 33,578) have been recorded in “Payables to non-controlling interest holders”,
RMB 821,276 and RMB 763,393 (US$ 109,952) have been recorded in “Long-term payables to non-controlling interest holders”
in our Consolidated Balance Sheets as of December 31, 2015 and 2016, respectively.
|
D.
|
Property, Plants and
Equipment
|
Our principal executive offices are located
at No. 3399 Chaoyang North Street in the National New and High-technology Industrial Development Zone in Baoding, China. We
conduct our research, development, manufacturing and management operations in sites located in Baoding, Hebei Province, Hengshui,
Hebei Province, Tianjin and Haikou, Hainan Province:
Facility
Number
|
|
Products
|
|
Location
|
|
Plant Size
(Square
Meters)
|
|
Duration
of Land
Use Right
|
|
Major
Equipment
|
1.
|
|
Ingots, wafers, cells, modules
|
|
Baoding, Hebei Province
|
|
25,842
|
|
March 2006 to June 2050 (a plot of 24,579 square
meters); December 2006 to November 2050 (a plot of 1,263 square meters)
|
|
Furnace, wire saw, wires quarter, diffusion
furnace, sintering furnace, PECVD antireflection coatings manufacturing equipment, automatic printer, laminating machine,
solar cell module production line before and after component lamination, automatic glue-spreads working station, solar cell
module testing device
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Same as above
|
|
Baoding, Hebei Province
|
|
232,158
|
|
December 2009 to December 2056 (a plot of 104,745
square meters); December 2009 to December 2056 (a plot of 102,886 square meters); and August 2010 to April 2060 (a plot of
24,527 square meters)
|
|
Same as above
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
|
Same as above
|
|
Baoding, Hebei Province
|
|
207,036
|
|
February 2010 to November 2059 (a plot of 163,579
square meters); December 2011 to December 2060 (a plot of 43,457 square meters)
|
|
Same as above
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
Same as above
|
|
Baoding, Hebei Province
|
|
11,698
|
|
September 2006 to August 2056 (a plot of 5,807
square meters); September 2006 to December 2049 (a plot of 5,891 square meters)
|
|
Same as above
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
|
Same as above
|
|
Baoding, Hebei Province
|
|
15,443
|
|
October 2008 to June 2049 (a plot of 6,746 square
meters); October 2008 to December 2056 (a plot 8,697 square meters)
|
|
Same as above
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
|
Same as above
|
|
Tianjin Ninghe Modern Industry Area
|
|
311,264
|
|
August 2011 to July 2061 (a plot of 233,296
square meters); August 2011 to June 2061 (a plot of 38,868 square meters); July 2013 to April 2063 (a plot of 19,074 square
meters; September 2015 to May 2065 (a plot of 20,026 square meters).
|
|
Same as above
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
Same as above
|
|
North Part of Hengshui Economic Development
Zone
|
|
292,508
|
|
February 2012 to December 2061(a plot of 82,603.2
square meters), May 2012 to April 2062 (a plot of 209,905.23 square meters)
|
|
Same as above
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
Same as above
|
|
Lixian, Baoding, Hebei Province
|
|
199,732
|
|
June 2011 to December 2060(a plot of 67,665.08
square meters), June 2012 to November 2054 (a plot of 65,400 square meters, February 2013 to May 2062 (a plot of 66,666.7
square meters)
|
|
Same as above
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
Same as above
|
|
Shiziling Industrial Park, National Hi-Tech
Development Zone, Haikou, Hainan Province
|
|
408,926
|
|
March 2010 to September 2057 (a plot of 181,339.31
square meters), June 2011 to September 2057 (a plot of 167,712.57 square meters), June 2011 to September 2057 (a plot of 59,875.92
square meters)
|
|
Same as above
|
ITEM 4A.
UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND
PROSPECTS
You should read the following discussion
and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and
the related notes included elsewhere in this annual report. This discussion may contain forward-looking statements based upon current
expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under “Item 3.D. Risk Factors” or in other parts
of this annual report.
|
A.
|
Operating Results Overview
|
We are one of the leading vertically integrated
PV product manufacturers in the world. We design, manufacture and sell PV modules, and design, assemble, sell and install PV systems.
We sell PV modules to PV system integrators and distributors located in various markets around the world, including Japan, the
United States, Europe, South Africa, Turkey, South Asia, Australia, Latin Americas and Middle East, etc.. Currently, we also sell
PV systems, primarily to customers in China.
Our manufacturing capacity and operations
have grown significantly since we completed construction of our first manufacturing facilities for PV modules in 2002. We use all
of the polysilicon ingots and wafers and PV cells we produced for the production of PV modules, which we sell to third-party customers.
Our shipment, including PV modules, were 3,361.3 megawatts, 2,447.0 megawatts and 2,170.4 megawatts, in 2014, 2015 and 2016, respectively.
The most significant factors that affect
our financial performance and results of operations are:
|
·
|
government subsidies and economic incentives;
|
|
·
|
the availability and accessibility of financing to our customers and us;
|
|
·
|
production capacity and utilization rate;
|
|
·
|
competition and product pricing;
|
|
·
|
vertically integrated manufacturing capabilities;
|
|
·
|
manufacturing technologies; and
|
|
·
|
foreign governments’ and international trade bodies’ trade protection measures.
|
Industry Demand
Our business
and revenue growth depend on market demand for PV products. Although solar power technology has been used for several decades,
the PV market grew significantly only in the past decade. According to EnergyTrend, solar energy division of TrendForce, global
PV market demand in 2016 increased by approximately 49% year over year to around 76.1 gigawatts, and is expected to reach 73.9
gigawatts in 2017.
This scenario assumes the continuation or introduction of adequate support mechanisms, accompanied
by a strong political will to consider PV as a major power source in the coming years. However, demand for our PV products also
depends on the general economic conditions in our target markets. Since the second half of 2008, economies around the world, including
those in our target markets, have experienced a period of slow economic growth as compared to prior years. Partly as a result of
these weakened worldwide macroeconomic conditions, the growth in demand for PV modules declined significantly since the fourth
quarter of 2008. Starting from the second quarter of 2009, the macroeconomic environment began to improve, which led to an increase
in demand for our products. The growth of demand for our products from some markets slowed down in the first quarter of 2011 until
the first quarter of 2013, primarily caused by the adjustment of subsidies and economic incentives for PV installations. However,
starting in 2014, the growth of demand for the products in our target markets, such as China and Japan began to increase and kept
increasing at a remarkable rate due to strong market demand and government supports with favorable policies. In 2015 and 2016,
China and Japan were the two largest markets for our company with strong demand for our PV products and are expected to maintain
momentum in 2017. Meanwhile, due to the continuous expansion of global PV manufacturing capacity and oversupply of PV modules in
recent years which, together with slower growth in demand for PV modules, the prices for PV modules continuously decreased in recent
years. Although, from the second half of 2014, polysilicon price began to decrease significantly and the spot market price fluctuated
under US$20 per kilogram as of the date of this annual report with a historically low level close to US$12 per kilogram at the
end of 2016.
Consequently, the profitability of the PV industry has continously weakened in
recent years. .
Government Subsidies and Economic Incentives
We believe that the near-term growth of
the market for PV products depends in part on the availability and size of government subsidies and economic incentives. Today,
the cost of solar power substantially exceeds the cost of electrical power generated from conventional fossil fuels such as coal
and natural gas. As a result, governments in many countries, including Germany, Italy, France, South Korea, the United States,
China, Greece, Israel, South Africa, the United Kingdom, India, Australia, Thailand, Singapore, Japan, Czech Republic,
Brazil, Peru, Mexico, Chile and Saudi Arabia, have provided subsidies and economic incentives for the use of renewable energy such
as solar power to reduce dependency on conventional fossil fuels as a source of energy. These subsidies and economic incentives
have been in the form of capital cost rebates, feed-in tariffs, tax credits, net metering and other incentives to end-users, distributors,
system integrators and manufacturers of solar power products, including PV products. The demand for our PV modules and PV systems
in our current, targeted or potential markets is affected significantly by these government subsidies and economic incentives.
However, the cancellation or change of
the supportive policies, such as the decreases of subsidy on solar PV in key markets, especially after the financial crisis in
2008, has impaired the profitability of the industry. For example, In June 2012, the German government passed the PV amendment
to its renewable energy law (EEG) 2012, which changed the 52 gigawatts capacity threshold, reduced the available PV rate, revised
the volume-based degression schedule, and limited the amount of electricity that PV generators can export to the grid. On July
5, 2013, the Italian government discontinued feed-in tariff payments, and feed-in tariffs for new solar PV projects have not been
available since July 2013. Furthermore, Levels of government subsidies generally, and FIT in particular, in China and in Japan
have decreased in recent years in terms of RMB or U.S. dollars per kWh, and such decreases are expected to continue in the future.
For example, on December 26, 2016, NDRC announced on its website the solar power tariff revisions for 2017 as follows: (i) in 2017,
for solar power plants in resource zones I, II and III, the FIT shall be lowered from the 2016 rates of RMB0.80 per kWh, RMB0.88
per kWh and RMB0.98 per kWh, respectively, to RMB0.65 per kWh, RMB0.75 per kWh and RMB0.85 per kWh, respectively, representing
decreases of 19%, 15% and 13%, respectively; (ii) the subsidy for distributed solar power plants shall remain unchanged at RMB0.42
per kWh; (iii) for solar power projects registered prior to 2017 and eligible for fiscal subsidies, the 2016 FIT rates shall remain
applicable if they are connected to the grid and in operation by June 30, 2017; and (iv) future solar power tariffs will be revised
annually in accordance with cost changes. Japan has also reduced its FIT several times in recent years and planned to continue
to reduce the FIT in the following years. There also have been other headwinds, such as trade barriers in the U.S., the European
Union, and other countries, which have resulted in the market volatility. See “Item 3.D. Key Information — Risk Factors
— Risks Related to Us and the PV Industry — A significant reduction in or discontinuation of government subsidies and
economic incentives may have a material and adverse effect on our results of operations”.
Availability and Accessibility of Financing
to Our Customers and Us
PV systems projects generally require significant
up-front expenditures, and as a result, our customers have historically relied on financing to purchase our products. If financing
for solar applications becomes inaccessible, the growth of the market for solar energy applications may be adversely affected.
For example, the average selling price of our PV modules decreased significantly from the fourth quarter of 2008 to the second
quarter of 2009, partly due to tighter credit for PV system project financing as a result of continued adverse conditions in the
credit market. In addition, rising interest rates could render existing financings more expensive, as well as serve to hinder potential
financings that would otherwise spur the growth of the PV industry.
We also require a significant amount of
cash to fund our operations. We have a significant amount of debt outstanding and debt service requirements to satisfy. If we cannot
maintain sufficient cash flow to fund our operations, our results of operations could be adversely affected. Our working capital
needs have been exacerbated by significant net losses we have incurred in recent years. For the years ended December 31, 2014,
2015, and 2016, our net loss was RMB1.4 billion, RMB5.9 billion, and RMB2.1 billion (US$305.2 million), respectively. As of December
31, 2016, we had a total deficit attributable to Yingli Green Energy of RMB15.4 billion (US$2.2 billion) and a deficit in working
capital of RMB7.5 billion (US$1.1 billion). As of December 31, 2016, we had cash, cash equivalents and restricted cash of RMB0.9
billion (US$125.1 million) and short-term borrowings, including the current portion of medium-term notes described below and long-term
debt, of RMB9.0 billion (US$1.3 billion).
In addition, we have experienced tight
cash flow due to repayment of three-year unsecured medium-term notes in the principal amount of RMB1.2 billion in May 2015 and
repayment of 70%, or RMB700 million, of five-year unsecured medium-term notes in the principal amount of RMB1.0 billion in October
2015, which resulted in a lower-than-expected utilization of our production capacity in 2015 and 2016, which in turn adversely
affected our results of operation in 2015 and 2016. On May 3, 2017, we paid RMB 300 million of the RMB-denominated five-year medium-term
notes issued by Yingli China in 2012 (the “2012 MTNs”) with full principal and accrued interest totaling RMB318 million
when they matured. As such, Yingli China has discharged all of its payment obligations under the 2012 MTNs. As of the date of this
annual report, we have medium-term notes of RMB1,757 million past due, including (i) RMB357 million of the RMB-denominated unsecured
five-year medium-term notes issued by Tianwei Yingli in 2010 (the “2010 MTNs”), which became due on October 13, 2015,
and (ii) RMB1.4 billion of the RMB-denominated unsecured five-year medium-term notes issued by Tianwei Yingli in 2011 (the “2011
MTNs”), which became due on May 12, 2016. Our company recently met with holders of the remaining portion of the 2010 MTNs
and 2011 MTNs, and we are considering our options with respect to the debt repayment issues faced by our company's principal subsidiaries.
Our company is continuing its negotiations with holders of the remaining portion of the 2010 MTNs and 2011 MTNs.
See
Item 5.B. “Liquidity and Capital Resources—Liquidity and Going Concern”. We cannot assure you, however, that
these negotiations will result in any agreement with holders of the 2010 MTNs or 2011 MTNs, and we cannot assure you that holders
of the 2010 MTNs and 2011 MTNs will not demand Tianwei Yingli to repay these notes, which are already due, or take other actions
against Tianwei Yingli in the future. As Tianwei Yingli is one of our major operating subsidiaries, its substantial indebtedness
that are already due and its noteholders’ rights to enforce such debts, as well as our other substantial indebtedness and
our net losses, may materially and adversely affect our business, financial condition and results of operations, as well as our
ability to meet our payment obligations. The substantial indebtedness carried by our company and our subsidiaries may also impede
us from being able to borrow or obtain future financing. See “Item 3.D. Risk Factors — Risks Related to Us and the
PV Industry — Tianwei Yingli is currently in payment default of the 2010 MTNs and 2011 MTNs, and we have breached in the
past, and may breach in the future, certain financial and restrictive covenants of our loan agreements, which may result in lenders
accelerating repayment of the affected loans and trigger cross-default provisions of other loans and borrowings, and we used to
be overdue, and are still overdue, in some of our payment obligations under other financing arrangements, all of which could materially
and adversely affect our liquidity and our creditworthiness to borrow or obtain other financings in the future”.
Capacity and Utilization
In order to take advantage of expected
long-term market demand for PV products, we have been expanding our manufacturing capacity. We started producing PV modules in
2002 with initial annual manufacturing capacity of three megawatts, polysilicon ingots and wafers in October 2003 with initial
annual manufacturing capacity of six megawatts, and PV cells in March 2004 with initial annual manufacturing capacity of three
megawatts. We expanded our annual manufacturing capacity for each of polysilicon ingots and wafers, PV cells and PV modules to
1,700 megawatts as of December 31, 2011, and 2,450 megawatts as of December 31, 2012. As of the date of this annual report, we
have an annual manufacturing capacity of approximately 3,000 megawatts for ingots and wafers, 3,200 megawatts for PV cells
and 4,000 megawatts for PV modules.
Utilization rate of our production capacity
also has a significant impact on our financial performance and results of operation. For example, mainly due to our tight cash
flow, we experienced lower-than-expected utilization of certain production facilities since the middle of 2015. Such lower-than-expected
utilization of our production capacity led to an increase in our unit manufacturing cost and to decreases in our own PV module
shipments and total net revenues. It also triggered impairment events and we recognized a non-cash impairment charge on our long-lived
assets of RMB3,804.1 million in 2015 and RMB1,277.4 million in 2016 as a result. Our ability to increase and maintain high utilization
of our production capacity will be important to our future financial performance.
Manufacturing capacity and utilization
rate have a significant bearing on the profitability and competitive position of PV product manufacturers. Achieving economies
of scale from expanded manufacturing capacity and high utilization is critical to maintaining our competitive position in the PV
industry. Manufacturers with greater economies of scale may manage their production more efficiently, obtain larger market share
by offering their products at more competitive prices by virtue of their enhanced ability to obtain volume discounts from suppliers
of their polysilicon and other raw materials, and have other bargaining leverage.
Competition and Product Pricing
PV modules, which currently are our principal
products, are priced primarily on the basis of the number of watts of electricity they generate and the prevailing market price
per watt generated. We price our PV modules based on the market prices that prevail at the time we enter into sales contracts with
our customers or as our customers place their purchase orders with us, taking into account various factors, including, among others,
the size of the contract or the purchase order, the strength and history of our relationship with a particular customer, and our
polysilicon costs. We believe that the quality of our PV products and our low-cost manufacturing capabilities have afforded us
flexibility to adjust the prices of our products in accordance with our sales strategy and market demands. From 2003 until the
beginning of the fourth quarter of 2008, the average selling prices of PV modules rose across the industry, due primarily to high
demand for PV modules as well as rising polysilicon costs during the same period.
Weakened demand for PV modules due to weakened
macroeconomic conditions, combined with an increased supply of PV modules due to PV module manufacturers worldwide having expanded
their production capacities in recent years, caused prices of PV modules to decline from the fourth quarter of 2008. Conditions
in the credit market improved from the second quarter of 2009, which contributed to an overall increase in demand for our products
in the second half of 2009. However, decreasing costs of raw materials continued to exert downward pressure on the selling prices
of PV modules. The average selling prices in 2010 declined during the first, second and third quarters, and slightly bounced back
in the fourth quarter of 2010, which was primarily attributable to robust market demand, broader recognition of our brand’s
quality and diversified customer base. The average selling price in 2011 declined moderately in the first and second quarter, declined
sharply in the third quarter and continued to drop in the fourth quarter, which was primarily due to reduced government subsidies
and increased supplies of PV products. The average selling price of our PV modules in the first three quarters of 2014 remained
at levels similar to those in 2013, but declined slightly in the fourth quarter of 2014 due to adjustments to the composition of
our PV modules’ target geographic markets. In the first quarter of 2015, the average selling price of our PV modules remained
at levels similar to those in the fourth quarter of 2014, but declined slightly in the remaining quarters of 2015, which was mainly
due to increased supplies of PV modules globally and the change in our sales mix as we had more shipments to China. In the
first half of 2016, the average selling price of our PV modules slightly increased mainly due to robust demand in China as our
major market, but declined significantly in the second half of 2016, which was mainly due to increased supplies of PV modules globally
and decreases in FIT in China.
We sell our PV modules primarily through
sales contracts with a term of less than one year and are obligated to deliver PV modules according to predetermined prices and
delivery schedules.
Price of Polysilicon
Polysilicon is the most important raw material
used in our manufacturing process. Until the third quarter of 2008, an industry-wide shortage of polysilicon coupled with rapidly
growing demand from the solar power industry caused rapid increases in polysilicon prices. However, during the fourth quarter of
2008 and the first half of 2009, polysilicon prices declined continuously as a result of significant new manufacturing capacity
coming on line and falling demand for solar power products and semiconductor devices resulting from the global financial crisis
and adverse conditions in the credit market. From the third quarter of 2010, polysilicon prices rebounded due to a recovery in
demand for PV products in major markets. From the second quarter of 2011, polysilicon prices have decreased significantly as a
result of increased polysilicon manufacturing capacity across the industry and the downward price pressure exerted by the decreasing
average selling price of PV modules. In 2012, polysilicon prices continued to decline and reached a historical low of approximately
US$14 per kilogram in November 2012. Partly due to China’s anti-dumping and anti-subsidy investigations of United States,
South Korean and European manufacturers of polysilicon, polysilicon prices rebounded slightly from December 2012. Since June
2013, polysilicon price has begun to increase and reached approximately US$20 per kilogram until the first half of 2014. From the
second half of 2014, polysilicon price has slightly decreased and fluctuated under US$20 per kilogram as of the date of this annual
report with a historically low level close to US$12 per kilogram at the end of 2016.
The average price of polysilicon over the
medium- to long-term will depend on a number of factors, including the macroeconomic environment, the scope and progress of current
and future plans of suppliers to expand their polysilicon manufacturing capacity, the level of demand for polysilicon from the
PV and semiconductor industries, and any changes in government regulations and subsidies in respect of PV and other alternative
energy industries that may significantly affect demand for polysilicon. We believe that none of these factors can be predicted
with reasonable certainty as of the date of this annual report, and the average price of polysilicon may increase or decrease significantly
over the medium- to long-term as a result of any combination of such factors.
Our process technology enables us to increase
our utilization of polysilicon scraps in the production of ingots and wafers, the price of which scraps historically has been lower
than that of high-purity polysilicon. However, as the price of high-purity polysilicon has declined significantly since the fourth
quarter of 2008, we have been utilizing an increased proportion of high-purity polysilicon in our manufacturing processes to further
ensure that the standard of high quality for our PV modules continues to be met.
Historically, we relied on spot market
purchases to meet a significant portion of our polysilicon needs. In order to secure an adequate and timely supply of polysilicon,
in the past we also entered into various purchase agreements and memorandums of understanding with local and foreign suppliers,
including some of the world’s major polysilicon suppliers. Supplies under these purchase agreements started in early 2009.
In response to the significant decrease in polysilicon prices since the fourth quarter of 2008, we have renegotiated, and are still
negotiating, with our polysilicon suppliers to reduce the purchase price for a substantial amount of polysilicon supplied under
certain of our polysilicon supply contracts. However, the purchase prices specified in certain of our long-term polysilicon supply
contracts have been higher than the actual polysilicon prices prevailing in the market, which have continuously declined. In 2011
and 2013, as a result of lower polysilicon prices we recognized a total non-cash provision of RMB851.7 million and RMB393.0 million,
respectively, on inventory purchase commitments under our long-term polysilicon supply contracts with certain supplier. We did
not recognize any such provision in 2014. In 2015 and 2016, we recognized incremental provisions of RMB77.7 million and RMB90.3
million, respectively, on inventory purchase commitments under our long-term polysilicon supply contracts as a result of a foreign
exchange re-measurement due to significant fluctuation in the foreign exchange rate between the Renminbi and U.S. dollars. Our
management has been negotiating with our suppliers on adjusting the prices under these long-term contracts. These negotiations
may result in new commercial terms under the contracts. However, if the circumstances upon which the new commercial terms were
negotiated should undergo a material change, the commercial terms would be adjusted accordingly to reflect conditions then prevailing
in the open market. If the effective polysilicon prices under our long-term supply contracts remains higher than prevailing market
prices, we may incur higher polysilicon costs relative to other competitors who purchase their polysilicon from the spot market.
On the other hand, we cannot assure you that we will be able to secure sufficient quantities of polysilicon to meet the requirements
of our existing production capacity or to support any future expansion of our manufacturing capacity. See “Item 3.D. Risk
Factors — Risks Related to Us and the PV Industry — Our polysilicon costs may be higher than those of other market
players due to our long-term commitment to purchase polysilicon at fixed prices, and we have failed to perform certain of our obligations
under these long-term polysilicon supply contracts according to their original terms” and “Item 3.D. Risk Factors —
Risks Related to Us and the PV Industry — Our failure to obtain polysilicon in sufficient quantities, of appropriate quality
and in a timely manner, could disrupt our operations and reduce and limit the growth of our manufacturing output and revenue”.
From 2006 to 2010, we entered into seven
long-term supply contracts with Wacker to provide supplies of polysilicon from 2009 through 2013, from 2009 through 2017, from
2010 through 2018, from 2009 through 2011, from 2010 through 2017, from 2011 through 2013 and from 2011 through 2018, respectively.
In addition, we entered into one long-term supply agreement in February 2008 with OCI to provide supplies of polysilicon for
the period from 2009 through 2013. Between 2009 and 2013, we entered into another two long-term supply contracts with OCI to provide
supplies of polysilicon from 2011 through 2015 and from 2012 through 2018, respectively. We also entered into a polysilicon supply
contract with Daqo to provide supplies of polysilicon from the fourth quarter of 2008 through the end of 2010. In August 2010,
we entered into another polysilicon supply agreement with Daqo to provide supplies of polysilicon from 2011 through 2012. In March 2011,
we entered into a long-term polysilicon supply contract with Hemlock to provide supplies of polysilicon from 2013 through 2020.
In November 2011, we entered into an amendment to this long-term supply contract with Hemlock to purchase polysilicon starting
from 2012 through 2020 instead of 2013 through 2020. In October 2013, we also entered into an agreement with a certain vendor
to amend our long-term supply contracts with the vendor to include a price adjustment mechanism that allows the vendor and us to
renegotiate the purchase price on a quarterly basis within a specified price range based on prices then prevailing in the open
market. Due to fluctuations in polysilicon prices, we successfully negotiated and executed amendments for current purchases on
a quarterly or monthly basis with some of these vendors that amended certain commercial terms such as total contract quantity,
advance payment arrangements and unit prices for the relevant quarter or month several times in 2014, 2015 and 2016.
Vertically Integrated Manufacturing Capabilities
We believe that our vertically integrated
business model offers us several advantages, particularly in areas of cost reduction and quality control, over our competitors
that depend on third parties to source core product components. First, the vertical integration enables us to capture margins at
every stage of the PV product value chain in which we are engaged. Second, by streamlining our manufacturing processes, we can
reduce production costs and costs associated with toll manufacturing, packaging and transportation as well as breakage losses that
occur during shipment between various production locations associated with toll manufacturing arrangements. Third, we control operations
at substantially all stages of the PV value chain, including research and development, which enables us to monitor more closely
the quality of our PV products from start to finish, and design and streamline our manufacturing processes in a way that enables
us to leverage our technologies more efficiently and reduce costs at each stage of the manufacturing process. We believe that the
synergies resulting from our vertically integrated business model have enabled us to reduce the quantity of polysilicon that we
use to make PV modules, improve the conversion efficiency of our PV cells and reduce the lead time needed to fulfill the orders
of our customers.
However, since the middle of 2015, we have
experienced lower-than-expected utilization of our production capacity because we did not have sufficient working capital to maintain
the full utilization of production facilities as a result of the tight cash flow. This tight cash flow is partially due to our
repayment of three-year unsecured medium-term notes in the principal amount of RMB1.2 billion when they matured in May 2015, and
our repayment of 70%, or RMB700 million, of five-year unsecured medium-term notes in the principal amount of RMB1.0 billion when
they matured in October 2015. As a measure to reduce our operating cash requirements in 2015 and 2016, we have contracted with
third parties to allow them operate more than half of our polysilicon ingot and wafer production facilities. These third parties
pay us a monthly fee to operate these production facilities, pay the salaries of our staff members employed and utility expenses
incurred at such facilities, produce fixed volumes of polysilicon ingots and wafers on a monthly basis, and cover all other manner
of operating, ancillary, and raw material expenses of such production. As part of the arrangement, we agree to purchase part or
all of the wafers so produced by said third parties at designated prices based on our needs, subject to certain adjustments under
the relevant agreements. As these third parties would provide all the working capital required for production of the polysilicon
ingots and wafers, these arrangements effectively help us finance our production value chain, reduce our working capital requirements,
and increase the utilization of our polysilicon ingot and wafer production facilities. In addition, we also entered into agreements
to process PV cells and PV modules for third parties as an Original Equipment Manufacturer (OEM) in 2015 and 2016, in order to
improve the utilization rate of our production capacities.
Manufacturing Technologies
The advancement of manufacturing technologies
is important for improving the conversion efficiency of our PV cells and reducing the production costs of our PV products. Because
PV modules are priced based on the number of watts of electricity they generate, higher conversion efficiency generally leads to
higher revenues from sales of PV modules.
We continually undertake efforts to develop
advanced manufacturing technologies to increase the conversion efficiency of our PV cells. We employ a number of techniques to
reduce our production costs while striving to reach a PV cell conversion efficiency ratio that is on a par with or above an acceptable
range. Our research and development team continues to focus on finding ways to improve our manufacturing technology and reduce
manufacturing costs without compromising the quality of our products. We have signed a series of agreements with domestic leading
PV cell and wafer manufacturers and developed various ways on technical cooperation with these companies, which enabled us to increase
the utilize rate of our manufacturing facilities and make further improvement on manufacturing costs reduction and techniques upgrades.
For example, in order to improve the operational efficiency of our production lines and reduce production cost, we have invested
more than RMB70 million in upgrading production lines through approximately 30 technological upgrading projects to increase automation
and ramp up capacity in 2016.
For our adopted
monocrystalline PV technologies, we have been collaborating with the Energy Research Centre of the Netherlands, a leading solar
research center in Europe, and Tempress Systems, a wholly-owned subsidiary of Amtech Systems, Inc., a global supplier of production
and automation systems and related supplies for the manufacture of PV cells, to implement Project PANDA, a research and development
project for next-generation high efficiency monocrystalline PV cells since June 2009. Our 600 megawatts of PANDA production
capacity for each of monocrystalline ingots and wafers, cells and modules in Baoding, Hebei Province commenced initial production
in the second quarter of 2011. We achieved an average cell conversion efficiency rate of 20.8% on the PANDA commercial production
lines in 2016. In addition, in 2016, we commercialized the frameless PANDA Bifacial module, which integrates the technology of
PANDA n-type monocrystalline PV cells and is made of two layers of 2.5mm thick low-iron tempered glass, replacing the conventional
back sheet and glass structure. PANDA Bifacial module can generate power not only from the front side, but also from the rear side
by making use of the reflected photons that hit the module on the back side, depending on the environmental condition of installation.
The PANDA Bifacial module has received China General Certification Centre’s (“CGC”)
FRONTRUNNER certification in the end of 2016, which was the first FRONTRUNNER certification to module that can generate power by
both the front and rear sides in China. In early 2017, we also launched our Hotspot Free module, which can eliminate potential
safety risks such as fire and material degradation and ensure better safety, module reliability and higher returns.
Foreign Governments’ and International
Trade Bodies’ Trade Protection Measures
Our businesses in foreign markets are subject
to trade protection measures and adverse trade policies or remedies promulgated by foreign governments and international trade
bodies against exports from China.
On September 5 and November 8,
2012, respectively, the European Union initiated anti-dumping and anti-subsidy investigations into CSPV wafers, cells, and modules
from China. On June 4, 2013, the European Commission issued its provisional anti-dumping determination and on August 2,
2013, the European Commission accepted an undertaking, or the Undertaking, made by a group of Chinese PV products exporters (including
us) jointly with the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, or CCCME. Pursuant to
the Undertaking, the Chinese exporters will limit their exports of solar panels to the EU and set prices above a minimum price,
in exchange for the EU agreeing to forgo the imposition of anti-dumping duties on these solar panels from China. CCCME is responsible
for allocating the quota among these exporters, and we have been allocated a portion of the quota. On December 5, 2013, the
Council of the European Union adopted the final findings of the European Commission and imposed anti-dumping and anti-subsidy duties
on CSPV modules and key components (i.e. cells) originating in or consigned from PRC. Wafers were excluded from the product scope.
The anti-dumping duty rates ranged from 27.3% to 64.9%, while the anti-subsidy duty rates ranged from 0% to 11.5%. The rates applicable
to us are 35.5% and 6.3%, respectively. The definitive duties will be imposed for a two-year period starting from December 6,
2013. At the same time, the Council of the European Union also confirmed the European Commission’s acceptance of the Undertaking.
In December 2015, the EU Commission initiated an expiry review of the anti-dumping measure and the EU Commission has initiated
ex officio a partial interim review as to whether the maintenance of the anti-dumping measure is in the Union’s interest.
In March 2017, as the result of these reviews, the EU Commission determined and proposed that the anti-dumping measure shall be
maintained and extended for 18 months.
While we are exempted from paying any anti-dumping
and anti-subsidy duties to the EU starting from August 6, 2013, the increased selling price and the reduced consumption on
the European market under the Undertaking may bring significant uncertainties to our business in the European market. For example,
increased price for our modules sold in EU has made returns for some ground-mounted solar projects of our customers less attractive
and demand in large-utility projects have declined in Europe compared with the period before the effectiveness of the Undertaking.
We also face competitions from modules manufactured in third countries at a lower price than ours. In addition, if we breach or
withdraw from the Undertaking, or the European Commission withdraws its acceptance of the Undertaking, the anti-dumping and anti-subsidy
duties will automatically apply to us. Thus, there can be no assurance that our entry into and performance of the Undertaking will
eliminate potential material and adverse effects of anti-dumping and anti-subsidy duties on our business in Europe and our results
of operations.
On November 7, 2012, the U.S. ITC
determined that CSPV modules produced from Chinese cells are materially injuring the U.S. CSPV cells and modules industry. The
U.S. DOC issued its final determinations on the rates of the anti-dumping, or AD, and countervailing duties, or CVD, on October
10, 2012, which became effective upon issuance of the final anti-dumping and countervailing duties orders in early December
2012. As a result of such final determinations, we, as a voluntary respondent, are subject to an average aggregated AD/CVD rate
of 29.18%. However, this average aggregated AD/CVD rate might be subject to change due to the administrative review process initiated
by DOC in early 2014. We were mandatory respondent in the first administrative review of the anti-dumping duty order and obtained
an anti-dumping rate of 0.79% in the final determination in July 2015. As one of the non-mandatory respondents in the first administrative
review of the countervailing duty order, we obtained a countervailing duty rate of 20.94% in July 2015. In February 2015, the DOC
initiated the second administrative review of the AD/CVD duty order. We are a mandatory respondent in the second administrative
review of the anti-dumping duty order and obtained an anti-dumping duty of 12.19% in the final determination in June 2016. We were
not part of the second administrative review of the countervailing duty order and therefore the final result of the second administrative
review of the countervailing duty order is inapplicable to us.
On February 3, 2016, the DOC initiated the
third administrative review of the anti-dumping duty order (“Solar 1ADAR3”) covering the period of December 1, 2014
to November 30, 2015 and the third administrative review of the countervailing duty order (“Solar 1 CVD AR3”) covering
the period of January1, 2014 to December 31, 2014 of CSPC whether or not assembled into modules (certain solar cells and panels)
from the PRC. Subject merchandise includes CSPV, modules or panels, whether or not partially or fully assembled into other products,
including, but not limited to modules, laminates, and building integrated materials. On December 22, 2016, the DOC published
its preliminary determination of the AD review and the dumping margins for the entities covered by this review are from 7.72% to
238.95%. As a separate rate company in this review, the AD margin applicable to us is 13.97%. On January 9, 2017, the DOC published
its preliminary determination of the CVD review and the countervailable subsidy rates for the entities covered by this review are
from 12.48% to 20.98%. Since the final results of this review are the basis for the assessment of anti-dumping duties on period
of review, or POR, entries and for future deposits of estimated anti-dumping duties, upon issuance of the final results of this
review, the DOC will determine, and Customs and Border Protection, or CBP, CBP shall assess, anti-dumping duties on all appropriate
entries covered by this review. The DOC will likely issue the final determination for this review in July 2017. For CVD review,
both Yingli and Solar World withdrew the CVD review requests within 90 days of the date of publication of the notice of initiation,
and therefore, we are no longer subject to CVD review and the entries of subject merchandise into the United States during the
CVD AR3 review period are to be liquidated at the CVD rates applicable at the time of entry and CBP will collect cash deposits
of estimated CVDs at the most recent CVD countervailable rate applicable to us (20.94%).
On February 13, 2017, the DOC initiated
the fourth administrative review of the anti-dumping duty order (“Solar 1 AD AR4”) covering the period of December
1, 2015 to November 30, 2016 and the third administrative review of anti-dumping duty order (“Solar 1 CVD AR4”) covering
the period of January1, 2015 to December 31, 2015 of CSPC whether or not assembled into modules (certain solar cells and panels)
from the PRC. On the same day, we, as a listed party, were required by the DOC to file an anti-dumping Quantity & Value, or
Q&V, questionnaire, and the response to which would be the basis for the DOC to select mandatory respondents. We have filed
the anti-dumping Q&V and provided all documents required by the DOC. The mandatory respondent selection result for this AD
administrative review and CVD administrative review has not been issued.
In January 23, 2014, the DOC initiated
a parallel AD investigation into CSPV products from Mainland China and Taiwan and CVD investigation into CSPV products from Mainland
China. The products concerned are CSPV cells, and modules, laminates and/or panels consisting of CSPV cells, whether or not partially
or fully assembled into other products, including building integrated materials. Subject merchandise also includes modules, laminates
and/or panels assembled in Mainland China and Taiwan consisting of CSPV cells that are completed or partially manufactured within
a customs territory other than Mainland China and Taiwan, using ingots, wafers that are manufactured in Mainland China and Taiwan,
or cells where the manufacturing process begins in Mainland China and Taiwan and is completed in other countries (hereinafter “Solar
II”). On December 23, 2014, the DOC published its confirmative final determination on these investigations by imposing
punitive AD tariffs ranging from 26.71% to 165.04% and CVD tariffs ranging from 27.64% to 49.21%. As a separate rate company in
these investigations, the AD and CVD tariffs applicable to our company will be 52.31% and 38.43%, respectively. On February 10,
2015, the ITC issued its final injury determinations by confirming injury to the U.S. CSPV module industry by Chinese CSPV module
manufacturers. As a result of these determinations of the DOC and ITC, Chinese modules integrating cells from third countries will
be subject to the new AD and CVD tariffs when exported to the US. Although we have very limited sales of modules to the U.S. incorporating
third country cells, such determinations may adversely affect our business flexibility in the U.S. market and our business in the
U.S. may be materially and adversely impacted.
In April 2016, the DOC initiated the first
administrative review for the anti-dumping measure and countervailing measure for Solar II for certain Chinese exporters. In February
2017, the DOC issued a preliminary determination as to its first administrative review of the AD and CVD measures. The preliminary
result for the Chinese exporters included in the first administrative review of the anti-dumping measure was 14.70%, and the preliminary
result for the Chinese exporters included in the first administrative review of the countervailing measure was 13.93%. Our company
was not included in either the AD or CVD first administrative review and therefore the result of such reviews will not affect the
rates applicable to our company.
In February 2017, the U.S. petitioner requested
a second administrative review for the anti-dumping measure and countervailing measure for Solar II for certain Chinese exporters,
including our company. The DOC has not yet initiated such administrative reviews.
If such investigations instituted in our
target markets lead to any adverse trade protection measures or remedies against exports from China, the prices of our products
will be forced to increase significantly and we may lose customer orders to our competitors, which may materially and adversely
affect our business prospects and results of operations.
Net Revenues
We currently derive net revenues from five
sources:
|
·
|
sales of PV modules, which
are currently our principal source of revenues and are primarily driven by market demand as well as our manufacturing capacity;
|
|
·
|
sales of PV cells, wafers and raw materials, which consist of sales of low efficiency PV cells, wafers and raw materials, based on overall consideration of the market and our operation conditions;
|
|
·
|
PV cells and PV modules processing fee, which we generate through providing PV cells and PV modules processing services to third parties as OEM;
|
|
·
|
sales of PV systems, which consist of sales of PV systems and related installation services; and
|
The following table sets forth each revenue
source as a percentage of total consolidated net revenues for the periods indicated.
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Net revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of PV modules
|
|
|
12,179,474
|
|
|
|
8,464,779
|
|
|
|
7,026,074
|
|
|
|
1,011,965
|
|
Sales of PV systems
|
|
|
161,035
|
|
|
|
197,365
|
|
|
|
127,353
|
|
|
|
18,343
|
|
Sales of PV cells, wafers and raw materials
|
|
|
439,622
|
|
|
|
686,056
|
|
|
|
746,261
|
|
|
|
107,484
|
|
Processing fee of PV cells and PV modules
|
|
|
—
|
|
|
|
389,450
|
|
|
|
308,386
|
|
|
|
44,417
|
|
Other revenues
|
|
|
147,246
|
|
|
|
228,136
|
|
|
|
168,025
|
|
|
|
24,200
|
|
Total net revenues
|
|
|
12,927,377
|
|
|
|
9,965,786
|
|
|
|
8,376,099
|
|
|
|
1,206,409
|
|
Our net revenues are net of business tax,
value-added tax, city construction tax and education surcharges. Key factors affecting our net revenues include the average selling
price per watt and wattage of our PV modules sold.
We have been dependent on a limited number
of customers for a significant portion of our revenues. In 2014, 2015 and 2016, sales to our five largest customers accounted for
approximately 13.9%, 19.4%, and 10.7% respectively, of our net revenues. Our largest customers have changed from year to year due
to rapid growth in the sales of our PV modules, our diversification into new geographic markets and our ability to find new customers
willing to place large orders with us.
We currently sell most of our PV modules
to customers located in the PRC, Japan, the United States and Europe. The following table sets forth our total consolidated net
revenues by geographic region for the periods indicated:
|
|
For the Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
% of Total
|
|
|
|
|
|
% of Total
|
|
|
|
|
|
|
|
|
% of Total
|
|
Country/Region
|
|
Revenues
|
|
|
Revenues
|
|
|
Revenues
|
|
|
Revenues
|
|
|
Revenues
|
|
|
Revenues
|
|
|
|
RMB
|
|
|
|
|
|
RMB
|
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
(In thousands, except percentages)
|
|
China
|
|
|
4,550,915
|
|
|
|
35.2
|
|
|
|
4,078,476
|
|
|
|
40.9
|
|
|
|
4,932,284
|
|
|
|
710,397
|
|
|
|
58.9
|
|
Japan
|
|
|
2,487,949
|
|
|
|
19.3
|
|
|
|
2,723,800
|
|
|
|
27.3
|
|
|
|
2,363,239
|
|
|
|
340,377
|
|
|
|
28.2
|
|
United States
|
|
|
2,301,496
|
|
|
|
17.8
|
|
|
|
1,248,536
|
|
|
|
12.5
|
|
|
|
513,690
|
|
|
|
73,987
|
|
|
|
6.1
|
|
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
671,534
|
|
|
|
5.2
|
|
|
|
170,518
|
|
|
|
1.7
|
|
|
|
3,089
|
|
|
|
445
|
|
|
|
0.0
|
|
Spain
|
|
|
186,341
|
|
|
|
1.4
|
|
|
|
136,964
|
|
|
|
1.4
|
|
|
|
15,575
|
|
|
|
2,243
|
|
|
|
0.2
|
|
France
|
|
|
191,071
|
|
|
|
1.5
|
|
|
|
363,635
|
|
|
|
3.6
|
|
|
|
1,477
|
|
|
|
213
|
|
|
|
0.0
|
|
Italy
|
|
|
32,607
|
|
|
|
0.3
|
|
|
|
21,680
|
|
|
|
0.2
|
|
|
|
229
|
|
|
|
33
|
|
|
|
0.0
|
|
Netherlands
|
|
|
116,725
|
|
|
|
0.9
|
|
|
|
39,715
|
|
|
|
0.4
|
|
|
|
39,209
|
|
|
|
5,647
|
|
|
|
0.5
|
|
Greece
|
|
|
2,225
|
|
|
|
—
|
|
|
|
239
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
United Kingdom
|
|
|
998,203
|
|
|
|
7.7
|
|
|
|
80,255
|
|
|
|
0.8
|
|
|
|
88,129
|
|
|
|
12,693
|
|
|
|
1.1
|
|
Turkey
|
|
|
118,305
|
|
|
|
0.9
|
|
|
|
550,799
|
|
|
|
5.5
|
|
|
|
69,956
|
|
|
|
10,076
|
|
|
|
0.8
|
|
Rest of Europe
|
|
|
138,945
|
|
|
|
1.1
|
|
|
|
74,141
|
|
|
|
0.8
|
|
|
|
4,112
|
|
|
|
592
|
|
|
|
0.0
|
|
Subtotal — Europe
|
|
|
2,455,956
|
|
|
|
19.0
|
|
|
|
1,437,946
|
|
|
|
14.5
|
|
|
|
221,776
|
|
|
|
31,942
|
|
|
|
2.6
|
|
Rest of World
|
|
|
1,131,061
|
|
|
|
8.7
|
|
|
|
477,028
|
|
|
|
4.8
|
|
|
|
345,110
|
|
|
|
49,706
|
|
|
|
4.2
|
|
Total net revenues
|
|
|
12,927,377
|
|
|
|
100
|
|
|
|
9,965,786
|
|
|
|
100
|
|
|
|
8,376,099
|
|
|
|
1,206,409
|
|
|
|
100
|
|
Most of our net revenues from sales of PV cells,
wafers and raw materials, PV cells and PV modules processing fee and sales of PV systems are currently derived from China.
Cost of Revenues
Our cost of PV module sales consists primarily
of:
|
·
|
Polysilicon
. The cost
of polysilicon has a material effect on our cost of raw materials. We purchase polysilicon from various suppliers, including silicon
manufacturers and distributors.
|
|
·
|
Other Raw Materials
. Other raw materials include crucibles, silicon carbides, cutting fluid, steel cutting wires, alkaline detergents, metallic pastes, laminate materials, silica gel, tempered glass, aluminum frames, solder, junction boxes, cables, connectors and other chemical agents and electronic components.
|
|
·
|
Toll Manufacturing
. We process silicon raw materials into ingots and produce wafers, PV cells and PV modules in-house. As our PV cell manufacturing capacity could be less than the production capacities for our wafers and PV modules, we have used toll manufacturing arrangements for PV cells. Besides, we also entered into toll manufacturing arrangements for specific PV modules to meet the requirements of our customers on a limited scale.
|
|
·
|
Direct Labor
. Direct labor costs include salaries and benefits for personnel directly involved in manufacturing activities.
|
|
·
|
Overhead
. Overhead costs include utilities, maintenance of production equipment, land use rights and other ancillary expenses associated with manufacturing activities.
|
|
·
|
Depreciation of Property, Plants and Equipment
. Depreciation of property, plants and equipment is provided on a straight-line basis over the relevant asset’s estimated useful life, which is thirty years for buildings, four to twenty-five years for machinery and equipment, three to five years for furniture and fixtures and eight to ten years for motor vehicles, taking into account their estimated residual value.
|
Our cost of PV cells, wafers and raw materials
sales includes the costs of polysilicon and other raw materials, toll manufacturing cost, direct labor costs, overhead costs and
depreciation, which are similar to our cost of PV module sales described above.
Our cost of revenue for processing of PV
cells and PV modules as OEM includes direct labor costs, overhead costs and depreciation.
The cost of PV systems includes the costs
of PV modules, batteries, inverters, other electronic components and related materials and labor.
Our cost of revenues is affected primarily
by our ability to control raw material costs, achieve economies of scale in our operations and manage our vertically integrated
product chain efficiently. Furthermore, we balance automation and manual operation in our manufacturing processes, and have been
able to increase operating efficiencies and expand our manufacturing capacity cost-effectively.
Gross Profit/Loss and Gross Profit/Loss Margin
Our gross profit is affected by a number
of factors, including the average selling prices for our PV products, the cost of polysilicon, product mix, economies of scale
and benefits from vertical integration, and our ability to manage our raw material supply cost-effectively. Our gross profit was
RMB1,151.9 million (US$165.9 million) in 2016. Our gross profit margin was 13.8% in 2016, compared to our gross profit margin of
11.9% in 2015 and 17.3% in 2014.
We may continue to face pressure to narrow
our profit margin in the sales of PV modules due to the decrease in the average selling price of our PV modules and increasingly
intense competition in the PV module market, although a decrease in our average purchase price of polysilicon per kilogram has
alleviated some of this margin narrowing pressure. Furthermore, we believe that the economies of scale achieved in our expanded
PV businesses and the cost reduction achieved through research and development efforts at each stage of our vertically integrated
manufacturing process, among other factors, will have a positive effect on our gross profit margins over time.
Operating Expenses
Our operating expenses consist of:
|
·
|
Selling expenses
,
which consist primarily of advertising costs, salaries and employee benefits of sales personnel, sales-related travel and entertainment
expenses, sales-related shipping costs, warranty costs, amortization of intangible assets (including backlog and customer relationships),
share-based compensation expenses and other selling expenses, including sales commissions paid to our sales agents. We expect
that selling expenses will decrease as a percentage of net revenues over time as we achieve greater economies of scale.
|
Before September 30, 2011, our PV modules were
typically sold with a two- or five-year limited warranty for defects in materials and workmanship, and a 10-year and 25-year warranty
guaranteeing 90% and 80% of initial power generation capacity, respectively. From October 1, 2011, we implemented a new and
improved warranty term that guarantees 91.2% of nominal power output for 10 years and 80.7% of nominal power output for a period
of 25 years for multicrystalline PV modules, and 98.0% of nominal power output for the first year, 92.0% of nominal power output
for 10 years, and 82.0% of nominal power output for a period of 25 years for monocrystalline Panda PV modules. In addition, based
on customers’ specific requirements, we also provide our multicrystalline PV modules with a linear-based warranty, which
guarantees each year’s power output during the twenty-five-year warranty period. In December 2013, we entered into a
similar module performance warranty insurance agreement with another insurance company for the same scope of beneficiaries during
the period from January 1, 2014 to December 31, 2014. In March 2015, January 2016 and January 2017, we renewed the agreement
for the same scope of beneficiaries for 2015, 2016 and 2017 respectively. These warranties require us to fix or replace the defective
products. Taking into account estimated product failure rates, the costs of repairing and/or replacing failed products, and other
costs associated with repairing and/or replacing such failed products, we currently accrue the equivalent of 1% of gross revenues
for warranty obligations. In 2016, we accrued warranty provision of RMB84.9 million (US$12.2 million).
|
·
|
General and administrative expenses
, which consist primarily of salaries and benefits for our administrative and finance personnel, audit, legal and consulting fees, other travel and entertainment expenses, bank charges, amortization of technical know-how, depreciation of equipment used for administrative purposes and share-based compensation expenses, provision against doubtful receivables (excluding accounts receivables) and provision against prepayments to suppliers (excluding prepayments to firm purchase commitments).
|
|
·
|
Research and development expenses
, which consist primarily of costs of raw materials used in research and development activities, salaries and employee benefits for research and development personnel, and prototype and equipment costs relating to the design, development, testing and enhancement of our products and their manufacturing processes. We are a party to several research grant contracts with the PRC government under which we receive funds for specified costs incurred in certain research projects. We record such amounts in “Other Income” in the Consolidated Statement of Comprehensive Income/(Loss) when the related research and development costs are incurred. We expect our research and development expenses to increase as we place a greater strategic focus on PV system sales in overseas markets and as we continue to hire additional research and development personnel and focus on continuous innovation of process technologies for our PV products. We conduct our research and development, design and manufacturing operations in China, where the costs of skilled labor, engineering and technical resources, as well as land, facilities and utilities, tend to be lower than those in more developed countries.
|
|
·
|
Provision for doubtful accounts receivable
, which represents our estimated losses on accounts receivable resulting from customers’ inability or failure to make payments under our sales contracts. We consider age of doubtful accounts receivable, historical collection experience, customer-specific facts and current economic conditions to determine the amount of such provision.
|
|
·
|
Impairment of long-lived assets
, which represents the difference between the carrying amount and the fair value of the long-lived assets that are considered to be impaired. Long-lived assets, such as property, plant and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the middle of 2015, due to lower-than-expected utilization of certain production facilities, our company did an impairment analysis on its long-lived assets, and recorded an impairment loss of RMB3,804.1 million for property, plant and equipment with respect to the production facilities based on the difference between carrying value and fair value of long-lived assets which was determined upon expected future cash flows discounted at the weighted average cost of capital. As a result of a significant drop in the selling price of PV modules in late 2016, our company also recorded an impairment of RMB1,277.4 million in 2016.
|
|
·
|
Provision for reserve for inventory purchase commitments under long-term polysilicon supply contracts.
In 2011, we recognized a provision of RMB851.7 million for our inventory purchase commitments under our long-term polysilicon supply contracts as a result of the continuing decline in the purchase price for polysilicon prevailing in the open market. No such provision was made in 2012. In 2013, we recognized provisions of RMB393.0 for inventory purchase commitments under our long-term polysilicon supply contracts as a result of our having re-assessed the purchase commitments under those supply contracts based on then-current market prices for polysilicon and the status of our performance of, and negotiations with our suppliers under, the contracts. These negotiations may result in new commercial terms under the contracts. However, if the circumstances upon which the new commercial terms were negotiated should undergo a material change, the commercial terms would be adjusted accordingly to reflect conditions then prevailing in the open market. In 2015 and 2016, we did not recognize additional contingency losses for inventory firm purchase commitment. However, due to significant fluctuation in the foreign exchange rates between Renminbi and U.S. dollars and given that the inventory purchase commitment is denominated in U.S. dollars, which is different from the functional currency of our related subsidiaries, we recognized a foreign exchange re-measurement loss of RMB77.7 million and RMB90.3 million in 2015 and 2016 respectively. We determined that such provision was not needed in 2014 since the foreign exchange rate was stable and the impact caused by the foreign exchange rate fluctuation was immaterial.
|
|
·
|
Provision for prepayment in relation to inventory purchase commitments under long-term polysilicon supply contracts
. From 2013 to 2015, we failed to purchase contractual volume as stated in the long-term contract with another supplier, therefore, the supplier claimed that certain advance payments had been forfeited according to the original terms. In 2013, 2015 and 2016, we recognized provisions of RMB87.1 million, RMB 71.3 million and RMB10.7 million, respectively, on the prepayment in relation to our inventory purchase commitments for those years under the long-term contract with this supplier. We also recognized a provision of RMB 450.8 million in 2015 on the prepayment in relation to our inventory purchase commitments under the long-term contract with this supplier for the remaining contract period as we estimated that we will also fail to purchase contractual volume as stated in the long-term contract in the remaining contract period in the future. No such provision was further recognized in 2016.
|
Taxation
Under current laws of the Cayman Islands
and the British Virgin Islands, we are not subject to income or capital gains tax. Additionally, dividend payments made by us are
not subject to withholding tax in the Cayman Islands and the British Virgin Islands.
In accordance with the FIE Income Tax Law
and its implementation rules, as a foreign-invested enterprise primarily engaged in manufacturing and having been in operation
for more than ten years, Tianwei Yingli was entitled to an exemption from the 25% enterprise income tax for two years from its
first profit making year following its conversion into a Sino-foreign equity joint venture company, specifically in 2007 and 2008,
and a 50% reduction in the subsequent three years, from 2009 to 2011.
On March 16, 2007, the National People’s
Congress passed the EIT Law, which replaces the FIE Income Tax Law and adopts a uniform income tax rate of 25% for most domestic
enterprises and foreign investment enterprises. The EIT Law became effective on January 1, 2008. The EIT Law provides a five-year
transition period from its effective date for enterprises that were established before the promulgation date of the EIT Law and
which enterprises were entitled to preferential tax rates and treatments under then-effective tax laws or regulations. On December 26,
2007, the PRC government issued detailed implementation rules regarding the transitional preferential policies.
Furthermore, under the EIT Law, entities
that qualify as “high and new technology enterprises strongly supported by the state” are entitled to a preferential
enterprise income tax rate of 15%. The Ministry of Science and Technology, the MOF and the State Administration of Taxation jointly
issued the Administrative Regulations on the Recognition of High and New Technology Enterprises on April 14, 2008 and the
Guidelines for the Recognition of High and New Technology Enterprises issued on July 8, 2008. In 2008, Tianwei Yingli was
recognized by the Chinese government as a “High and New Technology Enterprise” (“HNTE”) under the new EIT
law and its relevant regulations. In 2011, Tianwei Yingli renewed its HNTE qualification, which entitled it to the preferential
income tax rate of 15% for 2012 and 2013. In 2014, Tianwei Yingli renewed its HNTE qualification again, which extended its entitlement
to the preferential income tax rate of 15% to 2016. Yingli China was recognized by the Chinese government as a HNTE under the new
EIT law and its relevant regulations, which entitled it to the preferential income tax rate of 15% from 2011 to 2013. In 2014,
Yingli China renewed its HNTE qualification, which entitled it to the preferential income tax rate of 15% from 2014 to 2016. In
2011, Hainan Yingli was recognized by the Chinese government as a HNTE under the new EIT law and its relevant regulations. Being
a HNTE located in the Hainan Special Economic Zone, Hainan Yingli was entitled to a 2+3 tax holiday starting from the year in which
it first generated operating income. Hainan Yingli elected and was approved to commence its 2+3 tax holiday in 2011. Therefore,
Hainan Yingli was entitled to income tax exemption for 2011 and 2012 and subject to the reduced income tax rate of 12.5% from 2013
to 2015. Since the tax holiday ended in 2015, Hainan Yingli has been subject to a preferential income tax rate of 15% in 2016.
In 2013, Yingli Tianjin, Yingli Lixian and Yingli Hengshui were recognized by the Chinese government as HNTEs under the new EIT
law and its relevant regulations, which entitled them to the preferential income tax rate of 15% from 2013 to 2015. In 2016, Yingli
Tianjin, Yingli Lixian and Yingli Hengshui renewed their HNTE qualification, which entitled them to the preferential income tax
rate of 15% from 2016 to 2018.
Subject to reapplication or renewal, except
for Tianwei Yingli, the other subsidiaries included Yingli China, Hainan Yingli, Yingli Tianjin, Yingli Lixian and Yingli Hengshui’s
HNTE status will enable them to continue to enjoy the preferential income tax rate. Management believes that these subsidiaries,
except for Tianwei Yingli, meet all the criteria for the reapplication of HNTE status.
Moreover, the EIT Law and its implementation
rules impose a 10% withholding tax, unless reduced by a tax treaty or agreement for distributions of dividends in respect
of earnings accumulated beginning on January 1, 2008 by a foreign investment enterprise to its immediate overseas holding
company, insofar as the latter is treated as a non-resident enterprise. Distributions of earnings generated before January 1,
2008 are exempt from such withholding tax. Therefore, we did not recognize a deferred tax liability for undistributed earnings
through December 31, 2007. We intend indefinitely to reinvest undistributed earnings generated during and after 2008 and therefore
have not recognized a deferred tax liability for these earnings.
Yingli Green Energy Europe GmbH, or Yingli
Europe, and Yingli Green Energy South East Europe GmbH (formerly known as Yingli Green Energy Greece Sales GmbH), or Yingli South
East Europe, are located in Germany and subject to a corporate income tax rate of 15% plus a solidarity surcharge of 5.5% on corporate
income taxes. In addition, Yingli Europe and Yingli South East Europe are subject to trade income tax rates of 17.15% and 12.775%,
respectively. The aggregate statutory income tax rate in Yingli Europe and Yingli South East Europe are subject to statutory income
tax rates in the aggregate of 32.975% and 28.6%, respectively.
Yingli Green Energy Americas, Inc.,
or Yingli Americas, is located in New York City of the United States of America and is subject to a federal corporate tax rate
of 34% and a state corporate tax rate of 6.6%, resulting in an aggregate income tax rate of 38.4%.
Domestic project assets in China are entitled
to a 3+3 tax holiday starting from the year in which they first generate operating income. The domestic project assets elected
and were approved to commence their 3+3 tax holiday. Therefore, the domestic project assets are entitled to income tax exemption
for the first three years starting from the year in which they first generate operating income and subject to a reduced income
tax rate of 12.5% in the following three years.
Critical Accounting Policies
We prepare our consolidated financial statements
in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i) the reported
amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the end of each reporting period
and (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these estimates
and assumptions based on historical experience, knowledge and assessment of current business and other conditions, expectations
regarding the future based on available information and reasonable assumptions, which together form a basis for making judgments
about matters not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting
process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than
others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements
as their application places the most significant demands on the judgment of our management.
Accrued Warranty Obligations
Before September 30, 2011, our PV
modules were typically sold with a two- or five-year limited warranty for defects in materials and workmanship, and a 10-year and
25-year warranty guaranteeing 90% and 80% of initial power generation capacity, respectively. To remain consistent with industry
practice, from October 1, 2011, we implemented a new and improved warranty term that guarantees 91.2% of nominal power output
for 10 years, and 80.7% of nominal power output for a period of 25 years for multicrystalline PV modules and 98.0% of nominal power
output for the first year, 92.0% of nominal power output for 10 years, and 82.0% of nominal power output for a period of 25 years
for monocrystalline Panda PV modules. From September 1, 2014, we updated our warranty terms to guarantee 91.2% of nominal power
for 10 years and 80.7% of nominal power output for 25 years for multicrystalline PV modules, and to guarantee 98.0% of nominal
power output for the first year, 92.2% of nominal power output for 10 years, and 82.4% of nominal power output for 25 years for
monocrystalline Panda PV modules. In addition, based on customers’ specific requirements, we also provide our multicrystalline
PV modules with a linear-based warranty, which guarantees each year’s power output during the twenty-five-year warranty period.
In December 2013, we entered into a similar module performance warranty insurance agreement with an insurance company for
the same scope of beneficiaries during the period from January 1, 2014 to December 31, 2014, and renewed the agreement
in March 2015, January 2016 and January 2017 for the period from January 1, 2015 to December 31, 2015, January 1,
2016 to December 31, 2016 and from January 1, 2017 to December 31, 2017, respectively. As a result, we bear the
risk of warranty claims long after we have sold our products and recognized revenues. We have sold PV modules only since January 2003,
and none of our PV modules have been in use for the entire warranty period. We perform industry-standard testing to test the quality,
durability and safety of our products. As a result of such tests, we believe that the quality, durability and safety of our products
are within industry norms. Our estimate of the amount of our warranty obligations is based on the results of these tests, with
consideration being given to the warranty accrual practice of other companies in the same business and our expected failure rate
and costs to service failed products. Our warranty obligation will be affected by our estimated product failure rates, the costs
to repair or replace failed products and potential service and delivery costs incurred in correcting product failures. Consequently,
we accrue the equivalent of 1% of gross revenues as a warranty liability to accrue the estimated cost of our warranty obligations.
As of December 31, 2014, 2015 and 2016, our accrued warranty costs amounted to RMB748.4 million, RMB792.1 million, and RMB841.8
million (US$121.2 million), respectively. As of December 31, 2014, 2015 and 2016, RMB707.5 million, RMB753.3 million, and
RMB804.3 million (US$115.9 million), respectively, in warranty costs were classified as noncurrent liabilities, which reflects
our estimate of the timing of when the warranty expenditures will likely be made.
We charge actual warranty expenditures
against the accrued warranty liability. To the extent that actual warranty expenditures differ significantly from estimates, we
will revise our warranty provisions accordingly.
Changes in the carrying amount of accrued
warranty liability are as follows:
|
|
For the Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
(In thousands)
|
|
Beginning balance
|
|
|
666,946
|
|
|
|
748,428
|
|
|
|
792,139
|
|
|
|
114,092
|
|
Warranty expense for current year sales
|
|
|
120,780
|
|
|
|
84,520
|
|
|
|
84,924
|
|
|
|
12,232
|
|
Warranty costs incurred or claimed
|
|
|
(39,298
|
)
|
|
|
(40,809
|
)
|
|
|
(35,257
|
)
|
|
|
(5,078
|
)
|
Total accrued warranty cost
|
|
|
748,428
|
|
|
|
792,139
|
|
|
|
841,806
|
|
|
|
121,246
|
|
Less: accrued warranty cost, current portion
|
|
|
40,903
|
|
|
|
38,869
|
|
|
|
37,462
|
|
|
|
5,396
|
|
Accrued warranty cost, excluding current portion
|
|
|
707,525
|
|
|
|
753,270
|
|
|
|
804,344
|
|
|
|
115,850
|
|
Long-Lived Assets
As of December 31, 2014, 2015 and
2016, our intangible assets primarily consisted of technical know-how, customer relationships, long-term supplier agreements and
trademarks.
We depreciate and amortize our property,
plant, equipment and intangible assets, which are subject to amortization, using the straight-line method over the estimated useful
lives of the assets. We make estimates of the useful lives of plant and equipment (including the salvage values) in order to determine
the amount of depreciation expense to be recorded during each reporting period. We estimate the useful lives at the time the assets
are acquired based on historical experience with similar assets as well as anticipated technological or other changes. If technological
changes were to occur more rapidly than anticipated or in a different form than anticipated, we might shorten the useful lives
assigned to these assets, which would result in the recognition of increased depreciation and amortization expenses in future periods.
There has been no change to the estimated useful lives or salvage values during 2014, 2015 and 2016.
We evaluate long-lived assets, including
property, plant and equipment and intangible assets, which are subject to amortization, for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. We assess recoverability by comparing the
carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated undiscounted future cash flows, we recognize an impairment charge based on the amount
by which the carrying amount of the asset exceeds the fair value of the asset. We estimate the fair value of the asset based on
the best information available, including prices for similar assets and, in the absence of an observable market price, the results
of using a present value technique to estimate the fair value of the asset. Intangible assets that are not subject to amortization
are tested annually for impairment at December 31, and are tested for impairment more frequently if events and circumstances indicate
that the asset might be impaired. For intangible assets that are not subject to amortization, an impairment loss is recognized
to the extent that the carrying amount exceeds the asset’s fair value.
No impairment on our long-lived assets
was recognized in 2013 and 2014 as the average selling price of PV modules stabilized in 2013 and 2014.
Due to the significant decrease in shipment,
gross profit margins and lower-than-expected utilization of production facilities in the middle of 2015, we believe that there
were indicators that the carrying amount of our long-lived assets may not be recoverable.
We determined that buildings, machinery
and equipment, land use rights and shared assets in all solar production lines (including production lines of ingot, wafer, cell
and module, hereafter “Solar Production Lines”) should be one asset group and subject to be tested for impairment.
We first compared undiscounted cash flows expected to be generated by that the asset group to its carrying value. The estimated
future undiscounted net cash flows expected to be generated by the assets over their remaining estimated useful lives were based
on certain assumptions, such as forecasts of future operating results, gross margin and expected future growth rates. We then concluded
that the carrying value of the asset group is not recoverable on an undiscounted cash flow basis.
An impairment should be recognized to the
extent that the carrying value exceeds its fair value. We estimated the fair value based on discounted cash flow analysis using
market participants’ assumptions, such as forecasts of future operating results, discount rates commensurate with the risk
involved, and expected future growth rates. The carrying value of the equipment was reduced to fair value based on the discounted
cash flow analysis.
In applying the discounted cash flow analysis,
we made complex and highly subjective judgments and assumptions about market participants’ financial and operating results.
These assumptions include: no material changes in the existing political, legal and economic conditions in China; no major changes
in the applicable tax rate in China, and no material deviation in market conditions from economic forecasts.
We are also required to make other assumptions
such as our weighted average cost of capital, general market and macroeconomic conditions, and market participants, Changes in
these assumptions could significantly affect the valuation results, our financial positions, and the results of our impairment
assessment. The main assumptions used in the discounted cash flow are set out as follows:
|
·
|
Weighted average cost of
capital, or WACC—The WACCs were determined based on a consideration of such factors as risk-free rate, comparative industry
risk, equity risk premium, company size and company-specific factors. We used WACC of 15.0% in the discounted cash flow.
|
|
·
|
Comparable companies—In
deriving the discounted cash flow and WACCs, which are used as the discount rates under the discounted cash flow, three to four
publicly traded solar companies were selected for reference as market participants.
|
The assumptions used in deriving the fair
values are inherently uncertain and highly subjective.
After the work performed as discussed above,
an impairment loss of RMB3,804.1 million related to buildings, machinery and equipment and shared assets in all solar production
lines was recognized in 2015 to the extent that the asset group’s carrying value exceeds its fair value.
As a result of a significant drop in the
selling price of PV modules in late 2016, we also recorded such impairment loss of RMB1,277.4 million in 2016.
Share-Based Compensation
As further described in Note (22) to our
consolidated financial statements, we account for share-based compensation under FASB ASC Topic 718, “
Compensation —
Stock Compensation
”. Under ASC Topic 718, the cost of all share-based payment transactions must be recognized in our
consolidated financial statements based on their grant-date fair value over the vesting period, which is generally the period from
the date of grant to the date when the share compensation is no longer contingent upon additional service from the employee, or
the vesting period. We determine the fair value of our employees’ share options as of the grant date using the Black-Scholes
option pricing model.
Under this model, we make a number of assumptions
regarding the fair value of the options, including:
|
·
|
the estimated fair value of our ordinary shares on the grant date;
|
|
·
|
the maturity of the options;
|
|
·
|
the expected volatility of our future ordinary share price;
|
|
·
|
the risk-free interest rate; and
|
|
·
|
the expected dividend rate.
|
For the share options granted after our
initial public offering, the fair value of our ordinary shares on the grant date is determined by the closing trade price of our
ordinary shares on the grant date. Prior to 2011, due to the lack of a sufficient trading history at the time the options were
issued, we estimated the expected volatility of our ordinary share price by referring to 11 comparable companies in the PV manufacturing
business whose shares are publicly traded over the most recent period to be equal to the expected life of our employees’
share options. Starting in 2011, our calculation of expected volatility was based on the historical volatility of our stock price.
We had 6,910,812, 6,542,994, and 7,328,575
employee share options outstanding as of December 31, 2014, 2015 and 2016, respectively. The following table sets forth information
regarding our employee share options outstanding as of December 31, 2014, 2015 and 2016:
|
|
Number of
Stock options
|
|
|
Weighted
Average
exercise price
|
|
|
Weighted
Average
remaining
contractual
term
|
|
|
Aggregate
intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2013
|
|
|
5,169,567
|
|
|
US$
|
4.58
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,792,820
|
|
|
US$
|
4.17
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited or cancelled
|
|
|
(51,575
|
)
|
|
US$
|
(3.80
|
)
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2014
|
|
|
6,910,812
|
|
|
US$
|
4.48
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
86,000
|
|
|
US$
|
0.84
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
US$
|
—
|
|
|
|
|
|
|
|
|
|
Forfeited or cancelled
|
|
|
(453,818
|
)
|
|
US$
|
(7.43
|
)
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2015
|
|
|
6,542,994
|
|
|
US$
|
4.23
|
|
|
|
4.49 years
|
|
|
|
—
|
|
Vested and expected to vest as of December 31, 2015
|
|
|
6,542,994
|
|
|
US$
|
4.23
|
|
|
|
4.49 years
|
|
|
|
—
|
|
Exercisable as of December 31, 2015
|
|
|
6,483,744
|
|
|
US$
|
4.04
|
|
|
|
4.44 years
|
|
|
|
—
|
|
Granted
|
|
|
817,881
|
|
|
US$
|
0.50
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
US$
|
—
|
|
|
|
|
|
|
|
|
|
Forfeited or cancelled
|
|
|
(32,300
|
)
|
|
US$
|
(5.98
|
)
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2016
|
|
|
7,328,575
|
|
|
US$
|
3.81
|
|
|
|
4.12 years
|
|
|
|
|
|
Vested and expected to vest as of December 31, 2016
|
|
|
7,328,575
|
|
|
US$
|
3.81
|
|
|
|
4.12 years
|
|
|
|
|
|
Exercisable as of December 31, 2016
|
|
|
6,531,394
|
|
|
US$
|
4.01
|
|
|
|
3.44 years
|
|
|
|
|
|
In addition to share options, we have granted
a total of 2,665,060 restricted shares under our 2006 stock incentive plan for the benefit of 81 participants, consisting of 715,920
restricted shares granted to four directors and officers of Yingli Green Energy and 1,949,140 restricted shares to 76 other employees
and nonemployees, comprising 33,792 restricted shares that were forfeited, as of December 31, 2014. None of these restricted
shares remained unvested as of December 31, 2016.
We recorded noncash share-based compensation
expense of RMB34.9 million, RMB12.0 million, and RMB1.5 million (US$0.2 million) as translated at the applicable average exchange
rate prevailing during the period for the year ended December 31, 2014, 2015 and 2016.
Changes in our estimates and assumptions
regarding the expected volatility and valuation of our ordinary shares could significantly impact the estimated fair values of
our share options and, as a result, our net income (loss) and the net income available to our ordinary shareholders.
Based on the closing price of our ADS of
US$2.60 on December 30, 2016, the aggregate intrinsic value of the options outstanding as of December 31, 2016 was nil.
Valuation of Inventories
Our inventories are stated at the lower
of cost or market value. We routinely evaluate quantities and value of our inventories in light of current market conditions and
market trends, and record a write-down against the cost of inventories for a decline in market value. Expected demand and anticipated
sales prices are the key factors affecting our inventory valuation analysis. For purposes of our inventory valuation analysis,
we develop expected demand and anticipated sales prices primarily based on sales orders and, to a far lesser extent, industry trends
and individual customer analysis. We also consider sales and sales orders after each reporting period-end but before the issuance
of our financial statements to assess the accuracy of our inventory valuation estimates. Historically, actual demand and sales
prices have generally been consistent with or greater than expected demand and anticipated sales prices used for purposes of our
inventory valuation analysis. The evaluation also takes into consideration new product development schedules, the effect that new
products might have on sales of existing products, product obsolescence, customer concentrations, product merchantability and other
factors. Market conditions are subject to change and actual consumption of inventories could differ from forecasted demand. Furthermore,
the price of polysilicon, our primary raw material, is subject to fluctuations based on global supply and demand. Our management
continually monitors changes in the purchase price we pay for polysilicon, including prepayments to suppliers, and the impact of
such changes on our ability to recover the cost of inventory and our prepayments to suppliers. Our products have a long life cycle
and obsolescence has not historically been a significant factor in the valuation of inventories. For the years ended December 31,
2014, 2015 and 2016, inventory write-downs due to the lower of cost or market assessment, which are included in the cost of revenues,
were RMB4.2 million, RMB31.9 million, and RMB89.1 million (US$12.8 million), respectively.
Inventory Purchase Commitments
Until the third quarter of 2008, an industry-wide
shortage of high purity polysilicon coupled with growing demand for PV modules caused the increases of polysilicon prices. In order
to ensure the adequate supply of polysilicon, we entered into several long-term fixed price supply contracts with Supplier A, B
and C from 2006 to 2011 under which the polysilicon would be delivered from 2009 to 2020. However, from the second quarter of 2011,
the polysilicon price has decreased significantly as the result of increased polysilicon manufacturing capacity and the pressure
from the decreasing average selling price of PV modules.
In October 2013, we entered into agreements
with Supplier B to amend the contract and include a price adjustment mechanism that allows us and the vendor to renegotiate purchase
price on a quarterly basis within a specified price range set forth in the amendments based on market price.
|
(a)
|
The inventory firm purchase
commitment with Supplier A for the years ended December 31, 2014, 2015 and 2016
|
As of December 31, 2013, the total liability
recognized for loss on inventory purchase commitments of RMB 1,244,743, after excluding the portion of RMB 87,134 recorded as a
reduction of “Prepayment to suppliers” related to Supplier C, was all related to the long-term fixed price polysilicon
contracts with Supplier A (see “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry — Our polysilicon
costs may be higher than those of other market players due to our long-term commitment to purchase polysilicon at fixed prices,
and we have failed to perform certain of our obligations under these long-term polysilicon supply contracts according to their
original terms”), based on the management’s assessment by applying a methodology similar to that used in the lower
of cost or market evaluation with respect to inventory. The provision was determined by using management’s best estimates
of future purchase prices over the remaining terms of the contracts and applying such estimated purchase prices in the lower of
cost or market evaluation. In estimating the anticipated renegotiated purchase prices, we considered the pertinent terms of each
of the long-term supply contracts, the history and progress of renegotiation with the relevant vendors and the actual price concessions
granted, the polysilicon market development based on available industry research data and the likelihood of achieving different
levels of renegotiated prices for future periods. In addition to the estimated renegotiated purchase price, certain other key assumptions
were used in measuring the loss accrual, which included but were not limited to (i) the estimated net realizable value of the PV
modules manufactured from the polysilicon expected to be purchased under the long-term supply contracts; and (ii) the normal profit
margin of the PV modules for purposes of estimating the replacement cost or market price under the lower of cost or market evaluation.
We also considered the quantities that were required to be purchased and amounts due on take or pay arrangements, as well as the
history and progress of renegotiation with the relevant vendors and the actual concessions granted in developing the amount of
the estimated loss contingencies.
In the years ended December 31, 2014, 2015
and 2016, after management’s assessment by using the same methodology mentioned above, no additional contingency losses for
inventory firm purchase commitment with Supplier A was determined to be required. However, due to significant fluctuation in the
foreign exchange rates between the RMB and US$ in 2015 and 2016 and given that the inventory purchase commitment to Supplier A
is dominated in US dollar, which is different from the related entities’ functional currency, a foreign exchange re-measurement
loss of RMB 77,705 and RMB 90,300 (US$13,006) was recorded as additional provision and was recorded in “Provision for reserve
for inventory purchase commitments” for the years ended December 2015 and 2016, respectively. No such provision was needed
in 2014 since the foreign exchange rate was stable and the provision caused by the foreign exchange rate fluctuation was immaterial.
As of December 31, 2014, 2015 and 2016,
the total reserve for inventory purchase commitment of Supplier A was RMB 1,244,743, RMB 1,322,448 and RMB 1,412,748 (US$ 203,478),
respectively. Based on the stated delivery schedules through the end of 2014, 2015 and 2016, RMB 13,042, nil and nil were recorded
in “Other current liabilities and accrued expenses”, respectively, and the remaining balance of RMB 1,231,701, RMB
1,322,448 and RMB 1,412,748 (US$ 203,478) were recorded in “Reserve for inventory purchase commitments” as of December
31, 2014, 2015 and 2016, respectively. The following table presents the movement of the liability for inventory purchase commitment:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
(In thousands)
|
|
Beginning balance
|
|
|
(1,244,743
|
)
|
|
|
(1,244,743
|
)
|
|
|
(1,322,448
|
)
|
|
|
(190,472
|
)
|
Additions
|
|
|
-
|
|
|
|
(77,705
|
)
|
|
|
(90,300
|
)
|
|
|
(13,006
|
)
|
Ending balance
|
|
|
(1,244,743
|
)
|
|
|
(1,322,448
|
)
|
|
|
(1,412,748
|
)
|
|
|
(203,478
|
)
|
In entering into our inventory purchase contracts with Supplier
A, we made prepayments as described in “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry — Our
polysilicon costs may be higher than those of other market players due to our long-term commitment to purchase polysilicon at fixed
prices, and we have failed to perform certain of our obligations under these long-term polysilicon supply contracts according to
their original terms”. As of December 31, 2015 and 2016, total balance of prepayments made to Supplier A was RMB 224,029
and RMB 239,327 (US$34,500). In 2014, 2015 and 2016, due to the anti-dumping duty and anti-subsidy investigation against Solar-Grade
Polysilicon launched by the Ministry of Commerce of the People’s Republic of China, we did not make any purchases from the
Supplier A under the above-mentioned long-term fixed price supply contract, which was entered into in 2011 and was effective from
2013 to 2020. We received invoices from Supplier A under its take-or-pay obligation for failing to take the shipments from 2013
to 2016 and are currently in discussion with the Supplier A to seek an acceptable solution to both parties in accordance with the
long-term supply contract. According to the long-term supply contracts entered into between us and Supplier A, the minimum purchase
amount approximates US$1.6 billion in total. We believe that, it is probable we will execute the agreements due to the “take
or pay” obligation, which requires we to pay full amount to Supplier A according to the purchase and payment schedule listed
in the agreements with Supplier A, regardless of whether we actually purchase raw materials from Supplier A. In addition, we also
believe that based upon the status of the negotiations with Supplier A, as of December 31, 2015 and 2016, it is reasonably assured
that (i) these prepayments are not legally forfeited, and (ii) these prepayments could be utilized for deliveries once we start
purchasing from Supplier A. As a result, we believe that the total prepayments could be utilized for deliveries once we start purchasing
from Supplier A, therefore there was no need to make a reserve against the prepayments to Supplier A as of December 31, 2015 and
2016.
|
(b)
|
The inventory firm purchase
commitment with Supplier C for the years ended December 31, 2014, 2015 and 2016
|
As described in note 2(c), we also have prepayments with respect
to another supplier, Supplier C, for the purchase of polysilicon. As of December 31, 2013, a provision of RMB 87,134 has been recorded
as a reduction of “Prepayment to suppliers” in relation to the failure to purchase the stated quantities under the
long-term fixed price supply contracts with Supplier C.
In 2015, we failed to purchase from Supplier C the stated quantities
under the long-term fixed price supply contracts as our management determined after taking into consideration all relevant factors
that it would be in our best interest not to accept those deliveries when they were due. As a result, because the contract has
been substantially executed, the vendor claimed that certain advance payments had been forfeited. Unlike the take or pay obligation
for Supplier A described in paragraph (a) above, if we fail to take the full amount of the agreed annual quantity in any calendar
year, we do not have to pay for the remaining annual commitment, but rather only forfeit the unutilized portion of the prepayment
related to that year. Further, we do not have the right to utilize this prepayment for deliveries in later years. Accordingly,
a provision of RMB 71,266 was made against the forfeited advance payments as December 31, 2015. In 2015, we made a further assessment
and estimated that for our best interest, we would continue not to purchase from Supplier C the stated quantities in the remaining
execution period of these long-term fixed price supply contracts. As a result, an additional impairment of RMB 450,784 was provided
as of December 31, 2015 based on the estimated shortage between the contractual procurement volume and the estimated procurement
volume in the remaining execution period.
For year ended December 31, 2016, we made an additional true-up
provision of RMB 10,672 (US$1,537), based on the difference between the actual shortage of the purchase volume in 2016 and the
estimated purchase volume.
The following table presents the movement of the reserve against
inventory purchase prepayments for Supplier C:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
(In thousands)
|
|
Beginning balance
|
|
|
(87,134
|
)
|
|
|
(87,134
|
)
|
|
|
(609,184
|
)
|
|
|
(87,741
|
)
|
Additions
|
|
|
-
|
|
|
|
(522,050
|
)
|
|
|
(10,672
|
)
|
|
|
(1,537
|
)
|
Ending balance
|
|
|
(87,134
|
)
|
|
|
(609,184
|
)
|
|
|
(619,856
|
)
|
|
|
(89,278
|
)
|
As of December 31, 2015 and 2016, total
impairment provided against prepayments to Supplier C in relation to inventory purchase commitments was RMB 609,184 and RMB 619,856
(US$ 89,278), respectively. As of December 31, 2016, total remaining unreserved prepayments to Supplier C was RMB 238,242 (US$34,314),
which represents management’s best estimation on the recoverability of the prepayments.
Allowance for Doubtful Accounts
We establish an allowance for doubtful
accounts for the estimated loss on receivables when collection may no longer be reasonably assured. We assess collectability of
receivables based on a number of factors, including the customer’s financial condition and creditworthiness. We make credit
sales to major strategic customers in Europe. To reduce credit risks relating to other customers, we require some of our customers
to pay a major portion of the purchase price by letters of credit. For the years ended December 31, 2014, 2015 and 2016, our
provisions for doubtful accounts amounted to RMB228.8 million, RMB414.8 million, and RMB61.5 million (US$8.9 million) respectively.
We recorded a reversal of allowance for doubtful accounts of RMB59.5 million, RMB10.4 million, and RMB66.6 million (US$9.6 million)
in 2014, 2015 and 2016, respectively, primarily due to the collection of a previously reserved amount from customers.
The following table sets forth the movement
of allowance for doubtful accounts for the years ended December 31, 2014, 2015 and 2016:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
(286,997
|
)
|
|
|
(250,514
|
)
|
|
|
(527,335
|
)
|
|
|
(75,952
|
)
|
Additions
|
|
|
(228,835
|
)
|
|
|
(414,759
|
)
|
|
|
(61,482
|
)
|
|
|
(8,855
|
)
|
Reversal of allowance for doubtful accounts
|
|
|
59,464
|
|
|
|
10,414
|
|
|
|
66,586
|
|
|
|
9,590
|
|
Write-off of accounts receivable
|
|
|
205,854
|
|
|
|
127,524
|
|
|
|
5,204
|
|
|
|
750
|
|
Reversal of partial accounts receivable written off in prior years
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,093
|
)
|
|
|
(1,742
|
)
|
Ending balance
|
|
|
(250,514
|
)
|
|
|
(527,335
|
)
|
|
|
(529,120
|
)
|
|
|
(76,209
|
)
|
Results of Operations
The following table sets forth a summary
of our results of operations for the periods indicated. Our historical results presented below are not necessarily indicative of
the results that may be expected for any future period.
|
|
For the Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
|
(In thousands, except percentages)
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of PV modules
|
|
|
12,179,474
|
|
|
|
94.2
|
|
|
|
8,464,779
|
|
|
|
84.9
|
|
|
|
7,026,074
|
|
|
|
1,011,965
|
|
|
|
83.9
|
|
Sales of PV systems
|
|
|
161,035
|
|
|
|
1.2
|
|
|
|
197,365
|
|
|
|
2.0
|
|
|
|
127,353
|
|
|
|
18,343
|
|
|
|
1.5
|
|
Other revenues
|
|
|
586,868
|
|
|
|
4.6
|
|
|
|
1,303,642
|
|
|
|
13.1
|
|
|
|
1,222,672
|
|
|
|
176,101
|
|
|
|
14.6
|
|
Total net revenues
|
|
|
12,927,377
|
|
|
|
100.0
|
|
|
|
9,965,786
|
|
|
|
100.0
|
|
|
|
8,376,099
|
|
|
|
1,206,409
|
|
|
|
100.0
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of PV modules sales
|
|
|
10,050,844
|
|
|
|
77.7
|
|
|
|
7,329,306
|
|
|
|
73.5
|
|
|
|
6,044,193
|
|
|
|
870,545
|
|
|
|
72.2
|
|
Cost of PV systems sales
|
|
|
137,396
|
|
|
|
1.1
|
|
|
|
186,219
|
|
|
|
1.9
|
|
|
|
121,971
|
|
|
|
17,567
|
|
|
|
1.5
|
|
Cost of other revenues
|
|
|
500,892
|
|
|
|
3.9
|
|
|
|
1,262,931
|
|
|
|
12.7
|
|
|
|
1,058,062
|
|
|
|
152,393
|
|
|
|
12.6
|
|
Total cost of revenues
|
|
|
10,689,132
|
|
|
|
82.7
|
|
|
|
8,778,456
|
|
|
|
88.1
|
|
|
|
7,224,226
|
|
|
|
1,040,505
|
|
|
|
86.2
|
|
Gross profit
|
|
|
2,238,245
|
|
|
|
17.3
|
|
|
|
1,187,330
|
|
|
|
11.9
|
|
|
|
1,151,873
|
|
|
|
165,904
|
|
|
|
13.8
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
1,095,145
|
|
|
|
8.5
|
|
|
|
854,315
|
|
|
|
8.6
|
|
|
|
630,873
|
|
|
|
90,865
|
|
|
|
7.5
|
|
General and administrative expenses(1)
|
|
|
615,131
|
|
|
|
4.8
|
|
|
|
523,150
|
|
|
|
5.2
|
|
|
|
542,758
|
|
|
|
78,173
|
|
|
|
6.5
|
|
Research and development expenses
|
|
|
573,792
|
|
|
|
4.4
|
|
|
|
396,991
|
|
|
|
4.0
|
|
|
|
146,850
|
|
|
|
21,151
|
|
|
|
1.8
|
|
Provisions for /(reversal of) doubtful accounts receivable
|
|
|
169,371
|
|
|
|
1.3
|
|
|
|
404,345
|
|
|
|
4.1
|
|
|
|
(5,104)
|
|
|
|
(735)
|
|
|
|
(0.1)
|
|
Disposal gain from of long-lived assets and land use right in relation to a subsidiary
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,167,317
|
)
|
|
|
(11.7
|
)
|
|
|
143,016
|
|
|
|
20,599
|
|
|
|
1.7
|
|
Impairment of long-lived assets
|
|
|
—
|
|
|
|
—
|
|
|
|
3,804,116
|
|
|
|
38.2
|
|
|
|
1,277,373
|
|
|
|
183,980
|
|
|
|
15.3
|
|
Provision for prepayments in relation to inventory purchase commitments
|
|
|
—
|
|
|
|
—
|
|
|
|
522,050
|
|
|
|
5.2
|
|
|
|
10,672
|
|
|
|
1,537
|
|
|
|
0.1
|
|
Provision for reserve for inventory purchase commitments
|
|
|
—
|
|
|
|
—
|
|
|
|
77,705
|
|
|
|
0.8
|
|
|
|
90,300
|
|
|
|
13,006
|
|
|
|
1.1
|
|
Total operating expenses(1)
|
|
|
2,453,439
|
|
|
|
19.0
|
|
|
|
5,415,355
|
|
|
|
54.3
|
|
|
|
2,836,738
|
|
|
|
408,576
|
|
|
|
33.9
|
|
Loss from operations(1)
|
|
|
(215,194
|
)
|
|
|
(1.7
|
)
|
|
|
(4,228,025
|
)
|
|
|
(42.4
|
)
|
|
|
(1,684,865)
|
|
|
|
(242,672)
|
|
|
|
(20.1)
|
|
Interest expense, net
|
|
|
(980,845
|
)
|
|
|
(7.6
|
)
|
|
|
(954,544
|
)
|
|
|
(9.6
|
)
|
|
|
(656,622)
|
|
|
|
(94,573)
|
|
|
|
(7.8)
|
|
Foreign currency exchange (losses)/gain
|
|
|
(243,386
|
)
|
|
|
(1.9
|
)
|
|
|
(132,709
|
)
|
|
|
(1.3
|
)
|
|
|
6,000
|
|
|
|
864
|
|
|
|
0.1
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
|
(In thousands, except percentages)
|
|
Other income
|
|
|
125,568
|
|
|
|
1
|
|
|
|
148,462
|
|
|
|
1.5
|
|
|
|
246,967
|
|
|
|
35,571
|
|
|
|
3.0
|
|
Income tax expense
|
|
|
(89,723
|
)
|
|
|
(0.7
|
)
|
|
|
(731,191
|
)
|
|
|
(7.3
|
)
|
|
|
(12,895
|
)
|
|
|
(1,857
|
)
|
|
|
(0.2
|
)
|
Equity in income/(loss) of affiliates, net
|
|
|
2,245
|
|
|
|
-
|
|
|
|
(829
|
)
|
|
|
-
|
|
|
|
(17,554
|
)
|
|
|
(2,528
|
)
|
|
|
(0.2
|
)
|
Net loss(1)
|
|
|
(1,401,335
|
)
|
|
|
(10.9
|
)
|
|
|
(5,898,836
|
)
|
|
|
(59.2
|
)
|
|
|
(2,118,969
|
)
|
|
|
(305,195
|
)
|
|
|
(25.3
|
)
|
Less: Loss attributable to the non-controlling interests
|
|
|
101,526
|
|
|
|
0.8
|
|
|
|
298,310
|
|
|
|
3.0
|
|
|
|
21,315
|
|
|
|
3,070
|
|
|
|
0.3
|
|
Net loss attributable to Yingli Green Energy(1)
|
|
|
(1,299,809
|
)
|
|
|
(10.1
|
)
|
|
|
(5,600,526
|
)
|
|
|
(56.2
|
)
|
|
|
(2,097,654
|
)
|
|
|
(302,125
|
)
|
|
|
(25.0
|
)
|
|
(1)
|
Subsequent to furnishing the Form 6-K on April 13, 2017 related to the earnings release which included our financial
information for the fourth quarter and full year ended December 31, 2016, in consideration of the uncertainties involved in
the appeals process described below, our management reevaluated its earlier assessment of certain litigation originally
filed against us by a supplier in September 2015 and related court
judgments issued at the end of December 2016 of which our company
was notified in January 2017 and which we appealed, and concluded that our company should recognize a provision of RMB59
million (US$8.5 million) in respect of such litigation in the year ended December 31, 2016. The recognition of this
provision impacted our general and administrative expenses, total
operating expenses, loss from operations, net loss, net loss
attributable to Yingli Green Energy, earnings per share and earnings per ADS in our results of operations for the year ended
December 31, 2016. For more information, see “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry
— We are exposed to various risks related to legal or administrative proceedings or claims that could adversely affect
our financial condition, results of operations and reputation, and may cause losses to our business.” and “(25)
Commitments and Contingencies” in the financial statements included elsewhere in this annual report.
|
Year Ended December 31, 2016 Compared to Year Ended
December 31, 2015
Net Revenues
. Our total net revenues
were RMB8,376.1 million (US$1,206.4 million) in 2016, which decreased by 16.0% from RMB9,965.8 million in 2015. Our PV module
shipment volume (including shipments for PV systems) in 2016 was 2,170.4 megawatts, a decrease of 11.3% from 2,447.0 megawatts
in 2015. The decrease in total net revenues year-over-year was mainly due to decreased PV module shipments as a result of a lower
utilization rate of production capacity caused by tight cash flow starting from mid-2015, as well as a decline in the average selling
price of our company’s modules.
Net revenues from sales of PV modules were
RMB7,026.1 million (US$1,012.0 million), or 83.9% of total net revenues in 2016, compared to RMB8,464.8 million, or 84.9% of total
net revenues in 2015. Our PV module sales in China in 2016 were RMB3,691.2 million (US$531.6 million), or 44.1% of our total net
revenues, compared to RMB2,714.8 million, or 27.2% of our total net revenues in 2015. Our PV module sales in Japan in 2016 were
RMB2,288.7 million (US$329.6 million), or 27.3% of our total net revenues, compared to RMB2,613.5 million, or 26.2% of our total
net revenues in 2015.
Net revenues from sales of PV cells, wafers
and raw materials were RMB746.3 million (US$107.5 million), or 8.9% of total net revenues in 2016, compared to RMB686.1 million,
or 6.9% of total net revenues in 2015.
Net revenues from PV cells and PV modules
processing fee were RMB308.4 million (US$44.4 million), or 3.7% of total net revenues in 2016, compared to RMB389.5 million, or
3.9% of total net revenues in 2015.
Net revenues from sales of PV systems were
RMB127.4 million (US$18.3 million), or 1.5% of total net revenues in 2016, compared to RMB197.4 million, or 2.0% of total net revenues
in 2015. Most of our net revenues from sales of PV systems in 2016 were derived from China.
Other revenues were RMB168.0 million (US$24.2
million), or 2.0% of total net revenues in 2016, compared to RMB228.1 million, or 2.3% of total net revenues in 2015. Net revenues
from sales of electricity were RMB 33.4 million (US$ 4.8 million), or 0.4% of total net revenues in 2016, compared to RMB 38.1
million, or 4% of total net revenues in 2015, which has been classified in “Other revenues”.
Cost of Revenues.
The cost of PV
modules sales as a percentage of net revenues from PV modules slightly decreased to 86.0% in 2016, from 86.6% in 2015. Net revenues
from sales of electricity were RMB 33.4 million (US$ 4.8 million), or 0.4% of total net revenues in 2016, compared to RMB 38.1
million, or 4% of total net revenues in 2015, which has been classified in “Other revenues”.
Gross Profit.
Our gross profit was
RMB1,151.9 million (US$165.9 million) in 2016, compared to RMB1,187.3 million in 2015. Our gross margin was 13.8% in 2016, compared
to 11.9% in 2015.
Operating Expenses
. Our operating
expenses in 2016 were RMB2,836.7 million (US$408.6 million), compared to RMB5,415.4 million in 2015. Operating expenses as a percentage
of net revenue was 33.9% in 2016, compared to 54.3% in 2015. The decrease was mainly due to,
|
·
|
Impairment
of long-lived assets.
Mainly due to the lower utilization rate of production facilities, our company recorded an impairment
loss of RMB 3.8 billion for property, plant and equipment based on the difference between carrying value and fair value of such
long-lived assets in 2015, while due to a significant decrease in the selling price of PV modules in late 2016, our company recorded
such impairment loss of RMB1.3 billion in 2016.
|
|
·
|
Provision
for/ (reversal of) doubtful accounts receivable.
As a result of certain customers’ prolonged failure to settle accounts
receivable and the continuing deterioration of their financial condition and creditworthiness, we made a total provision of RMB
404.3 million in 2015 for the doubtful accounts receivable related to these customers, while we reversed provision for doubtful
accounts receivable of RMB 5.1 million (US$ 0.7 million) in 2016 due to collection of these accounts receivable.
|
|
·
|
Provision
for prepayments in relation to inventory purchase commitments.
In 2015, our company recorded provisions of RMB 522.1 million
for the prepayments to certain supplier under our company's long-term polysilicon supply contracts as a result of the reassessment
of the purchase commitments under those supply contracts, while our company recorded such provision of RMB10.7 million in 2016.
|
|
·
|
Selling
expenses.
Our company’s selling expenses were RMB630.9 million (US$90.9 million) in 2016, decreased from RMB854.3 million
in 2015. The decrease was primarily due to a lower freight and insurance costs as a result of decreased total PV module shipments.
|
|
·
|
General
and administrative expenses.
Our company made a provision of RMB113.4 million (US$16.3 million) in 2016 against prepayments
made to several suppliers due to these suppliers failing to fulfill their delivery obligations under their contracts with our
company and each was in financial difficulty. Except for the bad debt provision, our company’s general and administrative
expenses decreased to RMB429.3 million (US$61.8 million) in 2016 from RMB523.2 million in 2015 mainly as a result of more strict
and effective control on general and administrative expenses.
|
|
·
|
Research
and development expenses.
Our research and development expenses decreased to RMB146.9 million (US$21.2 million) in 2016 from
RMB397.0 million in 2015. The decrease in research and development expenses from 2016 to 2015 was mainly due to our enhanced control
of research and development projects as a result of our tight cash flow.
|
The decrease in our operating expenses was partially offset
by,
|
·
|
Disposal
gain from long-lived assets and land use right in relation to a subsidiary and write off of related receivable.
In 2015, Fine
Silicon, one of our company's subsidiaries in China, disposed its long-lived assets and land use rights and our company recognized
a disposal gain of RMB 1.2 billion while in 2016, we further received RMB 103 million from local government. For the expected
remaining outstanding receivables of RMB 143,016 (US$20,599), as further discussed with local government in terms of the method
of calculation of the contributions, we believe the expected remaining amount will not be paid. As a result, a fully provision
of RMB143,016 (US$20,599) was provided by us for the year ended December 31, 2016.
|
|
·
|
Provision
for reserve for inventory purchase commitments.
In 2015, our company recorded provision for reserve for inventory purchase
commitments of RMB77.7 million while our company recorded such provision of RMB90.3 million (US$13.0 million) in 2016.
|
Loss from Operations
. Loss from
operations was RMB1,684.9 million (US$242.7 million) in 2016, compared to RMB4,228.0 million in 2015. As a result of the cumulative
effect of the above factors, operating loss margin was 20.1% in 2016, compared to 42.4% in 2015.
Interest Expenses, Net.
Net interest
expense in 2016 was RMB656.6 million (US$94.6 million), compared to RMB 954.5 million in 2015. The decrease in interest expenses
in 2016 is primarily attributable to our company having entered into supplement agreements with certain lending banks to reduce
its interest rate on bank borrowings from those lending banks. As of December 31, 2016, our company had an aggregate of RMB11.5
billion (US$1.7 billion) of borrowings and medium-term notes outstanding, compared to RMB 11.8 billion as of December 31, 2015.
The weighted average interest rate for our company's borrowings in 2016 was 5.59%, which decreased from 6.39% in 2015.
Foreign Currency Exchange Gain/Loss
.
Foreign currency exchange gain was RMB6.0 million (US$0.9 million) in 2016, compared to a foreign currency exchange loss of RMB132.7
million in 2015. Our company recorded a foreign currency exchange gain in 2016 was mainly due to appreciation of Japanese Yen and
Euro appreciated against Renminbi in 2016 and our company had a balance of net financial assets denominated in Japanese Yen and
Euro, which was substantially offset by a currency exchange loss caused by the depreciation of Renminbi against the U.S. dollar
in 2016 because our company had a balance of net financial liabilities denominated in U.S. dollar. The foreign exchange loss in
2015 was mainly due to the depreciation of Renminbi against the U.S. dollar.
Income Tax Expense.
We recognized
an income tax expense of RMB12.9 million (US$1.9 million) in 2016, compared to an income tax expense of RMB731.2 million in 2015.
The significant amount incurred in 2015 was primarily due to assessment on recovery of deferred income tax assets which resulted
in an additional valuation allowance of deferred income tax assets as well as the realization of deferred tax assets upon the disposal
of Fine Silicon land use rights.
Loss Attributable to the Non-controlling
Interests
. In 2016, loss attributable to the non-controlling interests was RMB21.3 million (US$3.1 million), compared to RMB298.3
million in 2015.
Net Loss Attributable to Yingli Green
Energy
. As a result of the cumulative effect of the above factors, our net loss attributable to Yingli Green Energy was RMB2,097.7
million (US$302.1 million) in 2016, compared to RMB5,600.5 million in 2015.
Year Ended December 31, 2015 Compared to Year Ended December
31, 2014
Net Revenues
. Our total net revenues
were RMB9,965.8 million in 2015, which decreased by 22.9% from RMB12,927.4 million in 2014. Our PV module shipment volume (including
shipments for PV systems) in 2015 was 2,447.0 megawatts, a decrease of 27.2% from 3,361.3 megawatts in 2014. The decrease in total
shipments was primarily due to the lower-than-expected utilization rate of our production facilities for our in-house PV modules
as a result of tight cash flow in 2015. The decrease in total net revenues year-over-year was mainly due to reduction in total
PV module shipment and decline in our average selling prices of PV modules around the world, especially in China.
Net revenues from sales of PV modules were
RMB8,464.8 million, or 84.9% of total net revenues in 2015, compared to RMB12,179.5 million, or 94.2% of total net revenues in
2014. Our PV module sales in China in 2015 were RMB2,714.8 million, or 27.2% of our total net revenues, which decreased from RMB4,550.9
million, or 35.2% of our total net revenues in 2014. Our PV module sales in Japan in 2015 were RMB2,613.5 million, or 26.2% of
our total net revenues, which increased from RMB2,415.6 million, or 19.8% of our total net revenues in 2014. Our PV module sales
in the United States in 2015 were RMB1,235.2 million, or 12.4% of our total net revenues which decreased from RMB2,301.5 million,
or 17.8% of our total net revenues in 2014.
Net revenues from sales of PV cells, wafers and raw materials
were RMB686.1 million, or 6.9% of total net revenues in 2015, which increased from RMB439.6 million, or 3.4% of total net revenues
in 2014.
Net revenues from PV cells and PV modules
processing fee were RMB389.5 million, or 3.9% of total net revenues in 2015. We did not generate such revenues in 2014.
Net revenues from sales of PV systems were
RMB197.4 million, or 2.0% of total net revenues in 2015, which increased from RMB161.0 million, or 1.2% of total net revenues in
2014. Most of our net revenues from sales of PV systems in 2015 were derived from China.
Other revenues were RMB228.1 million, or
2.3% of total net revenues in 2015, which increased from RMB147.2 million, or 1.1% of total net revenues in 2014.
Cost of Revenues
. The cost of PV
modules sales as a percentage of net revenues from PV modules increased to 86.6% in 2015, from 82.5% in 2014. This increase was
primarily due to an increase in unit production cost of PV modules as a result of the lower-than-expected utilization rate of production
facilities and decline in total net revenues.
Gross Profit
. As a result of the
factors described above, our gross profit was RMB1,187.3 million in 2015, which decreased from gross profit of RMB2,238.2 million
in 2014. Our gross margin was 11.9% in 2015, which decreased from 17.3% in 2014.
Operating Expenses
. Our operating
expenses were RMB5,415.4 million in 2015, which increased from RMB2,453.4 million in 2014. Operating expenses as a percentage of
net revenue increased to 54.3% in 2015 from 19.0% in 2014. The increase was mainly due to,
|
·
|
Impairment of long-lived assets
. Due to lower-than-expected
utilization of certain production facilities, we did an impairment analysis on our long-lived assets in 2015 and recorded an impairment
loss of approximately RMB3.8 billion for property, plant and equipment with respect to the production facilities based on the
difference between carrying value and fair value of such long-lived assets. We did not record such impairment loss in 2014.
|
|
·
|
Provision for reserve for inventory purchase commitments
under long-term polysilicon supply contracts
. In 2015, we recorded provisions of approximately RMB77.7 million for the inventory
purchase commitments with certain supplier under our long-term polysilicon supply contracts as a result of the reassessment of
the purchase commitments under those supply contracts. No such provision was made in 2014.
|
|
·
|
Provision for prepayment in relation to inventory purchase
commitments under long-term polysilicon supply contracts
. In 2015, we recorded provisions of approximately RMB522.1 for the
prepayments to certain supplier under our long-term polysilicon supply contract, which included: 1) Provision of RMB71.3 million
due to that we failed to purchase contractual volume as stated in the long-term contract in 2015; 2) Provision of RMB450.8 million
as we estimated that we will also fail to purchase contractual volume as stated in the long-term contract in the remaining contract
period in the future. No such provision was made in 2014.
|
|
·
|
Provision for doubtful accounts receivable
. As a
result of certain customers’ prolonged failure to settle accounts receivable and the continuing deterioration of their financial
condition and creditworthiness, we made a total provision of RMB404.3 million in 2015 for the doubtful accounts receivable related
to these customers, while we made provision for doubtful accounts receivable of RMB169.4 million in 2014.
|
The increase in our operating expenses was partially offset
by,
|
·
|
Gain on disposal of land use rights
. In 2015, Fine
Silicon disposed its land use rights and we recognized a disposal gain of approximately RMB1.2 billion, while we did not recognize
such gain in 2014.
|
|
·
|
Selling
expenses
. Our selling expenses were RMB854.3 million in 2015, which decreased from
RMB1,095.1 million in 2014. The decrease was primarily due to a lower freight and insurance
costs as a result of decreased total PV module shipments.
|
|
·
|
General
and administrative expenses
. Our general and administrative expenses decreased to
RMB523.2 million in 2015 from RMB615.1 million in 2014.
|
|
·
|
Research
and development expenses. Our research and development expenses decreased to RMB397.0 million in 2015 from
RMB573.8 million in 2014. The decrease in research and development expenses from 2015 to 2014 was mainly due to our balanced control
of research and development projects as a result of the tight cash flow.
|
Loss from Operations
. Loss from
operations was RMB4,228.0 million in 2015, compared to RMB215.2 million in 2014. As a result of the cumulative effect of the above
factors, operating loss margin was 42.4% in 2015, compared to 1.7% in 2014.
Interest Expenses
, Net. Net interest
expenses were RMB954.5 million in 2015, which decreased from RMB980.8 million in 2014. The slight decrease in interest expenses
in 2015 was mainly due to reduction in the principal of our borrowings, primarily as a result of the repayment of the bank loans
and two medium-term notes due in May 2015 and October 2015. The weighted average interest rate for our borrowings in 2015 was 6.39%,
which slightly decreased from 6.44% in 2014.
Foreign Currency Exchange Losses
.
Foreign currency exchange losses were RMB132.7 million in 2015, compared to RMB243.4 million in 2014. The decrease in foreign exchange
loss year-over-year was mainly due to less depreciation of Euros and Japanese Yen against Renminbi in 2015, and to the fact that
we had a balance of net current assets denominated in Euro and Japanese Yen.
Income Tax Expense
. We recognized
an income tax expense of RMB731.2 million in 2015, compared to an income tax expense of RMB89.7 million in 2014. The increase of
income tax expense year-over-year was primarily due to assessment on recovery of deferred income tax assets which resulted in an
additional valuation allowance of deferred income tax assets in 2015.
Loss Attributable to the Noncontrolling
Interests
. In 2015, loss attributable to the non-controlling interests was RMB298.3 million, compared to RMB101.5 million in
2014.
Net Loss Attributable to Yingli Green
Energy
. As a result of the cumulative effect of the above factors, our net loss attributable to Yingli Green Energy was RMB5,600.5
million in 2015, compared to RMB1,299.8 million in 2014.
|
B.
|
Liquidity and Capital
Resources
|
We require a significant amount of cash
to fund our operations. We also have a significant amount of debt outstanding and debt service requirements to satisfy. We may
also require cash to meet our future capital requirements, which may be difficult to predict.
Cash Flows and Working Capital
Our ability to continue as a going concern
for a reasonable period of time largely depends on the ability of our management to successfully execute our business plan (including
increasing sales while decreasing operating costs and expenses) and, if required, the ability to obtain additional funds from third
parties, including banks, or from the issuance of additional equity or debt securities. There is substantial doubt in this regard.
See “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry — There is substantial doubt as to our
ability to continue as a going concern”.
The primary sources of our financing have
been borrowings from banks and other third parties, private placements of our debt, equity and equity-linked securities as well
as our initial public offering, follow-on offerings, convertible senior notes offering, and medium-term notes offering. As of December 31,
2016, we had RMB506.6 million (US$73.0 million) in cash, RMB361.8 million (US$52.1 million) in restricted cash, RMB9,010.2 million
(US$1,297.7 million) in outstanding short-term borrowings (including the current portion of our long-term debt, RMB357 million
of the 2010 MTNs that became due on October 13, 2015, RMB1.4 billion of the 2011 MTNs that became due on May 12, 2016, and RMB300.0
million of the 2012 MTNs that became due on May 3, 2017), and RMB2,523.6 million (US$363.5 million) in outstanding long-term debt
(excluding the current portion).
As of December 31, 2016, our cash
consisted of cash on hand, cash in bank accounts and interest-bearing savings accounts, and our restricted cash consisted of bank
deposits for securing letters of credit, letters of guarantee granted to us and bank deposits for securing loan facilities.
Borrowings
Our outstanding short-term borrowings from
banks were made principally to support our working capital requirements and to repay other short-term borrowings. Our short-term
borrowings from banks have a term of less than one year and expire at various times throughout the year. We have historically negotiated
renewals of certain of these borrowings shortly before they were to mature.
Short-term borrowings and current instalments of long-term
debt consist of the following:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed by bank deposits
|
|
|
—
|
|
|
|
30,000
|
|
|
|
4,321
|
|
Guaranteed by related parties
|
|
|
3,871,241
|
|
|
|
4,338,276
|
|
|
|
624,842
|
|
Guaranteed by property, plant and equipment
|
|
|
1,805,607
|
|
|
|
1,335,374
|
|
|
|
192,334
|
|
Guaranteed by accounts receivable
|
|
|
128,917
|
|
|
|
—
|
|
|
|
—
|
|
Guaranteed by third parties
|
|
|
—
|
|
|
|
34,000
|
|
|
|
4,897
|
|
Unsecured loans
|
|
|
711,793
|
|
|
|
404,666
|
|
|
|
58,284
|
|
Subtotal of short-term borrowings*
|
|
|
6,517,558
|
|
|
|
6,142,316
|
|
|
|
884,678
|
|
Current portion of long-term debts (note 10(b))*
|
|
|
849,625
|
|
|
|
810,889
|
|
|
|
116,791
|
|
Current portion of medium-term notes (note (11))
|
|
|
1,757,000
|
|
|
|
2,057,000
|
|
|
|
296,270
|
|
Total short-term borrowings and current portion of long-term debt
|
|
|
9,124,183
|
|
|
|
9,010,205
|
|
|
|
1,297,739
|
|
*Short-term borrowings and current portion of long-term
debts consist of the following:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Short-term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
No breach of loan covenants or no triggering cross default
|
|
|
3,311,873
|
|
|
|
1,852,798
|
|
|
|
266,859
|
|
In breach of loan covenants or triggering cross default with
no waivers from banks
|
|
|
3,205,685
|
|
|
|
4,289,518
|
|
|
|
617,819
|
|
|
|
|
6,517,558
|
|
|
|
6,142,316
|
|
|
|
884,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debts
|
|
|
|
|
|
|
|
|
|
|
|
|
No breach of loan covenants or no triggering cross default
|
|
|
226,330
|
|
|
|
37,012
|
|
|
|
5,331
|
|
In breach of loan covenants and no waiver received from banks
|
|
|
584,448
|
|
|
|
657,835
|
|
|
|
94,748
|
|
In breach of loan covenants with waivers received from banks
|
|
|
38,847
|
|
|
|
116,042
|
|
|
|
16,712
|
|
|
|
|
849,625
|
|
|
|
810,889
|
|
|
|
116,791
|
|
As of December 31, 2016, we and our subsidiaries
had 66 outstanding loans classified as current liabilities with financial covenants and were in breach of the financial covenants
under 15 of these loans with an aggregate principal amount of RMB3,540,745 (US$509,973). All of these loans were borrowed by Yingli
China and Tianjin Yingli from China Development Bank and the financial covenants breached were regarding the current ratio, quick
ratio, debt-to-asset ratio and debt coverage ratio of Yingli China, and the debt-to-asset ratio of Tianjin Yingli. Given the original
terms of these loans would have matured in the near term and considering our continued need for short-term financing, we had focused
on negotiating with China Development Bank for the extension of these loans and did not request any separate waiver for breach
of financial covenants. As of December 31, 2016, notwithstanding the failure of Yingli China and Tianjin Yingli to satisfy the
relevant financial covenants in the original agreements, China Development Bank, which was fully aware of the financial condition
of Yingli China and Tianjin Yingli, agreed to extend the terms of certain of these loans by an additional one year upon their maturity
with the existing financial covenants. Among the 15 loans mentioned above, the terms of 13 loans had been extended by written agreements
between China Development Bank and Yingli China or Tianjin Yingli by year ended December 31, 2016, the term of one loan was subsequently
extended. All the loans mentioned above were classified as current liabilities as of December 31, 2016 because they were in breach
of loan covenants both before and after extension.
As of December 31, 2016, the breach of
financial covenants mentioned above did not trigger any cross-default provision under any loan of us and our subsidiaries. We and
our subsidiaries did not have any cross-default triggered under any of their loans classified as non-current liabilities due to
any other reason either.
As of December 31, 2016, because Yingli
China failed to repay 10 short term loans totaling RMB73,156 (US$10,537) when such repayments became due in October and November
2016, such payment default triggered cross-defaults under Yingli China’s 17 other loans classified as current liabilities
with an aggregate principal amount of RMB2,377,478 (US$342,428). In addition, Hainan Yingli failed to repay a loan with a principal
amount of RMB99,089 (US$14,272) upon its maturity in November 2015, and such payment default triggered cross-defaults under Hainan
Yingli’s four other loans classified as current liabilities with an aggregate principal amount of RMB184,720 (US$26,605).
All the loans mentioned above were classified as current liabilities as of December 31, 2016 because they either had payment defaults
or cross-defaults. Yingli China subsequently repaid the short term loans totaling RMB 73,156. Meanwhile, Hainan Yingli is still
in negotiation with the bank to extend the term.
Short-term borrowings outstanding (including the current portion
of long-term debt) as of December 31, 2015 and 2016 bore a weighted average interest rate of 5.72% and 5.08% per annum, respectively.
All short-term borrowings mature and expire at various times within one year.
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Long-term debt and medium-term notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured loans from China Development Bank
|
|
|
2,888,287
|
|
|
|
3,000,548
|
|
|
|
432,169
|
|
Guaranteed by related parties
|
|
|
45,000
|
|
|
|
33,000
|
|
|
|
4,753
|
|
Secured by multiple assets
|
|
|
322,236
|
|
|
|
300,962
|
|
|
|
43,347
|
|
Medium-term notes (note (11))
|
|
|
2,057,000
|
|
|
|
2,057,000
|
|
|
|
296,270
|
|
Borrowings from other third parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed by property, plant and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
5,312,523
|
|
|
|
5,391,510
|
|
|
|
776,539
|
|
Less: current portion
|
|
|
(2,606,625
|
)
|
|
|
(2,867,889
|
)
|
|
|
(413,062
|
)
|
Total long-term debt and medium-term notes
|
|
|
2,705,898
|
|
|
|
2,523,621
|
|
|
|
363,477
|
|
As of December 31, 2015 and 2016, long-term debts that
were in breach and no breach of loan covenants as following:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Long-term debt::
|
|
|
|
|
|
|
|
|
|
|
|
|
In breach of loan covenants with waivers from banks
|
|
|
898,257
|
|
|
|
865,625
|
|
|
|
124,676
|
|
No breach of loan covenants
|
|
|
1,507,641
|
|
|
|
1,657,996
|
|
|
|
238,801
|
|
Total long-term debt
|
|
|
2,405,898
|
|
|
|
2,523,621
|
|
|
|
363,477
|
|
Long-term loans that breached certain
loan covenants as of December 31, 2016
In October 2011, Tianjin Yingli New Energy
Resources Co., Ltd. (“Tianjin Yingli”) borrowed an eight-year RMB 350,000 loan from China Development Bank at an interest
rate of the five-year Renminbi benchmark loan rate per annum (“Tianjin Yingli RMB Loan”). The loan is guaranteed by
property, plant and equipment. We withdrew RMB 350,000 (US$ 50,410) by the end of December 31, 2016. Based on the amendment entered
into in April 2016, the amended repayment schedule is RMB 600 due in February 2017, RMB 10,000 due in August 2017, RMB 25,000 due
in February 2018, RMB 25,000 due in August 2018, RMB 25,000 due in February 2019, RMB 25,000 due in August 2019, RMB 25,000 due
in February 2020, RMB 25,000 due in August 2020, RMB 25,000 due in February 2021, RMB 25,000 due in August 2021, RMB 25,000 due
in February 2022, RMB 19,000 due in October 2022. As of December 31, 2016, the current and non-current portion of this long-term
borrowing was RMB 10,600 (US$ 1,527) and RMB 244,000 (US$ 35,143), respectively.
The loan agreement for Tianjin Yingli RMB
Loan required Tianjin Yingli to maintain a debt-to-asset ratio (calculated as total liabilities divided by total assets) of no
more than 80%. As of December 31, 2016, Tianjin Yingli was in breach of the financial covenant to maintain a debt-to-asset ratio
of less than 80%. China Development Bank granted a written waiver to Tianjin Yingli which waived the requirement regarding Tianjin
Yingli’s debt-to-asset ratio under the loan agreement until June 2018. The waiver did not impose any new financial covenant
or require any prepayment.
In October 2011, Tianjin Yingli borrowed
an eight-year US$100,000 loan from China Development Bank at an interest rate of 6-month LIBOR plus 5.2% per annum. The loan is
guaranteed by property, plant and equipment (the “Tianjin Yingli USD Loan”). We withdrew US$100,000 (RMB694, 300) by
the end of December 31, 2016. Based on the first amendment entered into in November 2015, the loan repayment schedule of the loan
with a remaining balance of US$ 70,000 was modified. The original repayment schedule was US$9,000 due in August 2015, US$9,000
due in February 2016, US$9,000 due in August 2016, US$9,000 due in February 2017, US$9,000 due in August 2017, US$10,000 due in
February 2018, US$5,000 due in August 2018, US$5,000 due in February 2019 and US$5,000 due in August 2019. The amended repayment
schedule was US$200 due in April 2016, US$200 due in October 2016, US$10,000 due in April 2017, US$10,820 due in October 2017,
US$14,300 due in April 2018, US$11,500 due in October 2018, US$11,500 due in April 2019 and US$11,480 due in October 2019. No other
key terms were changed in the amendment. Based on the second amendment entered into in April 2016, the amended repayment schedule
is US$200 due in April 2017, US$3,000 due in October 2017, US$7,000 due in April 2018, US$8,000 due in October 2018, US$8,000 due
in April 2019, US$7,000 due in October 2019, US$7,000 due in April 2020, US$7,000 due in October 2020, US$6,000 due in April 2021,
US$6,000 due in October 2021, US$6,000 due in April 2022 and US$4,760 due in October 2022. In addition, the interest rate was modified
from 6-month LIBOR plus 5.2% per annum to 6-month LIBOR plus 4.5% per annum. As of December 31, 2016, the current and non-current
portion of this long-term borrowing was US$ 3,200 (RMB 22,218) and US$66,760 (RMB 463,515), respectively.
The loan agreement for the Tianjin Yingli
USD Loan required Tianjin Yingli to maintain a current ratio (calculated as total current assets divided by total current liabilities)
of no less than 60%, quick ratio (calculated as total current assets minus inventory and then divided by total current liabilities)
of no less than 50%, debt-to-asset ratio (calculated as total liabilities divided by total assets) of no more than 80%, debt coverage
ratio (calculated as cash available for debt servicing during the period divided by interest and principal payments during the
period) of no less than 150%, and interest coverage ratio (calculated as cash available for interest payment during the period
divided by interest and other fees payable during the period) of no less than 150%. As of December 31, 2016, Tianjin Yingli was
in breach of the financial covenant to maintain a debt-to-asset ratio of less than 80%. China Development Bank granted a written
waiver to Tianjin Yingli which waived the requirement regarding Tianjin Yingli’s debt-to-asset ratio under both loan agreements
until the end of the contract term. The waiver did not impose any new financial covenant or require any prepayment.
In October 2011, Hengshui Yingli New Energy
Resources Co., Ltd. (“Hengshui Yingli”) entered into an eight-year US$50,000 loan agreement with China Development
Bank at an interest of 6-month LIBOR plus 5.8% per annum and subject to adjustment annually (the “Hengshui Yingli USD Loan”).
The loan is guaranteed by property, plant and equipment. By the end of December 31, 2016, we withdrew US$50,000 (RMB 347,150).
Out of US$ 3,000 due in December 2015, US$ 50 was repaid. Based on the first amendment entered into in December 2015, the loan
repayment schedule of the loan with a remaining balance of US$ 34,950 was modified. The original repayment schedule was US$2,950
due in December 2015, US$4,000 due in June 2016, US$4,000 due in December 2016, US$4,000 due in June 2017, US$4,000 due in December
2017, US$4,000 due in June 2018, US$4,000 due in December 2018, US$4,000 due in June 2019, US$4,000 due in October 2019. The amended
repayment schedule was US$50 due in June 2016, US$50 due in December 2016, US$6,000 due in June 2017, US$6,000 due in December
2017, US$5,620 due in June 2018, US$5,620 due in December 2018, US$5,800 due in June 2019, US$5,810 due in October 2019. No other
key terms were changed in the amendment. Based on the second amendment entered into in March 2016, the interest rate was modified
from 6-month LIBOR plus 5.8% per annum to 6-month LIBOR plus 4.5% per annum. As of December 31, 2016, the current and non-current
portion of this long-term borrowing was US$ 12,000 (RMB 83,316) and US$ 22,850 (RMB 158,648), respectively.
The loan agreement for the Hengshui Yingli
USD Loan required Hengshui Yingli to maintain a debt-to-asset ratio (calculated as total liabilities divided by total assets) of
no more than 75% and debt coverage ratio (calculated as cash available for debt servicing during the period divided by interest
and principal payments during the period) of no less than 130%. As of December 31, 2016, Hengshui Yingli was in breach of the
financial covenant to maintain a debt-to-asset ratio of no more than 75%. China Development Bank granted a written waiver to Hengshui
Yingli which waived the requirement regarding Hengshui Yingli’s debt-to-asset ratio under the loan agreement until the end
of the contract term. The waiver did not impose any new financial covenant or require any prepayment.
Long-term loans that did not breach
loan covenants as of December 31, 2016
In December 2008, Yingli China entered
into an eight-year US$ 70,000 loan agreement at an interest rate of 6-month LIBOR plus 6% per annum with China Development Bank.
The loan is guaranteed by Tianwei Yingli and Mr. Liansheng Miao, our chairman and CEO, and secured by Yingli China’s property,
plant and equipment. The loan is repayable in annual instalment of US$ 8,000 for the first two years and US$ 9,000 for the remaining
six years, respectively, commencing in December 2009. In December 2015, out of US$ 18,000 that was due, we repaid US$ 50, and the
remaining portion of US$ 17,950 was extended to December 2016 based on the first amendment of the loan agreement entered into in
December 2015. Based on the second amendment of the loan agreement entered into in June 2016, the amended repayment schedule was
US$50 due in December 2017, US$8,920 due in December 2018 and US$8,930 due in December 2019. In addition, the interest rate was
modified from 6-month LIBOR plus 6% per annum to 6-month LIBOR plus 3.5% per annum. As of December 31, 2016, the current and non-current
portion of this long-term borrowing was US$50 (RMB 347) and US$ 17,850 (RMB 123,933), respectively.
In May 2010, Hainan Yingli entered into
a five-year RMB 180,000 loan agreement at an interest rate of the three-five year Renminbi benchmark loan rate per annum with Industrial
and Commercial Bank of China Limited. The loan is guaranteed by us and repayable in semi-annual instalment of RMB 20,000 starting
from August 2011. Based on the first amendment of the loan agreement entered into in December 2015, loan of RMB 14,000 that was
due in September 2015 was extended to September 2016. In addition, the interest rate was modified from the three-five year Renminbi
benchmark loan rate per annum to the five-year Renminbi benchmark loan rate plus an additional surcharge of 10% per annum. Based
on the second amendment of the loan agreement entered into in September 2016, the amended repayment schedule was RMB 2,000 due
in March 2017, RMB 2,000 due in June 2017 and RMB 10,000 due in September 2017. In addition, the interest rate was modified from
the five-year Renminbi benchmark loan rate plus an additional surcharge of 10% per annum to the five-year Renminbi benchmark loan
rate. As of December 31, 2016, the current and non-current portion of this long-term borrowing was RMB 14,000 (US$ 2,016) and nil,
respectively.
In May 2011,
Yingli China entered into a 42-month RMB 1,160,000 loan agreement with Bank of China and China Citic Bank at an interest rate of
the three-five year Renminbi benchmark loan rate plus an additional surcharge of 5% of the interest rate per annum. By the
end of December 31, 2016, we withdrew RMB 481,000 (US$ 69,278). The loan is guaranteed by Yingli Green Energy and Yingli Group.
As of December 31, 2016, the current and non-current portion of this long-term borrowing was RMB 164,300 (US$ 23,664) and nil,
respectively. Out of the loan of RMB 164,300, loan with RMB 20,000 due in November 2015 was extended to May 2016 based on the first
amendment of the loan agreement entered into in November 2015.
Based on the second amendment
of the loan agreement entered into in June 2016, total loan of RMB 164,300 and interest due in May 2016 was extended to May 2017.
In November 2011, Hainan Yingli entered
into an eight-year RMB 900,000 loan agreement with China Development Bank at an interest rate of the five-year Renminbi benchmark
loan rate per annum. The loan is guaranteed by property, plant and equipment. In May 2013, Hainan Yingli entered into an amendment
to increase this loan credit limit by RMB 282,150. Out of RMB 90,800 due in November 2015, RMB600 was repaid. Based on the first
amendment of the loan agreement entered into in November 2015, the loan repayment schedule of the loan with a remaining balance
of RMB 727,550 was modified. The original repayment schedule was RMB 90,200 due in November 2015, RMB90,800 due in May 2016, RMB90,800
due in November 2016, RMB90,800 due in May 2017, RMB90,800 due in November 2017, RMB90,800 due in May 2018, RMB90,800 due in November
2018 and RMB92,550 due in July 2019. The amended repayment schedule was RMB600 due in May 2016, RMB60,000 due in November 2016,
RMB110,000 due in May 2017, RMB110,000 due in November 2017, RMB110,000 due in May 2018, RMB110,000 due in November 2018 and RMB226,950
due in July 2019. Based on the second amendment of the loan agreement entered into in March 2016, the amended repayment schedule
was RMB100 due in May 2017, RMB100 due in November 2017, RMB60,000 due in May 2018, RMB60,000 due in November 2018, RMB80,000 due
in May 2019, RMB80,000 due in November 2019, RMB80,000 due in May 2020, RMB80,000 due in November 2020, RMB80,000 due in May 2021,
RMB80,000 due in November 2021 and RMB127,150 due in July 2020. No other key terms were changed in the amendment. As of December
31, 2016, the current and non-current portion of this long-term borrowing was RMB 200 (US$ 29) and RMB 727,150 (US$ 104,731), respectively.
In March 2012, Hainan Yingli entered into
a seven-year US$135,000 loan agreement with China Development Bank at an interest of the three-month LIBOR plus 5% per annum. We
withdrew US$135,000 (RMB 937,305) by the end of December 31, 2016 under this agreement. The loan is guaranteed by property, plant
and equipment. Out of US$ 10,600 due in November 2015, US$100 was repaid. Based on the first amendment entered into in November
2015, the loan repayment schedule of the loan with a remaining balance of US$ 81,900 was modified. The original repayment schedule
was US$10,500 due in November 2015, US$10,600 due in May 2016, US$10,600 due in November 2016, US$10,600 due in May 2017, US$10,600
due in November 2017, US$10,600 due in May 2018, US$10,600 due in November 2018 and US$7,800 due in July 2019. The amended repayment
schedule was US$100 due in May 2016, US$5,000 due in November 2016, US$12,000 due in May 2017, US$12,000 due in November 2017,
US$12,000 due in May 2018, US$12,000 due in November 2018 and US$28,800 due in July 2019. Based on the second amendment entered
into in March 2016, the amended repayment schedule was US$30 due in May 2017, US$30 due in November 2017, US$3,000 due in May 2018,
US$3,000 due in November 2018, US$10,000 due in May 2019, US$10,000 due in November 2019, US$10,000 due in May 2020, US$10,000
due in November 2020, US$10,000 due in May 2021, US$10,000 due in November 2021 and US$15,780 due in July 2022. In addition, the
interest rate was modified from the 3-month LIBOR plus an additional surcharge of 5% per annum to the 3-month LIBOR plus an additional
surcharge of 4% per annum. No other key terms were changed in the amendment. As of December 31, 2016, the current and non-current
portion of this long-term borrowing was US$ 60 (RMB 417) and US$ 81,780(RMB 567,799), respectively.
In May 2012, Hengshui Yingli entered into
an eight-year RMB 255,000 loan agreement with China Development Bank at an interest of the five-year Renminbi benchmark loan rate
plus an additional surcharge of 10% per annum and subject to adjustment annually. The loan is guaranteed by Yingli China. Out of
RMB 10,000 due in December 2015, RMB300 was repaid. Based on the first amendment of the loan agreement entered into in December
2015, the loan repayment schedule of the loan with a remaining balance of RMB 218,700 was modified. The original repayment schedule
was RMB 9,700 due in December 2015, RMB 15,000 due in June 2016, RMB15,000 due in December 2016, RMB20,000 due in June 2017, RMB20,000
due in December 2017, RMB25,000 due in June 2018, RMB25,000 due in December 2018, RMB30,000 due in June 2019, RMB30,000 due in
December 2019 and RMB29,000 due in May 2020. The amended repayment schedule was RMB300 due in June 2016, RMB300 due in December
2016, RMB15,000 due in June 2017, RMB15,000 due in December 2017, RMB25,000 due in June 2018, RMB25,000 due in December 2018, RMB22,850
due in June 2019, RMB22,850 due in December 2019 and RMB92,400 due in June 2020. Based on the second amendment of the loan agreement
entered into in March 2016, the interest rate was modified from the five-year Renminbi benchmark loan rate plus an additional surcharge
of 10% per annum to the five-year Renminbi benchmark loan rate per annum, with no surcharge. No other key terms were changed in
the amendment. As of December 31, 2016, the current and non-current portion of this long-term borrowing was RMB 30,000 (US$ 4,321)
and RMB 188,100 (US$ 27,092), respectively.
In April 2013, Yingli China entered into
a three-year US$55,000 loan agreement with China Development Bank at an interest rate of the 6-month LIBOR plus 5.2% per annum.
By the end of December 31, 2016, we withdrew US$55,000 (RMB 381,865) under this agreement. Based on the amendment of the loan agreement
entered into in March 2016, the term of the loan with a balance of US$ 55,000 (RMB 381,865) that was due in April 2016 was extended
to April 2017. In addition, the interest rate was modified from the 6-month LIBOR plus an additional surcharge of 5.2% per annum
to the 6-month LIBOR plus an additional surcharge of 2.5% per annum. As of December 31, 2016, the current and non-current portion
of this long-term borrowing was US$ 55,000 (RMB 381,865) and nil, respectively.
All amendments mentioned above are not
considered to be trouble debt restructuring because they do not meet the condition of lenders offering concession to us.
In November 2013, Hutubi Yingli Sunshine
New Resources Co. Ltd. (“Yingli Hutubi”) entered into a five-year RMB 22,500 loan agreement with Xinjiang Tianshan
Rural Commercial Bank at a fixed interest rate of 6.4%. This loan is guaranteed by equivalent bank deposits. By the end of December
31, 2016, we withdrew RMB 22,500 (US$ 3,241) under this agreement. As of December 31, 2016, the current and non-current portion
of this long-term borrowing was RMB 200 (US$ 29) and RMB 21,700 (US$ 3,125), respectively.
In November 2013, Yingli Hutubi entered
into a six-year RMB 55,000 loan agreement with Xinjiang Tianshan Rural Commercial Bank at a fixed interest rate of 7.9%. This loan
is guaranteed by Yingli Group and secured by solar panels having a market value of RMB 68,800 (US$ 9,909). By the end of December
31, 2016, we withdrew RMB 55,000 (US$ 7,922) under this agreement. As of December 31, 2016, the current and non-current portion
of this long-term borrowing was RMB 4,000 (US$ 576) and RMB 15,000 (US$ 2,160), respectively.
In February 2015, Yingli China entered
into a two-year RMB 100,000 loan agreement with Rural Credit Cooperative of Baoding at a fixed interest rate of 7.8% per annum.
The loan is guaranteed by property, plant and equipment. By the end of December 31, 2016, we withdrew RMB 100,000 (US$14,403) under
this agreement. As of December 31, 2016, the current and non-current portion of this long-term borrowing was RMB 98,000 (US$ 14,115)
and nil, respectively.
Long-term Loan repaid or settled for
the years ended December 31, 2014, 2015 and 2016
In July 2010, Yingli China entered into
a five-year RMB 500,000 loan agreement with Bank of Communications Co., Ltd. at an interest rate of the five-year Renminbi benchmark
loan rate per annum. The loan was guaranteed by Yingli Group and Yingli Green Energy and secured by Yingli China’s property,
plant and equipment. The loan was repayable in annual instalments of RMB 70,000, RMB 140,000, RMB 170,000, and RMB 120,000 in 2011,
2012, 2013 and 2014, respectively. The loan was fully repaid in 2014.
In March 2011, Yingli China entered into
a 45-month RMB 1,000,000 loan agreement with Bank of Communications Co., Ltd. at an interest rate of the three- to five-year Renminbi
benchmark loan rate plus an additional surcharge of 10% per annum. The loan was secured by property, plant and equipment. The loan
was fully repaid in 2014.
In December 2013, Yingli China entered
into a 14-month RMB 200,000 loan agreement with Zhongyuan Trust Ltd. Company at an interest rate of 9.725%. This loan was guaranteed
by related party’s property, plant and equipment. The bank loan was fully repaid in 2014.
In June 2010, Hainan Yingli entered into
a five-year RMB 220,000 loan agreement with Bank of Communications Co., Ltd. at a floating interest rate of the five-year Renminbi
benchmark loan rate as published by the People’s Bank of China plus an additional surcharge of 2.5% per annum. The loan was
guaranteed by Yingli Green Energy and repayable in annual instalments of RMB 55,000 starting from June 2011. The loan was fully
repaid in 2015.
In February 2011, Hainan Yingli entered
into a five-year RMB 400,000 loan agreement with China Merchants Bank at an interest rate of the five-year Renminbi benchmark loan
rate per annum. As of December 31 2014, we withdrew RMB 368,000 under this agreement. The loan was secured by Hainan Yingli’s
property, plant and equipment. The loan was fully repaid in 2015.
In August 2011, Fine Silicon Co., Ltd.
(“Fine Silicon”) entered into a five-year RMB 500,000 loan agreement with CDB Leasing Co., Ltd. at an interest rate
of 6.9% per annum plus an additional surcharge of 5% per annum. The loan was guaranteed by property, plant and equipment. We withdrew
RMB 500,000 by the end of December 31, 2014, under this agreement. As of December 31, 2014, total amount of this borrowing was
RMB 274,828. The loan was fully repaid in 2015.
In May 2015, Dafeng Xinghui Power Development
Co., Ltd entered into a two-year RMB 20,000 loan agreement with Jiangsu Dafeng Rural Commercial Bank at an interest rate of 7.5%
per annum. The loan was guaranteed by Yingli China and right of charging the electricity fee from produced by its own power plant
and Yingli China. As of December 31, 2016, the loan balance was excluded in the consolidation financial statement due to the disposal
of Dafeng Xinghui Power Development Co., Ltd in October 2016.
Except as otherwise disclosed in this annual
report, historically we have been able to repay our borrowings mostly from refinancing or new or additional borrowings from our
shareholders, related parties, other third parties as well as proceeds from our initial public offering, follow-on offerings, the
convertible senior notes offering and medium-term notes offerings. We assess our cash flow position from time to time and, if appropriate,
we plan to use the cash generated from our operations and to utilize a portion of the proceeds from future debt or equity offerings
to prepay some of our outstanding credit facilities in order to improve our balance sheet position. If we are unable to obtain
alternative funding or to generate the cash we need from our operations, our business and prospects may suffer. See “Item
3.D. Risk Factors — Risks Related to Us and the PV Industry — We require a significant amount of cash to fund our operations
as well as meet future capital requirements our debt repayment obligations. If we cannot obtain additional capital financing and
liquidity when we need it, our growth prospects and profitability business, financial condition and results of operation may be
materially and adversely affected. Certain financing activities may also dilute your equity interests in us and cause other material
adverse effects on our financial condition and results of operations”.
On October 13, 2010, Tianwei Yingli registered
its plan to issue up to RMB 2,400,000 RMB-denominated unsecured five-year medium-term notes (the “Registered Issue”)
with the PRC National Association of Financial Market Institutional Investors (“NAFMII”). The Registered Issue allows
Tianwei Yingli to issue RMB-denominated unsecured five-year medium-term notes in two tranches on the PRC inter-bank debenture market.
The First Tranche Issue with RMB 1,000,000 was completed on October 13, 2010 and matured on October 13, 2015. Tianwei Yingli had
an option to call the notes at the end of the third year after issuance. Upon exercise of the call option, the re-purchase amount
equals the par value of the notes plus any unpaid interest. The First Tranche bore a fixed annual interest rate of 4.3% per annum
in the first three years, and increased to 5.7% per annum in the remaining two years as Tianwei Yingli chose not to call the notes
on October 13, 2013. Following the election not to call the notes, We computed the effective interest rate of 4.82% evenly for
the entire contract term of 5 years.
On October 13, 2015, total amount of principal
and interests of the first tranche medium-term notes due was RMB 1,000.0 million and RMB 57.0 million, respectively. Yingli repaid
RMB 700.0 million, with the remaining principal of RMB 357.0 million unpaid. According to the meeting held among all holders of
medium-term notes (the “MTN holders”) on November 11, 2015, we promised to repay the remaining balance. An additional
penalty charge, which was calculated on the daily basis of 0.021% of the total amount of principal overdue, would be paid by us
due to our failure to repay the medium-term notes on time. As of December 31, 2015, the total interests payables and penalty charge
accrued was RMB 4.5 million and RMB 6.0 million, which was recorded under “Interest payable”. In 2016, we did not repay
the remaining principal of RMB 357 million (US$ 51.4 million). As of December 31, 2016, the total penalty charge accrued was RMB
33 million (US$ 4.8 million).
On May 10, 2011, the second tranche of
the medium-term notes with a principal amount of RMB 1,400,000, or the Second Tranche Issue, was issued. The Second Tranche Issue
bears a fixed annual interest rate of 6.15%. Tianwei Yingli failed to repay these medium term notes when they became due on May
12, 2016. As of December 31, 2016, the total interests payables and penalty charge accrued was RMB 86,100 (US$ 12,401) and RMB
67,620 (US$9,739), which was recorded under "Interest payable".
In March 2012, Yingli China registered
its plan to issue up to RMB 1,500,000 RMB-denominated unsecured three-year and five-year medium-term notes (the “Yingli China
Registered Issue”) with the NAFMII. The Yingli China Registered Issue allows Yingli China to issue RMB-denominated unsecured
three-year and five-year medium-term notes in two tranches on the PRC inter-bank debenture market. On May 3, 2012, the first tranche
issue with RMB 1,200,000 at a fixed annual interest rate of 5.78%, and the second tranche issue with RMB 300,000 at a fixed annual
interest of 6.01%, were issued with maturity on May 3, 2015 and May 3, 2017, respectively. The first tranche issue with RMB 1,200,000
was fully paid in 2015.
Issuance costs were deferred on the balance
sheet and amortized over the life of the medium term note. As of December 2015 and 2016, the total balances were RMB 1,595 for
Tianwei Yingli and Yingli China and RMB 305 (US$ 44) for Yingli China respectively.
However, if we need in the future to renegotiate
with our lenders again with respect to prepayment terms or to amend financial covenants or other relevant provisions, or to request
waivers for financial covenants under such loan agreements to address potential breaches, we cannot assure you that we will be
able to reach an agreement with any lender or to obtain any waiver so as to avoid a breach of an affected loan agreement. If we
are found to be in breach of one or more financial covenants under any loan agreement and are not able to obtain a waiver from
the relevant lender or to prepay the loan, such breach would constitute an event of default under the loan agreement. As a result,
repayment of the indebtedness under the relevant loan agreement may be accelerated, which in turn may require us to repay the entire
principal amount including interest, if any, accrued on certain of our other existing indebtedness under cross-default provisions
in our existing loan agreements. If we are required to repay a significant portion or all of our existing indebtedness prior to
its maturity, we may lack sufficient financial resources to do so. Furthermore, any breach of those financial covenants also will
restrict our ability to pay dividends. Any of those events could have a material and adverse effect on our financial condition,
results of operations and business prospects. See “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry
— Tianwei Yingli is currently in payment default of the 2010 MTNs and 2011 MTNs, and we have breached in the past, and may
breach in the future, certain financial and restrictive covenants of our loan agreements, which may result in lenders accelerating
repayment of the affected loans and trigger cross-default provisions of other loans and borrowings, and we used to be overdue,
and are still overdue, in some of our payment obligations under other financing arrangements, all of which could materially and
adversely affect our liquidity and our creditworthiness to borrow or obtain other financings in the future”.
We have significant working capital commitments because suppliers
of high-purity polysilicon require us to make prepayments in advance of shipment. As of December 31, 2016, our prepayments to suppliers
were RMB992.6 million (US$143.0 million), including amounts paid to related parties of RMB173.6 million (US$25.0 million).
Currently, a significant portion of our
revenue is derived from credit sales to our customers, generally with payments due within four months. Sales to a small number
of major customers exposed us to additional and more concentrated credit risks since a significant portion of our outstanding accounts
receivable is derived from sales to a limited number of customers. As of December 31, 2016, our five largest outstanding accounts
receivable balances outstanding accounted for approximately 16.3% of our total outstanding accounts receivable. The failure of
any of these customers to meet their payment obligations would materially and adversely affect our financial position, liquidity
and results of operations. Although we have been able to maintain adequate working capital primarily through short-term borrowings,
in the future we may not be able to secure additional financing on a timely basis or on terms acceptable to us or at all.
As a result of the reduced scale of our
operations, our working capital decreased in 2016. Our inventories were RMB1,314.8 million (US$189.4 million) as of December 31,
2016, compared to RMB1,484.3 million as of December 31, 2015. We also make prepayments for equipment purchases. Our prepayments
for equipment purchases amounted to RMB327.3million, RMB81.8 million, and RMB78.7 million (US$11.3 million) as of December 31,
2014, 2015 and 2016, respectively.
The following table sets forth a summary
of our cash flows for the periods indicated:
|
|
For the Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
(In thousands)
|
|
Net cash provided by / (used in) operating activities
|
|
|
433,953
|
|
|
|
984,667
|
|
|
|
(415,404
|
)
|
|
|
(59,833
|
)
|
Net cash provided by / (used in) investing activities
|
|
|
(315,845
|
)
|
|
|
1,413,458
|
|
|
|
(398,178
|
)
|
|
|
(57,348
|
)
|
Net cash provided by / (used in) financing activities
|
|
|
(182,686
|
)
|
|
|
(2,249,652
|
)
|
|
|
29,211
|
|
|
|
4,208
|
|
Effect of foreign currency exchange rate changes on cash and cash equivalents
|
|
|
28,154
|
|
|
|
23,222
|
|
|
|
50,264
|
|
|
|
7,240
|
|
Net increase / (decrease) in cash and cash equivalents
|
|
|
(36,424
|
)
|
|
|
171,695
|
|
|
|
(734,107
|
)
|
|
|
(105,733
|
)
|
Cash and cash equivalents at the beginning of the year
|
|
|
1,105,478
|
|
|
|
1,069,054
|
|
|
|
1,240,749
|
|
|
|
178,705
|
|
Cash and cash equivalents at the end of the year
|
|
|
1,069,054
|
|
|
|
1,240,749
|
|
|
|
506,642
|
|
|
|
72,972
|
|
Operating Activities
Net cash provided by/(used in) operating
activities consisted primarily of our net loss, offset or mitigated by non-cash adjustments, such as depreciation and amortization,
loss/(gain) on disposal of property, plant and equipment, disposal gain from long-lived assets and land use right in relation to
a subsidiary, gain on extinguishment of debt, gain on disposal of investments in affiliated companies, gain on disposal of subsidiaries,
provision for doubtful receivables and prepayments to suppliers other than inventory purchase commitments, loss on sale of accounts
receivable , write-down of inventories to net realizable value, equity in loss/(income) of affiliates, net, amortization of debt
issuance cost, share-based compensation, amortization of earned assets related government grants received in a prior period, deferred
income tax (benefit)/expense, foreign currency exchange losses, net, impairment of long-lives assets, provision for prepayment
in relation to inventory purchase commitments, provision for reserve for inventory purchase commitments and adjusted by changes
in operating assets and liabilities, such as restricted cash related to purchase of inventory and other operating activities, accounts
receivable, inventories, prepayments to suppliers, value-added tax recoverable, amounts due from and prepayments to related parties,
prepaid expenses and other assets, accounts payable, advances from customers, amounts due to related parties, other current liabilities
and accrued expenses and other liabilities. The fluctuations of net cash provided by/(used in) operating activities largely correspond
to the changes in net income or net loss.
Net cash used in operating activities for
the year ended December 31, 2016 was RMB 415.4 million (US$ 59.8 million), primarily attributable to a net loss of RMB 2,119.0
million (US$ 305.2 million) as positively adjusted for certain items such as depreciation and amortization of RMB 896.7 million
(US$ 129.2 million), disposal gain from long-live assets and land use right in relation to a subsidiary and write-off of related
receivable of RMB 143.0 million (US$ 20.6 million), provision for doubtful receivables and prepayments to suppliers other than
inventory purchase commitments of RMB 112.2 million (US$ 16.2 million), loss on sale of accounts receivable of RMB 0.4 million
(US$ 0.05 million), write-down of inventories to net realizable value of RMB 89.1 million (US$ 12.8 million), equity in loss of
affiliates, net of RMB 17.6 million (US$ 2.5 million), amortization of debt issuance cost of RMB 1.3 million (US$ 0.2 million),
share-based compensation of RMB 1.5 million (US$ 0.2 million), deferred income tax expense of RMB 2.6 million (US$ 0.4 million),
foreign currency exchange losses of RMB 69.6 million (US$ 10.0 million), impairment of long-lived assets of RMB 1,277.4 million
(US$ 184.0 million), provision for prepayment in relation to inventory purchase commitments of RMB 10.7 million (US$ 1.5 million),
provision for reserve for inventory purchase commitments of RMB 90.3 million (US$ 13.0 million), a decrease in restricted cash
related to purchase of inventory and other operating activities of RMB 62.3 million (US$ 9.0 million), a decrease in accounts receivable
of RMB 79.4 million (US$ 11.4 million), a decrease in value-added tax recoverable of RMB 14.0 million (US$ 2.0 million), a decrease
in amounts due from and prepayments to related parties of RMB 127.5 million (US$ 18.4 million), a decrease in prepaid expenses
and other assets of RMB 21.6 million (US$ 3.1 million), an increase in amounts due to related parties of RMB 73.8 million (US$
10.6 million), an increase in other current liabilities and accrued expenses of RMB 473.4 million (US$ 68.2 million), an increase
in other liabilities of RMB 66.2 million (US$ 9.5 million), partially offset by certain items such as gain on disposal of property,
plant and equipment of RMB 14.8 million (US$ 2.1 million), gain on extinguishment of debt of RMB 22.2 million (US$ 3.2 million),
gain on disposal of investments in affiliated companies of RMB 97.1 million (US$ 14.0 million), gain on disposal of subsidiaries
of RMB 34.3 million (US$ 4.9 million), amortization of earned assets related government grants received in a prior period of RMB
49.4 million (US$ 7.1 million), an increase in inventories of RMB 56.9 million (US$ 8.2 million), an increase in prepayments to
suppliers of RMB 39.7 million (US$ 5.7 million), a decrease in accounts payable of RMB 1,167.9 million (US$ 168.2 million), a decrease
in advances from customers of RMB 444.4 million (US$ 64.0 million).
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Our restricted cash mainly represents our deposits for letters of credit (“L/C”) and letters of guarantee (“L/G”)
issued for purchasing raw materials. Due to our financial condition in 2016, we had limited operating cash to be used as deposits
for issuance of L/Cs and L/Gs, which caused a decrease in our restricted cash from 2015 to 2016;
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The decrease in our accounts receivable from 2015 to 2016 was primarily due to a decrease in our sales as well as our enhanced
collection efforts;
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Excluding the noncash impact of use of inventories for project asset construction, our inventories increased from 2015 to 2016
primarily due to a decrease in market demand;
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The decrease in amounts due from and prepayments to related parties from 2015 to 2016 was primarily due to a decrease in our
sales to related parties as well as our enhanced collection efforts;
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The decrease in accounts payables from 2015 to 2016 was primarily due to overdue accounts payables that were paid off in 2016;
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The decrease in advances from customers from 2015 to 2016 was primarily due to a decrease in our sales and decreased demand
from our customers, together with lower advance payments received from our customers; and
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The increase in other current liabilities and accrued expenses from 2015 to 2016 was primarily due to our delayed payment of
interest expenses as a result of our tight operating cash flow.
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Net cash provided by operating activities
for the year ended December 31, 2015 was RMB 984.7 million, primarily attributable to a net loss of RMB 5,898.8 million as positively
adjusted for certain items such as depreciation and amortization RMB 1.2 billion, provision for doubtful accounts receivable of
RMB 404.3 million, write-down of inventories to net realizable value of RMB 31.9 million, equity in loss of affiliates, net of
RMB 0.8 million, amortization of debt issuance cost of RMB 4.2 million, share-based compensation of RMB 12.0 million, deferred
income tax expense of RMB 695.9 million, foreign currency exchange losses of RMB 39.1million, impairment of long-lived assets of
RMB 3,804 million, provision for prepayment in relation to inventory purchase commitments of RMB 522.1 million, provision for reserve
for inventory purchase commitments of RMB 77.7 million, a decrease in restricted cash related to purchase of inventory and other
operating activities of RMB 755.7 million, a decrease in accounts receivable of RMB 1,458.5 million, a decrease in prepayments
to suppliers of RMB 92.6 million, a decrease in value-added tax recoverable of RMB 90.9 million, an increase in amounts due to
related parties of RMB 855.8 million, an increase in other current liabilities and accrued expenses of RMB 484.0 million, an increase
in other liabilities of RMB 59.2 million, partially offset by certain items such as gain on disposal of property, plant and equipment
of RMB 33.4 million, disposal gain from long-lived assets and land use right in relation to a subsidiary of RMB 1,167.3 million,
gain on disposal of subsidiaries of RMB 33.2 million, amortization of earned assets related government grants received in a prior
period of RMB 56.9 million, an increase in inventories of RMB 276.2 million, an increase in amounts due from and prepayments to
related parties of RMB 672.9 million, an increase in prepaid expenses and other assets of RMB 8.6 million, a decrease in accounts
payable of RMB 1,232.6 million, a decrease in advances from customers of RMB 209.5 million.
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Our restricted cash mainly represents our deposits for letters of credit (“L/C”) and letters of guarantee (“L/G”)
issued for purchasing raw materials. Due to our financial condition in 2015, we had limited operating cash to be used as deposits
for issuance of L/Cs and L/Gs, which caused decrease in our restricted cash from 2014 to 2015;
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The decrease in our accounts receivable from 2014 to 2015 was primarily due to decrease in our sales as well as our enhanced
collection efforts;
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Excluding the noncash impact of use of inventories for project asset construction and the derecognization of related assets
and liabilities resulting from deconsolidation of the special purpose vehicles (“SPV”) upon the termination of our
contractual arrangements with Yingli PV Investment Group Co., Ltd. (“Yingli PV Group”) whereby Yingli PV Group constructed
PV projects on behalf of us and used SPV to hold such project assets, our inventories decreased from 2014 to 2015 primarily due
to the decrease in purchase of polysilicon from suppliers due to our tight operating cash flow;
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The increase in other current liabilities and accrued expenses from 2014 to 2015 was primarily due to our delayed payment for
certain expenses such as marketing, logistic fees and employee costs as a result of our tight operating cash flow; and
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Our accounts payables decreased from 2014 to 2015 primarily because our suppliers shortened our credit terms from 90 to 120
days in 2014 to zero to 60 days after they knew our failure to repay the 2010 MTNs and 2011 MTNs in 2015, and we also paid off
some of our overdue accounts payables in 2015.
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Net cash provided by operating activities
was RMB434.0 million in 2014, primarily resulting from improvements in operating efficiency and significant decrease in net losses.
Investing Activities
Net cash provided by/(used in) investing
activities largely reflects our government grants for property, plant and equipment, purchase of property, plant and equipment,
purchase of project assets, restricted cash related to purchase of property, plant and equipment, proceeds from sale of equipment
under sale-leaseback agreement, payments for land and land use rights, equity investments, proceeds from disposal of investment
in affiliates, loans made to related parties, proceeds from repayment of loans made to related parties, used in disposal of subsidiaries,
net of cash disposed, proceeds from disposal of plant, property and equipment and proceeds from disposal of long-lived assets and
land use right in relation to a subsidiary.
Net cash used in investing activities for
the year ended December 31, 2016 amounted to RMB 398.2 million (US$ 57.3 million), primarily as a result of purchase of property,
plant and equipment, purchase of project assets, change of restricted cash related to purchase of property, plant and equipment
balances, equity investments, loans made to related parties and used in disposal of subsidiaries, net of cash disposed in each
of the periods. The difference of net cash provided by or used in investing activities between 2015 and 2016 was mainly impacted
by the proceeds from disposal of long-live assets and land use right in relation to a subsidiary and proceeds from disposal of
plant, property and equipment.
Net cash provided by investing activities
for the year ended December 31, 2015 amounted to RMB 1,413.5 million, primarily as a result of government grants for property,
plant and equipment, change of restricted cash related to purchase of property, plant and equipment balances, proceeds from disposal
of long-term investment and investment in affiliates, proceeds from repayment of loans made to related parties, proceeds from disposal
of subsidiaries, proceeds from disposal of plant, property and equipment and proceeds from disposal of long-lived assets and land
use right in relation to a subsidiary in each of the periods. The increase from 2014 to 2015 was primarily due to proceeds from
disposal of long-lived assets and land use right in relation to a subsidiary, proceeds from disposal of plant, property and equipment.
Net cash used in investing activities for
the year ended December 31, 2014 amounted to RMB 315.8 million, primarily as a result of government grants for property, plant
and equipment, purchase of property, plant and equipment, change of restricted cash related to purchase of property, plant and
equipment balances, proceeds from sale of equipment under sale-leaseback agreement, payments for land use rights, equity investments,
proceeds from disposal of long-term investment, loans made to related parties, proceeds from disposal of plant, property and equipment
and proceeds from repayment of loans made to related parties in each of the periods.
Financing Activities
Net cash provided by financing activities
for the year ended December 31, 2016 was RMB 29.2 million (US$ 4.2 million), primarily consisting of proceeds from short-term
borrowings of RMB 2,541.6 million (US$ 366.1 million), repayment of short-term borrowings of RMB 2,893.1 million (US$ 416.7 million),
repayment of long-term debt of RMB 10 (US$ 1), repayment of capital and financing lease obligation of RMB 18.7 million (US$ 2.7
million), receipt of deposit for capital and financing lease of RMB 9.0 million (US$ 1.3 million), increase in restricted cash
related to guarantee of bank borrowings of RMB 76.9 million (US$ 11.1 million), proceeds from disposal of a subsidiary with land
use rights of RMB 470.0 million (US$ 67.7 million), transaction with non-controlling interest holders of RMB 2.5 million (US$ 0.4
million), contribution from non-controlling interest holders of RMB 23.0 million (US$ 3.3 million), repayment of payables to a
non-controlling interest holder of RMB 23.0 million (US$ 3.3 million).
Net cash used in financing activities for
the year ended December 31, 2015 was RMB 2,249.7 million, primarily consisting of proceeds from short-term borrowings of RMB
7.2 billion, proceeds from long-term debt of RMB 254.0 million, repayment of short-term borrowings of RMB 8.5 billion, repayment
of long-term debt of RMB 68.0 million, repayment of medium-term notes of RMB 1.8 billion, proceeds from failed sale-leaseback agreement
of RMB 250.0 million, repayment of capital and financing lease obligation of RMB 60.0 million, receipt of deposit for capital and
financing lease of RMB 60.0 million, payment for deposit for lease of RMB 1.0 million, decrease in restricted cash related to guarantee
of bank borrowings of RMB 220.1 million, proceeds from disposal of a subsidiary with land use rights of RMB 265.0 million, contribution
from non-controlling interest holders of RMB 18.0 thousand.
Net cash used in financing activities for
the year ended December 31, 2014 was RMB 182.7 million, primarily consisting of proceeds from short-term borrowings of RMB
8.9 billion, repayment of short-term borrowings of RMB 9.2 billion, repayment of long-term borrowings of RMB 280.4 million and
repayment of capital and financing lease obligation of RMB 81.2 million, decrease in restricted cash related to guarantee of bank
borrowings of RMB 5.1 million, issuance of ordinary shares of RMB 517.3 million and contribution from non-controlling interest
holders of RMB 1.0 million.
Inflation
Since our inception, inflation in China
has not materially affected our results of operations. According to the National Bureau of Statistics of China, the change in the
consumer price index in China was 2.0%, 1.4% and 2.0% in 2014, 2015 and 2016, respectively.
Dividends from Subsidiaries
We intend indefinitely to reinvest undistributed
earnings accumulated in and after 2008 in the PRC and therefore have not recognized a deferred income tax liability with respect
to those earnings; and restrictions under PRC law on the remittance of dividends outside the PRC have not had a material adverse
effect on our liquidity or capital resources. See “Item 3.D. Risk Factors—Risks Related to Doing Business in China—
Dividends we may receive from our operating subsidiaries located in the PRC may be subject to PRC withholding tax”.
Liquidity and Going Concern
The following factors raise substantial
doubt about our ability to continue as a going concern:
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For the year ended December 31, 2016, we incurred a net loss of RMB 2,118,969 (US$ 305,195).
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As of December 31, 2016, we had a total deficit attributable to Yingli Green Energy of RMB15,428,426 (US$ 2,222,156) and a deficit in working capital of RMB 7,471,576 (US$ 1,076,131).
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As of December 31, 2016, we had cash, cash equivalents and restricted cash of RMB 868,439 (US$ 125,081), short-term borrowings, including past due and current portion of medium-term notes and long-term debt of RMB 9,010,205(US$ 1,297,739) and long-term debts of RMB 2,523,621(US$ 363,477) and non-current medium-term notes of nil.
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As of December 31, 2016 and from the date of issuance of these statements, Baoding Tianwei Yingli New Energy Resources Co., Ltd. (“Tianwei Yingli”), one of our major manufacturing subsidiaries, had RMB 1,943,707 (US$ 279,952) and approximately RMB 1,993,518 (US$ 287,126) medium term notes overdue, including principal and interest, respectively.
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As of December 31, 2016 and from the date of issuance of these statements, we had RMB 222,331 (US$ 32,022) and approximately RMB 190,967 (US$ 27,505) of short-term borrowings overdue, included principal and interest, respectively.
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As of December 31, 2016, except for those loans and debts mentioned above, total short term loans expected to be repaid within one year is RMB 7,080,959 (US$ 1,019,870).
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Our liquidity is primarily dependent on
our ability to generate adequate cash flows from operations, to renew or rollover our short-term borrowings and to obtain adequate
external financings to support our working capital and meet our obligations and commitments when they become due.
We have carried out a review of our cash
flow forecast for the twelve months from the date of issuance of these statements. In preparing the cash flow forecast, our management
has considered historical cash requirements of us, our expected debt repayment obligations in 2017 and beyond, our plan to further
reduce operating costs and expenses, our plan to receive cash from disposal of certain equity investments, as well as the alternative
financing plans discussed in detail below. Our management also made the assumption about the numbers of shipments of modules and
gross profit margin.
We are currently exploring a variety of
alternative financing plans to improve our liquidity and financial position as follows:
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Form a Special Committee and Introducing Strategic Investors
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We issued a press release on March 7, 2017
and stated that, in order to properly consider our options with respect to and ultimately resolve the debt repayment issues faced
by our principal subsidiaries, our board of directors has formed a special committee (the "Special Committee") comprised
solely of independent directors to assess our operating and financial situation and evaluate, develop and recommend one or more
strategic alternatives and financing plans potentially workable to us in order to improve its debt structure.
We are in negotiation proactively with
certain investors for potential strategic investments in us or our major subsidiaries.
Such financing plan and strategic investments,
if successfully completed, will further increase the liquidity of us and improve our debt-to-equity ratio.
On May 3, 2017, we have paid the RMB300
million of RMB-denominated five-year medium-term notes issued by Yingli China in 2012 (the “2012 MTNs”) with full principle
and accrued interests totaling RMB318 million when they matured. As such, Yingli China has discharged all of its payment obligations
under the 2012 MTNs. As of the date of this annual report, we had MTNs of RMB 1,757.0 million outstanding. Of the total RMB 1,757.0
million of MTNs, RMB 357.0 million of the 2010 MTNs were due on October 13, 2015, and RMB1.4 billion of the 2011 MTNs were due
on May 12, 2016. Our company recently met with holders of the remaining portion of the 2010 MTNs and 2011 MTNs, and we are considering
our options with respect to the debt repayment issues faced by our company's principal subsidiaries. Our company is continuing
its negotiations with holders of the remaining portion of the 2010 MTNs and 2011 MTNs.
Also, as part our plan to improve liquidity,
for year ended December 31, 2016, we successfully negotiated with certain suppliers, and these suppliers agreed to waive partial
amount of the long ageing accounts payables. Total amount waived by the suppliers in 2016 as a result of the settlement was RMB
22,165 (US$3,192), which was recorded in “Other Income in the Consolidated Statements of Comprehensive Loss”.
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Renewal or Rollover of Borrowings and other Financing Arrangements
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We have maintained good relationships with
our lending banks and other financial institutions in China. While there can be no assurance that we will be able to refinance
our short-term borrowings as they become due, historically, we have renewed or rolled over most of our short-term bank and other
borrowings upon their maturity dates and has assumed we will continue to be able to do so. We have successfully renewed or rolled
over RMB 255.7 million (US$ 36.8 million) out of RMB 9,010.2 million (US$ 1,297.7 million) short-term borrowings outstanding as
of December 31, 2016 and have assumed we will continue to be able to do so for the foreseeable future. Based on our historical
experience, the roll-over requests will be approved, provided that we submit the required supporting documentation upon due dates.
In addition, we have obtained financing
through other arrangements, such as failed sale and lease back of certain machinery and equipment and financing in the form of
sale and repurchase of certain equity interest in its subsidiary, in substance, they are financing in nature and recorded as liabilities.
Based on the management’s assessment,
there can be no assurance, however, that such expected financing plans will be successfully completed on terms acceptable to us,
or effectively implemented within one year after the date that the consolidated financial statements are issued, or when implemented,
it will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern.
Our financing plans for our continuing operations, even if successful, may not result in sufficient cash flow to finance and maintain
its business. Facts and circumstances including recurring losses, negative working capital, net cash outflows, and uncertainties
on the repayment of the debts raise substantial doubt about our ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements
in ASC Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. The new standard will require us to separate
performance obligations within a contract, determine total transaction costs, and ultimately allocate the transaction costs across
the established performance obligations. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers”
(Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. As a result, ASU 2014-09
will become effective for us beginning in fiscal 2018 under either full or modified retrospective adoption, with early adoption
permitted as of the original effective date of ASU 2014-09. We have set up an implementation team that is currently in the process
of analyzing each of our revenue streams in accordance with the new revenue standard to determine the impact on the our consolidated
financial statements. We plan to continue the evaluation, analysis, and documentation of its adoption of ASU 2014-09 (including
those subsequently issued updates that clarify ASU 2014-09’s provisions) throughout 2017 as we work towards the implementation
and finalizes its determination of the impact that the adoption will have on its consolidated financial statements. We expect to
adopt the new revenue recognition guidance in the first quarter of 2018.
In August 2014, the FASB issued ASU No. 2014-15,
“Presentation of Financial Statements — Going Concern”. This standard requires management to evaluate for each
annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as
they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the
standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going
concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual
periods beginning after December 15, 2016. We adopted this standard during the fourth quarter of 2016 for related disclosure.
In November 2015, the FASB issued ASU 2015-17,
"Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. This ASU amends existing guidance to require
that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior
guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount
in a classified balance sheet. The amendments in this ASU are effective for annual reporting periods beginning after December 15,
2016, and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual
period. Additionally, the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively
to all periods presented. We plan to apply the new guidance retrospectively in 2017. The impact of adopting this guidance is not
expected to be material to the consolidated financial statements given our deferred tax amounts.
In January 2016, the FASB issued ASU 2016-01,
“Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities”. The amended guidance
(i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation
of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement
to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed
for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income
the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk
when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments
and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial
asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years,
or calendar 2018 for us. The amended guidance should be applied by means of a cumulative-effect adjustment to the balance sheet
as of the beginning of the fiscal year of adoption. The impact of adopting this guidance is not expected to be material to the
consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842)”. Under the new guidance, lessees will be required to recognize a lease liability and a lease asset
for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The update also expands the
required quantitative and qualitative disclosures surrounding leases. This update is effective for us from calendar 2019 and from
the first interim period of calendar 2019, with earlier application permitted. We are evaluating the impact of the adoption of
this update on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-06,
Contingent Put and Call Options in Debt Instruments. The amendments in this Update apply to all entities that are issuers of or
investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put)
options. The Amendments in this Update clarify the requirements for assessing whether contingent call (put) options that can accelerate
the payment of principal on debt instruments are clearly and closely related to their debt hosts, which is one of the criteria
for bifurcating an embedded derivative. An entity performing the assessment under the amendments in this Update is required to
assess the embedded call (put) options solely in accordance with the four-step decision sequence. Consequently, when a call (put)
option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a
call (put) option is related to interest rates or credit risks. The amendments are an improvement to GAAP because they eliminate
diversity in practice in assessing embedded contingent call (put) options in debt instruments. For public companies, the amendments
in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal
years. An entity should apply the amendments in this Update on a modified retrospective basis to existing debt instruments as of
the beginning of the fiscal year for which the amendments are effective. We are currently assessing the potential significant effects
of these changes on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-07,
Simplifying the Transition to the Equity Method of Accounting. The amendments in this Update eliminate the requirement that when
an investment qualified for use of the equity method as a result of an increase in the level of ownership interest or degree of
influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step
basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments
require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis
of the investor's previous held interest and adopt the equity method of accounting as of the date the investment becomes qualified
for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the
investment is required. The amendments in this Update require that an entity that has an available-for-sale equity security that
becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated
other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in this Update
are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.
The amendments should be applied prospectively upon their effective date to increase in the level of ownership interest or degree
of influence that result in the adoption of the equity method. Earlier application is permitted. We are currently assessing the
potential significant effects of these changes on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09,
“Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which
outlines new provisions intended to simplify various aspects related to accounting for share-based payments and their presentation
in the financial statements. We currently plan to implement this ASU as required in the first quarter of calendar 2017. We do not
expect that the adoption will have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13,
“Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This
ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount
expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis
of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The
standard is effective for us from calendar 2020, with early adoption permitted for calendar 2019. We have yet to commence an evaluation
of the impact of the adoption of this standard on its consolidated financial statements.
In August 2016, the FASB issued
ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230)." Current GAAP is unclear or does
not include specific guidance on how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce
diversity in practice in how eight particular transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective
for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, provided that all of the
amendments are adopted in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable
to apply the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. We are
currently assessing the potential significant effects of these changes on our consolidated financial statements.
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C.
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Research and Development
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The primary focus of our research and development
efforts is on improving our manufacturing processes at every stage of our production in order to improve the output quality at
each stage and deliver more energy-efficient and aesthetically improved PV products at a lower cost. We currently produce multicrystalline
polysilicon ingots primarily weighing up to 800 kilograms. Our research goals with regard to wafer cutting techniques include improving
the surface and internal physical characteristics of our wafers so as to decrease the wafer breakage rate and increase the number
of wafers produced from each ingot, as well as reduce the wafer thickness. We are also improving our ingot casting and crystal
growing processes to reduce the amount of time required for ingot formation, increase ingot output and reduce the cost of raw materials.
We believe that PV cells made from crystalline
silicon will continue to dominate the PV market in the foreseeable future. Therefore, our research and development efforts as they
relate to PV cells have focused on improving technologies and processing techniques to increase the conversion efficiency and the
power output of our PV cells, all of which were traditionally made from multicrystalline silicon. Starting from June 2009,
we have been in collaboration with the Energy Research Centre of the Netherlands, a leading solar research center in Europe, and
Tempress Systems, a wholly-owned subsidiary of Amtech Systems, Inc., a global supplier of production and automation systems
and related supplies for the manufacture of PV cells, to implement Project PANDA, a research and development project for next-generation
high efficiency monocrystalline PV cells. Our 600 megawatts of PANDA production capacity for each of the ingots and wafers, cells
and modules in Baoding, Hebei Province started initial production in the second quarter of 2011. We successfully produced next-generation
cells with an average cell conversion efficiency rate of 20.8% on the PANDA commercial production lines in 2016. We also seek to
reduce the breakage rate and failure rate and increase the success rate and conversion efficiency of our PV cells through the use
of advanced equipment and improved manufacturing processes at each stage of our production. To ensure the competitiveness of our
products, we closely monitor the development by our competitors of new-generation PV cells, such as thin film cells, that may or
may not be made from crystalline silicon and will seek to respond to challenges and opportunities posed by new technology as appropriate.
We have upgraded our module assembly techniques
to accommodate the delicate nature of thinner PV cells. We are researching new solutions to lengthen our PV modules’ life
span and make them more reliable, and to further increase the conversion efficiency of our PV cells and PV modules through the
use of new materials and new technologies. For example, in 2016, we commercialized the frameless PANDA Bifacial module, which integrates
the technology of PANDA n-type monocrystalline PV cells and is made of two layers of 2.5mm thick low-iron tempered glass, replacing
the conventional back sheet and glass structure. The PANDA Bifacial module can generate power not only from the front side, but
also from the rear side by making use of the reflected photons that hit the module on the back side, depending on the environmental
condition of installation. The PANDA Bifacial module has received China General Certification Centre’s (“CGC”)
FRONTRUNNER certification in the end of 2016. In early 2017, we also launched our Hotspot Free module, which can eliminate potential
safety risks such as fire and material degradation and ensure better safety, module reliability and higher returns. We are also
exploring multipurpose applications of our off-grid PV systems, and collaborating with international PV system installers and integrators
by participating in large on-grid PV system projects in order to accumulate more experience and knowledge with respect to such
projects.
Our research and development expenses were
RMB573.8 million, RMB397.0 million, and RMB146.9 million (US$21.5 million) in 2014, 2015 and 2016, respectively.
Other than as disclosed elsewhere in this
annual report, we are not aware of any trends, uncertainties, demands, commitments or events since December 31, 2016 that
are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources,
or that caused the disclosed financial information not to be necessarily indicative of future operating results or financial conditions.
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E.
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Off-Balance Sheet Arrangements
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We have not entered into any financial
guarantees or other commitments to guarantee the payment obligations of third parties. We have not entered into any derivative
contracts that are recorded as financial receivables or liabilities, or that are not reflected in our consolidated financial statements.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development
services with us.
Under the joint venture contract, Tianwei
Baobian has a right to subscribe for a number of ordinary shares newly issued by us to be determined by a predetermined formula
set forth in the joint venture contract. See “Item 4.A. History and Development of the Company —Joint Venture Contract
— Subscription Right”.
|
F.
|
Tabular Disclosure
of Contractual Obligations
|
Our contractual obligations and commitments
as of December 31, 2016 are set forth in the table below.
|
|
Payment Due by Period
|
|
|
|
Total
|
|
|
Less Than
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
More Than
5 Years
|
|
|
|
(In thousands of RMB)
|
|
Borrowings from banks and other parties(1)
|
|
|
10,525,426
|
|
|
|
7,707,626
|
|
|
|
1,399,205
|
|
|
|
1,053,590,
|
|
|
|
365,005
|
|
Medium-term notes(2)
|
|
|
2,394,566
|
|
|
|
2,394,566
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Payables and long-term payables to non-controlling interest holders (3)
|
|
|
1,285,630
|
|
|
|
239,025
|
|
|
|
82,690
|
|
|
|
23,230
|
|
|
|
940,685
|
|
Commitments for capital expenditures
|
|
|
1,510,799
|
|
|
|
1,359,719
|
|
|
|
151,080
|
|
|
|
—
|
|
|
|
—
|
|
Commitments for the purchase of raw materials
|
|
|
15,643,200
|
|
|
|
349,625
|
|
|
|
3,618,434
|
|
|
|
4,157,274
|
|
|
|
7,517,867
|
|
Financing and capital lease
|
|
|
403,319
|
|
|
|
86,067
|
|
|
|
115,690
|
|
|
|
81,404
|
|
|
|
120,158
|
|
Total
|
|
|
31,762,940
|
|
|
|
12,136,628
|
|
|
|
5,367,099
|
|
|
|
5,315,498
|
|
|
|
8,943,715
|
|
(1) Includes interest
of RMB 1,048,600 accrued at the interest rate applicable under the loan agreement, the interest rate was between 2.5% and 10%.
For borrowings with a floating rate, the most recent rate as of December 31, 2016 was applied. As of December 31, 2016,
we had RMB 172,245 of principal overdue and RMB 50,086 of interest overdue. As of December 31, 2016, we also had total short-term
loans and long-term debt due in one year of RMB 4,947,353, these loans were either in breach of loan covenants or triggered cross
defaults and no waivers were received from the banks; according to the loan agreements with banks, if our company is unable to
remediate those loans that are in breach of loan covenants or triggering of cross defaults within a grace period, the banks have
rights to ask our company to repay such loans immediately. Historically, no bank has asked our company to repay such loans mentioned
above. Moreover, while there can be no assurance that we will be able to refinance its short-term borrowings as they become due,
historically, our company has renewed or rolled over most of its short-term bank and other borrowings upon their maturity dates
and has assumed we will continue to be able to do so.
(2) Includes interest
of RMB 337,566 accrued at the interest rate applicable under the loan agreement.
(3) In November 2012, a third
party (“Party A”) contributed RMB 100,000 to Hainan Yingli to acquire 5.825% equity interest of Hainan Yingli. Pursuant
to the agreement between Yingli China and the investor, Yingli China is obligated to repurchase such equity interest from the investor
in the amount of RMB 100,000 plus 5% annual interest in 5 years. As of December 31, 2015 and 2016, we recorded RMB 100,000 of this
payment obligation in “Long-term payables to non-controlling interest holders” and “Payables to non-controlling
interest holders”, respectively, in our Consolidated Balance Sheets. Under the payment schedule, RMB 100,000 of this payment
obligation for sale and repurchase of 5.825% equity interest of Hainan Yingli will become due in November 2017.
In December 2013, another third party (“Party
B”) contributed RMB 100,000 to Hainan Yingli to acquire 5.50% equity interest of Hainan Yingli. Pursuant to the agreement
between Yingli China and the investor, Yingli China is obligated to purchase such equity interest from the investor in the amount
of RMB 100,000 plus 6.15% annual interest in 2 years. As of December 31, 2015 and 2016, we recorded RMB 100,000 of this payment
obligation overdue as “Payables to non-controlling interest holders” in our Consolidated Balance Sheet. We are still
in negotiation with the third party about the extension of the payment schedule under the relevant agreements.
In November 2015, Party B contributed a land use right
with fair value of RMB 728,116 to Hainan Yingli to acquire 21.84% equity interest of Hainan Yingli. Pursuant to the agreement between
Yingli China and the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount of
RMB 728,116 plus benchmark interest rate within 2 months to 10 years, among which, RMB 23,000 would be paid within two months,
RMB 82,000 would be paid within 3 years, and the remaining of 623,116 would be paid within 10 years. Because of Yingli China’s
contractual obligations to purchase the equity interests from these investors, the equity contributions made by the investors plus
accrued interest have been recorded as liabilities. This land use right was subsequently disposed by Hainan Yingli in December
2015 (refer to note 6). As in substance the whole arrangement is financing, proceeds received from the disposal were presented
as financing activities.
As of December 31, 2016, total current and non-current
payables to Party B was RMB 100,000 and RMB 705,116, respectively.
In January 2016, a third party (“Party C”)
contributed RMB 23,000 to Hainan Yingli to acquire 0.90% equity interest of Hainan Yingli. Pursuant to the agreement between Yingli
China and the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount of RMB 23,000
plus 19% aggregate interest in 5 years.
Based on the above repurchase schedule, including principal
and interest, RMB 135,339 and RMB 233,135 (US$ 33,578) have been recorded in “Payables to non-controlling interest holders”,
RMB 821,276 and RMB 763,393 (US$ 109,952) have been recorded in “Long-term payables to non-controlling interest holders”
in our Consolidated Balance Sheets as of December 31, 2015 and 2016, respectively.
This annual report contains forward-looking
statements that relate to future events, including our future operating results and conditions, our prospects and our future financial
performance and condition, all of which are largely based on our current expectations and projections. The forward-looking statements
are contained principally in the sections titled “Item 3.D. Risk Factors,” “Item 4. Information on the Company”
and “Item 5. Operating and Financial Review and Prospects”. These statements are made under the “safe harbor”
provisions of the U.S. Private Securities Litigation Reform Act of 1995.
You can identify these forward-looking
statements by terminology such as “may,” “will,” “expect,” “anticipate,” “future,”
“intend,” “plan,” “believe,” “estimate,” “is/are likely to” or other
and similar expressions. We have based these forward-looking statements largely on our current expectations and projections about
future events and financial trends that we believe may affect our financial condition, results of operations, business strategy
and financial needs. These forward-looking statements include, among other things, statements relating to:
|
·
|
our beliefs regarding our
abilities to secure sufficient funds to meet our cash needs for our operations and repayment of our existing debts;
|
|
·
|
our expectations regarding the worldwide demand for electricity and the market for solar energy;
|
|
·
|
our beliefs regarding the effects of environmental regulation, lack of infrastructure reliability and long-term fossil fuel supply constraints;
|
|
·
|
our beliefs regarding the inability of traditional fossil fuel-based generation technologies to meet the demand for electricity;
|
|
·
|
our beliefs regarding the importance of environmentally friendly power generation;
|
|
·
|
our expectations regarding governmental support for the deployment of solar energy;
|
|
·
|
our beliefs regarding the acceleration of adoption of solar technologies;
|
|
·
|
our expectations regarding advancements in our technologies and cost savings from such advancements;
|
|
·
|
our beliefs regarding the competitiveness of our PV products;
|
|
·
|
our beliefs regarding the advantages of our business model;
|
|
·
|
our expectations regarding the scaling of our manufacturing capacity;
|
|
·
|
our expectations regarding entering into or maintaining joint venture enterprises and other strategic investments;
|
|
·
|
our expectations regarding revenue growth and our ability to achieve profitability resulting from increases in our production volumes;
|
|
·
|
our expectations regarding our ability to secure raw materials in the future;
|
|
·
|
our expectations regarding the price trends of PV modules and polysilicon;
|
|
·
|
our beliefs regarding our ability to successfully implement our strategies;
|
|
·
|
our future business development, results of operations and financial condition; and
|
|
·
|
competition from other manufacturers of PV products, other renewable energy systems and conventional energy suppliers.
|
The forward-looking statements made in
this annual report relate only to events or information as of the date on which the statements were made in this annual report.
Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise, after the date on which the statements were made or to reflect the occurrence
of unanticipated events. You should read this annual report completely and with the understanding that our actual future results
may be materially different from what we expect.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
A.
|
Directors and Senior
Management
|
The following table sets forth information
regarding our directors and executive officers as of the date of this annual report.
Name
|
|
Age
|
|
Position
|
Liansheng Miao
|
|
61
|
|
Chairperson of board of directors and chief executive
|
Jingfeng Xiong
|
|
51
|
|
Director and vice president
|
Iain Ferguson Bruce(1)(2)
|
|
76
|
|
Independent director
|
Ming Huang(1)(2)
|
|
53
|
|
Independent director
|
Zheng Xue(1)(2)
|
|
46
|
|
Independent director
|
Junmin Liu
|
|
67
|
|
Independent director
|
Dengyuan Song
|
|
59
|
|
Chief technology officer
|
Yiyu Wang
|
|
40
|
|
Director and Chief financial officer
|
(1) Audit committee member.
(2) Compensation committee
member.
Mr. Liansheng Miao
is the chairperson
of the board of directors, the founder and chief executive officer of Yingli Green Energy. Prior to founding Tianwei Yingli in
1998, Mr. Miao was the chairperson of Yingli Group. Mr. Miao is an executive director of the Photovoltaic Committee of
the China Renewable Energies Association, vice chairperson of the China Rural Area Electricity Supply Association and vice chairperson
of the China Cells Industry Association. Mr. Miao is also a director of the Hebei New and High Technology Industry Association
and a director of the New Energy Chamber of Commerce of the All-China Federation of Industry and Commerce. Mr. Miao received
his bachelor’s degree in business management from Beijing Economics Institute and his master’s degree in business administration
from Peking University in China.
Mr. Jingfeng Xiong
is a director
and vice president of Yingli Green Energy. His directorship became effective on March 3, 2017. Mr. Xiong joined our company in
2000 and served as our company’s vice president since 2008. He has been responsible for our company’s manufacturing,
research and development with rich experience in operation management, technology improvement and technical innovation. He has
led our company’s Project PANDA, a research and development project for high efficiency monocrystalline PV cells. Mr. Xiong
has planned many other innovation programs and made outstanding contributions by optimizing operations and automating production
lines to improve yield rates, enhance cost savings and increase production efficiencies. In addition, he has been playing a key
role in the over-all planning of procurement, production and sales along with our company’s strategic adjustments in recent
years. He received a bachelor’s degree in electronics in 1999 from Hebei University and his EMBA degree from Nankai University
in China.
Mr. Iain Ferguson Bruce
is an independent
member of our board of directors and the chairperson of the audit committee and compensation committee of our board of directors.
His directorship became effective upon the completion of our initial public offering in June 2007. Mr. Bruce joined KPMG in Hong
Kong in 1964 and was elected to its partnership in 1971. He was the senior partner of KPMG from 1991 until his retirement in 1996
and also concurrently served as chairman of KPMG Asia Pacific from 1993 to 1997. Since 1964, Mr. Bruce has been a member of the
Institute of Chartered Accountants of Scotland, and is a fellow of the Hong Kong Institute of Certified Public Accountants, with
over 50 years of international experience in accounting and consulting. He is also a fellow of The Hong Kong Institute of Directors
and the Hong Kong Securities and Investment Institute (formerly known as Hong Kong Securities Institute). Mr. Bruce is an
independent non-executive director of Citibank (Hong Kong) Limited and MSIG Insurance (Hong Kong) Limited. Mr. Bruce is currently
an independent non-executive director of Goodbaby International Holdings Limited, a manufacturer of infants’ and children’s
products, The 13 Holding Limited (formerly known as Paul Y. Engineering Group Limited), a hotel and property investment company,
Tencent Holdings Limited, a provider of Internet services and mobile value-added services, and Wing On Company International Ltd.,
a department store operating and real property investment company; all of these companies are listed on The Stock Exchange of Hong
Kong Limited. In addition, Mr. Bruce also serves as an independent a director of Noble Group Limited effective March 1, 2017, a
commodity trading company that is listed on The Singapore Exchange Securities Trading Limited. He was also an independent
non-executive director of Vitasoy International Holdings Ltd., a beverage manufacturing company, and retired from that company’s
board on 4 September 2014, and was the chairman of KCS Limited until August 1, 2015. He was also an independent non-executive director
of Sands China Ltd., a gaming and hospitality company, and resigned on March 11, 2016.
Professor Ming Huang
is an independent
member of our board of directors and a member of the audit committee and compensation committee of our board of directors. He was
elected to our board in August 2008. Professor Huang also serves as an independent nonexecutive director of Fantasia Holdings
Group Co., Ltd., China Medical System Holdings Limited, JD.com, WH Group, and Guosen Securities Co., Ltd. Professor Huang
has been a professor of finance at the Johnson Graduate School of Management at Cornell University in the United States since July 2005.
He also serves as the La Caixa Professor of Finance at China Europe International Business School. Previously, he held a series
of faculty and administrative positions at Cheung Kong Graduate School of Business, Shanghai University of Finance and Economics,
Graduate School of Business at Stanford University, and the Chicago Graduate School of Business. Professor Huang’s academic
research primarily focuses on behavioral finance, credit risk and derivatives. Professor Huang received his bachelor’s degree
in physics from Peking University, his doctorate in theoretical physics from Cornell University and his doctorate in finance from
Stanford University.
Mr. Zheng Xue
is an independent
member of our board of directors and a member of the audit committee and compensation committee of our board of directors. His
directorship became effective on September 19, 2011. Since May 2015, Mr. Xue has been the chief financial officer of China
Music Corporation, one of the largest digital music companies in China. Prior to that, Mr. Xue was chief financial officer
of LightInTheBox.com, which is a China-based global online retailer. Prior to joining LightInTheBox.com in 2011, he served as chief
financial officer of ATMU Inc., which is the largest automated teller machines sourcing company in China. Prior to joining ATMU
Inc. in 2010, he served as an advisor of Asia Alternatives Management LLC since 2009. Prior to his affiliation with Asia Alternatives
Management LLC, Mr. Xue was a venture partner of Softbank China & India Holdings, a wholly owned subsidiary of Softbank
Corp, and manager of Bodhi Investments LLC, which focuses on early stage companies in China and India from 2006 to 2009. He also
worked at ChinaCast Education Corporation from 2006 to 2009, Target Media from 2005 to 2006 and eLong Inc. from 2003 to 2005 as
professional chief financial officer or director, respectively. Prior to joining eLong Inc. in 2003, Mr. Xue worked for eight
years in investment banking in the United States and China. Mr. Xue studied at Tsinghua University in China and received his
bachelor’s degree in physics from University of Illinois and his MBA degree from the University of Chicago in the United
States.
Professor Junmin Liu
is an independent
member of our board of directors and was elected to our board in August 2008. He is a professor in the Economics Department at
Nankai University in China. Professor Liu began his teaching career in September 1982 and has been teaching at Nankai University
since December 1992. Professor Liu's research and study focus on macroeconomics, virtual economies and finance. Professor Liu received
his Master's degree in economics and his doctorate in economics, both from Nankai University.
Dr. Dengyuan Song
is the chief
technology officer of Yingli Green Energy. Dr. Song has more than 27 years of experience in the research and development of
solar cells, silicon materials, and semiconductor PV devices in both Australia and China, including nearly 10 years of research
and development in polycrystalline silicon solar cells, thin-film solar cells and third-generation solar cells at the ARC Photovoltaics
Centre of Excellence at the University of New South Wales in Sydney, Australia. Prior to joining the University of New South Wales,
Dr. Song served as a professor at Hebei University in China, where his teaching and research covered a broad spectrum of topics,
including solar cells, silicon materials, photoelectric devices and automation engineering. Dr. Song has published and presented
over 150 papers in scientific and technical journals and at various PV industry conferences. He received his bachelor’s degree
in microelectronics engineering in 1982 from Hebei University and his doctorate in photovoltaic engineering in 2005 from the University
of New South Wales in Australia.
Mr. Yiyu Wang
is a director
and the chief financial officer of Yingli Green Energy. Mr. Wang served as the chief strategic officer of Yingli Green Energy
from 2006 to 2013. Prior to joining us in December 2006, Mr. Wang worked as a senior audit manager and an audit manager
at the accounting firm of PricewaterhouseCoopers since 1996. From 2003 to 2004, Mr. Wang worked at PricewaterhouseCoopers
in Sydney, Australia. Mr. Wang received his bachelor’s degree in international finance from Shanghai University in China.
The business address of our directors and
executive officers is c/o Tianwei Yingli New Energy Resources Co., Ltd., No. 3399 North Chaoyang Avenue, Baoding, People’s
Republic of China.
|
B.
|
Compensation of Directors
and Executive Officers
|
In 2015, the aggregate cash compensation
paid to our executive officers and directors was RMB11.7 million (US$1.8 million). For options and restricted shares granted to
officers and directors, see “— 2006 Stock Incentive Plan”.
2006 Stock Incentive Plan
The 2006 Stock Incentive Plan was adopted
by our shareholders and board of directors in December 2006. The 2006 Stock Incentive Plan provides for the grant of options,
limited stock appreciation rights and other stock-based awards such as restricted shares. The purpose of the plan is to aid us
and our affiliates in recruiting and retaining key employees, directors or consultants of outstanding ability and to motivate such
employees, directors or consultants to utilize their best efforts on behalf of us and our affiliates by providing incentives through
the granting of awards. Our board of directors believes that our company’s long-term success is dependent upon our ability
to attract and retain talented individuals who, by virtue of their ability, experience and qualifications, make important contributions
to our business.
Administration
. The 2006 Stock Incentive
Plan is administered by the compensation committee of our board of directors, or in the absence of a compensation committee, the
board of directors. The committee is authorized to interpret the plan, to establish, amend and rescind any rules and regulations
relating to the plan, and to make any other determinations that it deems necessary or desirable for the administration of the plan.
The committee determines the provisions, terms and conditions of each award, including, but not limited to, the exercise price
for an option, vesting schedule of options and restricted shares, forfeiture provisions, form of payment of exercise price and
other applicable terms.
Change of Control
. The 2006 Stock
Incentive Plan defines a “change of control” as the occurrence of any of the following events: (i) the sale or
disposition, in one or a series of related transactions, of all or substantially all, of our assets to any third party; (ii) any
third party is or becomes the beneficial owner, directly or indirectly, of more than 50% of the total voting power of our voting
stock or any entity which controls us (counting the shares that such third party has the right to acquire) by way of merger, consolidation,
tender, exchange offer or otherwise; or (iii) during any period of two consecutive years, individuals who at the beginning
of such period constituted the board (together with any new directors elected or nominated by such board) cease for any reason
to constitute a majority of the board, then in office. Upon a change of control, the compensation committee may decide that all
outstanding awards that are exercisable or otherwise unvested or subject to lapse restrictions will automatically be deemed exercisable
or otherwise vested or no longer subject to lapse restrictions, as the case may be, as of immediately prior to such acquisition.
The compensation committee may also, in its sole discretion, decide to cancel such awards for fair value, provide for the issuance
of substitute awards that will substantially preserve the otherwise applicable terms of any affected awards previously granted,
or provide that affected options will be exercisable for a period of at least 15 days prior to the acquisition but not thereafter.
Amendment and Termination of Plan
.
Our board of directors may at any time amend, alter or discontinue the 2006 Stock Incentive Plan. Amendments to or alterations
of the 2006 Stock Incentive Plan are subject to shareholder approval if they increase the total number of shares reserved for the
purposes of the plan or change the maximum number of shares for which awards may be granted to any participant, or if shareholder
approval is required by law or by stock exchange rules or regulations. Any amendment, alteration or termination of the 2006
Stock Incentive Plan must not adversely affect awards already granted without the written consent of the recipient of such awards.
Unless terminated earlier, the 2006 Stock Incentive Plan will continue in effect for a term of ten years from the date of adoption.
Amendment No. 1 to the 2006 Stock
Incentive Plan
. Our board of directors approved in April 2007 and our shareholders approved in May 2007, Amendment
No. 1 to the 2006 Stock Incentive Plan, which amended our 2006 Stock Incentive Plan to increase the number of ordinary shares
that we are authorized to issue from 3,394,054 shares to 8,240,658 shares. Among these shares, up to 2,715,243 shares may be issued
for the purpose of granting awards of restricted shares and up to 5,525,415 shares may be issued for the purpose of granting options.
The amendment did not change any other material provisions of the 2006 Stock Incentive Plan.
Amendment No. 2 to the 2006 Stock
Incentive Plan
. Our board of directors approved in July 2009 and our shareholders approved in August 2009, Amendment
No. 2 to the 2006 Stock Incentive Plan, which amended our 2006 Stock Incentive Plan to increase the number of ordinary shares
that we are authorized to issue from 8,240,658 shares to 12,745,438 shares. Among these shares, up to 2,715,243 shares may be issued
for the purpose of granting awards of restricted shares and up to 10,030,195 shares may be issued for the purpose of granting options.
The amendment did not change any other material provisions of the 2006 Stock Incentive Plan.
Options
. An option granted under
the 2006 Stock Incentive Plan will have specified terms set forth in an option agreement and will also be subject to the provisions
of the 2006 Stock Incentive Plan, which include the following principal terms. The compensation committee will determine in the
relevant option agreement the purchase price per share upon exercise of the option, with the purchase price to be no less than
100% of the fair market value of the shares on the option grant date. The compensation committee will also determine in the relevant
option agreement whether the option granted and vested under the award agreement will be exercisable following the recipient’s
termination of service with us. If the ordinary shares covered by an option are not exercised or purchased on the last day of the
period of exercise, they will terminate. The term of an option granted under the 2006 Stock Incentive Plan may not exceed ten years
from the date of grant. The consideration to be paid for our ordinary shares upon exercise of an option or purchase of shares underlying
the option include cash, check or other cash equivalents, ordinary shares, consideration received by us in a cashless exercise,
or any combination of the foregoing methods of payment. Options granted under the 2006 Stock Incentive Plan are not transferable
and may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the option holders, but the
compensation committee may permit the options to be exercised by and paid to certain persons or entities related to the option
holders.
Granted Options
. Each of the relevant
option award agreements provides for the vesting of options, provided the option holder remains a director, officer, employee or
consultant of ours. Following the option holder’s termination of service with us for any reason, the option, to the extent
not then vested, will be cancelled by us without consideration. Upon a change of control, the options will, to the extent not then
vested and not previously canceled, become fully vested and exercisable immediately. As of May 16, 2017, options to purchase an
aggregate of 2,486,427 ordinary shares have been forfeited and cancelled by us without consideration.
Restricted Shares
. Restricted shares
issued under the 2006 Stock Incentive Plan will have specified terms set forth in an award agreement and will also be subject to
the provisions of the 2006 Stock Incentive Plan. Unless otherwise permitted by the compensation committee, restricted shares are
not transferable and may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered at any time
prior to becoming vested or during any period in which we may repurchase them.
Granted Restricted Shares
. Restricted
shares are issued to DBS Trustees Limited, or the trustee, for the benefit of the trust participants, which consist of directors
and officers of ours or Tianwei Yingli, our other employees and nonemployee consultants pursuant to award agreements and a trust
deed. The trustee will hold the restricted shares in trust and will be the registered holder of the restricted shares until such
shares are vested, forfeited or repurchased by us. Our board of directors has appointed a managing committee to provide recommendations,
advice or instructions to the trustee in connection with the administration of the trust. The restricted stock award agreements
and the trust deed contain, among other things, provisions concerning the constitution and structure of the trust, and vesting
and forfeiture of the restricted shares, our right to repurchase the restricted shares within a period after vesting of the restricted
shares, distribution to trust participants, transfer restrictions, dividends and voting rights, and the consequences of third-party
acquisition.
Each of the relevant award agreements provides for the vesting
of restricted shares, provided that the option holder remains a director or officer of ours or Tianwei Yingli or our employee or
consultant. Restricted shares granted for the benefit of a trust participant will also fully vest upon termination of service resulting
from death or disability of the trust participant that is due to work-related reasons. Following a trust participant’s termination
of service with us, unless such termination results from the trust participant’s death or disability that is due to work-related
reasons, the restricted shares granted for the benefit of such trust participant will, to the extent not then vested, be forfeited
without any consideration. As of May 16, 2017, 33,792 restricted shares have been forfeited without any consideration.
For a period of six months after any restricted
shares are vested, the trustee will be required to, upon our written request, sell all or part of the vested restricted shares
to us at fair market value. The trustee will distribute the repurchase price paid by us, and any dividends accumulated on the repurchased
shares from their vesting dates, to us as the agent of the applicable trust participants. Any vested restricted shares that are
not repurchased by us during that six-month period will be distributed to us as the agent of the applicable trust participants
either in specie or in cash at the option of the applicable trust participants. We will then distribute the repurchase price, the
restricted shares or cash, as the case may be, to the applicable trust participants after withholding relevant taxes in accordance
with applicable laws.
The restricted shares will not be entitled
to dividends paid on the ordinary shares until such restricted shares are vested. The restricted shares will have the same voting
rights as our other ordinary shares. All voting rights of the restricted shares will be exercised by the trustee in accordance
with the managing committee’s instructions before the restricted shares are vested, and in accordance with the instructions
of the applicable trust participants after the restricted shares are vested. Upon a change of control, all restricted shares granted
to the trustee for the benefit of the trust participants will become fully vested immediately.
As the date of this annual report, an aggregate
of 2,665,060 restricted shares issued to the trustee for the benefit of 81 trust participants were all vested, comprising 33,792
restricted shares forfeited for three former employees.
Social Insurances and Housing Provident Fund
Pursuant to the relevant PRC regulations,
we are required to make contributions to social insurances and housing provident fund for each employee, including our executive
officers. See “Item 6.D. Employees”.
Terms of Directors and Executive Officers
Our officers are appointed by and serve
at the discretion of the board of directors. At each annual general meeting one third of our directors (save for the chairman of
the board and any managing director) are subject to retirement by rotation and otherwise hold office until such time as they are
removed from office by ordinary resolution or the unanimous written resolution of all shareholders. A director will be removed
from office automatically if, among other things, the director (i) becomes bankrupt or has a receiving order made against
him or her or suspends payment or makes a compromise with his creditors, or (ii) dies or is found by us to be or becomes of
unsound mind, or (iii) is absent from meetings of our board of directors for six consecutive months and our board of directors
resolves that his office should be vacated.
Board of Directors
The following describes the board of directors
of Yingli Green Energy. For a description of Tianwei Yingli’s board of directors, see “Item 4.A. History and Development
of the Company —Joint Venture Contract — Tianwei Yingli’s Management Structure and Board of Directors”.
Our board of directors currently has seven
directors, including four independent directors. Under our current articles of association, our board of directors consists of
at least two directors. Our directors are elected by the holders of ordinary shares. At each annual general meeting, one third
of our incumbent directors (other than the chairperson of our board and any managing director) will be subject to reelection. A
director is not required to hold any shares in the company in order to qualify as a director.
Committees of the Board of Directors
Our board of directors has established
an audit committee and a compensation committee. We have adopted a charter for each such committee.
Audit Committee
Our audit committee consists of Messrs. Iain
Bruce, Ming Huang and Zheng Xue and is chaired by Mr. Bruce. Mr. Bruce is a director with accounting and financial management
expertise as required by the NYSE corporate governance rules, or the NYSE rules. We believe that all of the members of our audit
committee satisfy the “independence” requirements of the NYSE rules and Rule 10A-3(b)(1) under the Securities
and Exchange Act of 1934, as amended, or the Exchange Act. Our audit committee consists solely of independent directors. The audit
committee oversees our accounting and financial reporting processes and the audits of our financial statements. The audit committee
is responsible for, among other things:
|
·
|
selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm;
|
|
·
|
reviewing with our independent registered public accounting firm any audit problems or difficulties and management’s response;
|
|
·
|
reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;
|
|
·
|
discussing the annual audited financial statements with management and our independent registered public accounting firm;
|
|
·
|
reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;
|
|
·
|
annually reviewing and reassessing the adequacy of our audit committee charter;
|
|
·
|
such other matters that are specifically delegated to the audit committee by our board of directors from time to time;
|
|
·
|
meeting separately and periodically with management and our internal and independent registered public accounting firm; and
|
|
·
|
reporting regularly to the full board of directors.
|
Compensation Committee
Our compensation committee consists of
Messrs. Iain Bruce, Ming Huang and Zheng Xue and is chaired by Mr. Bruce. We believe that all of the members of our compensation
committee satisfy the “independence” requirements of the NYSE rules. Our compensation committee assists the board in
reviewing and approving the compensation structure for our directors and executive officers, including all forms of compensation
to be provided to our directors and executive officers. Members of the compensation committee are not prohibited from direct involvement
in determining their own compensation. Our chief executive officer may not be present at any committee meeting during which his
compensation is deliberated. The compensation committee is responsible for, among other things:
|
·
|
approving and overseeing the compensation package for our executive officers;
|
|
·
|
reviewing and making recommendations to the board with respect to the compensation of our directors;
|
|
·
|
reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of those goals and objectives, and setting the compensation level of our chief executive officer based on this evaluation; and
|
|
·
|
reviewing periodically and making recommendations to the board regarding any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.
|
Special Committee
In order to properly consider our options
with respect to and ultimately resolve the debt repayment issues faced by our principal subsidiaries, our board of directors has
formed a special committee in March 3, 2017, consisting of Messrs. Iain Bruce, Ming Huang, Zheng Xue and Junmin Liu to assess
our operating and financial situation and evaluate, develop and recommend one or more strategic alternatives and financing plans
potentially available to us in order to improve our debt structure.
Interested Transactions
A director may vote in respect of any contract
or transaction in which he or she is interested, provided that (i) the nature of the interest of any directors in such contract
or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter, (ii) any required
approvals from our audit committee are obtained and (iii) the chairman of the relevant board meeting does not disqualify him
or her from voting.
Remuneration
The directors may determine remuneration
to be paid to the directors. The compensation committee assists the directors in reviewing and approving the compensation structure
for the directors.
Borrowing
The directors may, on our behalf, borrow
money, mortgage or charge our undertaking, property and uncalled capital, and issue debentures or other securities directly or
as security for any debt obligations of us or of any third party.
Qualification
There is no shareholding qualification
for directors.
Employment Agreements
We have entered into employment agreements
with all of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period.
We may terminate his or her employment for cause at any time, with prior written notice, for certain acts of the executive officer,
including but not limited to, a conviction of a felony, or willful gross misconduct by the executive officer in connection with
his or her employment, and in each case if such acts have resulted in material and demonstrable financial harm to us. An executive
officer may, with prior written notice, terminate his or her employment at any time for any material breach of the employment agreement
by us that is not remedied promptly after receiving from the employee to remedy such breach. Furthermore, either party may terminate
the employment agreement at any time without cause upon advance written notice to the other party. Upon termination, the executive
officer is generally entitled to severance pay of at least one month’s salary.
Each executive officer has agreed to hold,
both during and subsequent to the terms of his or her agreement, in confidence and not to use, except in pursuance of his or her
duties in connection with employment, any of our confidential information, technological secrets, commercial secrets and know-how.
Our executive officers have also agreed to disclose to us all inventions, designs and techniques resulting from work performed
by them, and to assign to us all right, title and interest in such inventions, designs and techniques.
We had 17,912, 14,533 and 10,625 employees
as of December 31, 2014, 2015 and 2016, respectively. The following table sets forth the number of our employees categorized
by our areas of operations and as a percentage of our total employees as of December 31, 2016.
|
|
As of December 31, 2016
|
|
|
|
Number of
Employees
|
|
|
Percentage
of Total
|
|
Manufacturing
|
|
|
6,880
|
|
|
|
64.75
|
%
|
Manufacturing Support
|
|
|
1,687
|
|
|
|
15.88
|
%
|
Research and Development
|
|
|
697
|
|
|
|
6.56
|
%
|
Procurement, Sales and Marketing
|
|
|
208
|
|
|
|
1.96
|
%
|
Management and Administrative
|
|
|
704
|
|
|
|
6.63
|
%
|
Logistics and Others
|
|
|
449
|
|
|
|
4.22
|
%
|
Total
|
|
|
10,625
|
|
|
|
100
|
%
|
Our success depends to a significant extent
upon our ability to attract, retain and motivate qualified personnel. Many of these employees have overseas education and industry
experience, and we periodically send our technical personnel overseas for advanced study and training. Our employees also receive
annual training courses in subjects relevant to their positions within our company. Substantially all of our employees are based
in China.
Pursuant to the relevant PRC regulations,
we are required to make contributions for each employee at a rate of 19%-20% of a standard salary base as determined by the local
social security bureau to a defined contribution retirement scheme organized by the local social security bureau. In addition,
we are also required to make contributions for each employee at rates of 6%-11%, 1% and 0.3%-1% of a standard base for medical
insurance benefits, unemployment and other statutory benefits, respectively. We are also required to make contributions to housing
provident fund for our employees, which varies, according to the locations and salary bands, from hundreds to thousands of RMB
monthly for each employee. In accordance with the local regulation in China where we have operations, we are required to make these
contributions on a monthly basis, and will be subject to penalties if we delay any of such contributions for more than three months.
Due to our tight cash flow since mid-2015, some of our subsidiaries failed to fully make contributions to the social insurances
and housing provident fund for their employees on time. As such, these subsidiaries had not been in compliance with local regulations
on social insurances and housing provident fund, and could be subject to penalties from local regulatory authorities. We have engaged
in active discussions with the relevant local regulatory authorities, clarifying our situation to them and seeking their understanding.
While the local regulatory authorities indicated that they understood our situation and had not imposed any penalties on us yet
and we have fully paid up all overdue amounts and are currently making contributions to our employees’ social insurances
and housing provident fund on a monthly basis as of the date of this annual report, there can be no assurance that they will not
impose penalties on us in the future. See “Item 3.D. Risk Factors — Risks Related to Us and the PV Industry —
We failed to fully make contributions to the social insurances and housing provident fund for our employees, which may subject
us to penalties from local regulatory authorities and cause disputes with our employees”.
Our employees are not subject to any collective
bargaining agreements. We have not been involved in any material labor disputes. We believe that we have a good relationship with
our employees.
The following table sets forth information
with respect to the beneficial ownership of our ordinary shares, as of the date of this annual report, by:
|
·
|
each of our directors and executive officers;
|
|
·
|
all of our directors and executive officers as a group; and
|
|
·
|
each person known to us to own beneficially more than 5.0% of our ordinary shares.
|
|
|
Ordinary Shares Beneficially
Owned (1)(2)
|
|
|
|
Number of Shares
|
|
|
%
|
|
Liansheng Miao(3)
|
|
|
52,748,252
|
|
|
|
28.88
|
|
Jingfeng Xiong
|
|
|
*
|
|
|
|
*
|
|
Iain Ferguson Bruce
|
|
|
*
|
|
|
|
*
|
|
Ming Huang
|
|
|
*
|
|
|
|
*
|
|
Zheng Xue
|
|
|
*
|
|
|
|
*
|
|
Junmin Liu
|
|
|
*
|
|
|
|
*
|
|
Dengyuan Song
|
|
|
*
|
|
|
|
*
|
|
Yiyu Wang
|
|
|
*
|
|
|
|
*
|
|
All directors and executive officers as a group
|
|
|
54,313,776
|
|
|
|
29.94
|
|
Principal Shareholders and 5% Shareholders:
|
|
|
|
|
|
|
|
|
Yingli Power Holding Company Ltd.(4)
|
|
|
51,600,652
|
|
|
|
28.39
|
|
* Less than 1% of
our outstanding share capital.
|
(1)
|
Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, and includes voting or investment power with respect to the securities.
|
|
(2)
|
Percentage of beneficial ownership of each person listed is based on 181,763,770 ordinary shares outstanding and, as applicable, (i) the ordinary shares underlying share options exercisable by such person and (ii) restricted ordinary shares awarded to such person that can be vested, in each case within 60 days of the date of this annual report, not including share options that can be exercised early, in the discretion of the holder, into unvested ordinary shares.
|
|
(3)
|
Represents 51,600,652 of our ordinary shares owned by Yingli Power, our principal shareholder, which is 100% beneficially owned by the family trust of Mr. Miao, and 272,000 restricted shares that were vested and 930,000 stock options exercisable. Mr. Miao’s business address is c/o Tianwei Yingli New Energy Resources Co., Ltd., No. 3399 North Chaoyang Street, Baoding, People’s Republic of China.
|
|
(4)
|
Represents 51,600,652 of our ordinary shares beneficially owned by Yingli Power. Yingli Power is 100% beneficially owned by the family trust of Mr. Liansheng Miao. The mailing address of Yingli Power is Romasco Place, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, British Virgin Islands.
|
As of May 16, 2017, 128,933,690 or
70.9% of our outstanding ordinary shares in the form of ADSs, are held by 19 record holders in the United States. Because
many of these shares are held by brokers or other nominees, we cannot ascertain the exact number of beneficial shareholders
with addresses in the United States. None of our shareholders has voting rights that are different from those of any other
shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our
company.
Please refer to “Item 6.B. Directors,
Senior Management and Employees — Compensation of Directors and Executive Officers — 2006 Stock Incentive Plan”
for information regarding options and restricted shares granted to our directors, officers, employees and consultants.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
Please refer to “Item 6.E. Directors,
Senior Management and Employees — Share Ownership”.
|
B.
|
Related Party Transactions
|
We adopted an audit committee charter,
which requires that the audit committee review all related party transactions on an ongoing basis and that all such transactions
be approved by the committee. Set forth below is a description of all of our related party transactions for the years presented.
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products to related parties (note (a))
|
|
|
435,046
|
|
|
|
756,431
|
|
|
|
390,388
|
|
|
|
56,228
|
|
Purchase of raw materials and services from related parties (note (b))
|
|
|
833,813
|
|
|
|
656,091
|
|
|
|
441,461
|
|
|
|
63,584
|
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable from related parties (note (a))
|
|
|
447,093
|
|
|
|
538,222
|
|
|
|
77,520
|
|
Prepayments to related party suppliers (note (b))
|
|
|
230,376
|
|
|
|
173,631
|
|
|
|
25,008
|
|
Other amounts due from related parties (note (c))
|
|
|
433,277
|
|
|
|
619,705
|
|
|
|
89,256
|
|
Total due from related parties - current
|
|
|
1,110,746
|
|
|
|
1,331,558
|
|
|
|
191,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
of amounts due from related party
(note (d))
|
|
|
32,318
|
|
|
|
32,332
|
|
|
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments for construction of property, plant and equipment to related party suppliers (note (e))
|
|
|
433
|
|
|
|
130
|
|
|
|
19
|
|
Total other due from related parties
|
|
|
433
|
|
|
|
130
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due to related parties (note (b))
|
|
|
(536,409
|
)
|
|
|
(393,063
|
)
|
|
|
(56,613
|
)
|
Short-term sales lease back and financing lease payable due to related parties
|
|
|
(57,248
|
)
|
|
|
(51,808
|
)
|
|
|
(7,462
|
)
|
Total due to related parties - current
|
|
|
(593,657
|
)
|
|
|
(444,871
|
)
|
|
|
(64,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
sales
lease back and financing lease payable due to related parties (
note (i)
)
|
|
|
(242,267
|
)
|
|
|
(267,367
|
)
|
|
|
(38,509
|
)
|
Notes:
|
(a)
|
We sold PV modules of RMB 14,793, RMB 5,365 and nil to its affiliate, Tibetan Yingli, for the years ended December 31, 2014, 2015 and 2016. We sold products of RMB 268,177, RMB 683,319 and RMB 377,496 (US$ 54,371) to the subsidiaries of Yingli Group for the years ended December 31, 2014, 2015 and 2016, respectively. We sold PV modules of RMB 81,203, nil and nil to an affiliate which we hold 26.53% of its equity interest for the years ended December 31, 2014, 2015and 2016. However, it was no longer our related party since 2016 due to that we disposed all of our share of equity.The amount of transaction mentioned above included value-added tax.
|
|
(b)
|
The balance as of December 31, 2015 and 2016 mainly represents the prepayments to subsidiaries of Yingli Group for the purchase of raw materials and receipt of services. We purchased raw materials of RMB 587,538, RMB 401,690 and RMB 204,436 (US$ 29,445) from the subsidiaries and an affiliate of Yingli Group for the years ended December 31, 2014, 2015 and 2016, respectively. We purchased services of RMB 230,950, RMB 239,060 and RMB 235,448 (US$33,912) from the subsidiaries of Yingli Group and our affiliate for the years ended December 31, 2014, 2015 and 2016, respectively. The amount of transaction mentioned above included value-added tax.
|
|
(c)
|
Other amounts due from related parties consists of the
following:
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Loans to Yingli Group and its subsidiaries (i)
|
|
|
51,800
|
|
|
|
399,677
|
|
|
|
57,565
|
|
Receivables for disposal of subsidiaries (ii)
|
|
|
146,606
|
|
|
|
146,606
|
|
|
|
21,116
|
|
Amount paid to Yingli Group and its subs to purchase raw materials on behalf of us for better credit term
|
|
|
140,891
|
|
|
|
—
|
|
|
|
—
|
|
Receivables for disposal of machinery
|
|
|
30,739
|
|
|
|
—
|
|
|
|
—
|
|
Others receivables from miscellaneous transactions
|
|
|
63,241
|
|
|
|
73,422
|
|
|
|
10,575
|
|
|
|
|
433,277
|
|
|
|
619,705
|
|
|
|
89,256
|
|
|
(i)
|
Hainan Yingli made one-year entrusted loans of RMB 50,000
,RMB 25,000 and RMB 40,000 in 2012, 2013 and 2014, to a subsidiary of Yingli Group at an interest rate of 5.4%, 6.0% and 6.0%
per annum, respectively, and collected RMB 65,000 and RMB 10,000 and nil in 2013, 2014 and 2015 for the above mentioned loans, respectively.
In 2015, Yingli Group disposed the 100% equity interest in the aforementioned subsidiary to a third party and the balance of RMB
40,000 was reclassified to other receivable.
|
In 2014, Hainan Yingli made another one-year entrusted loan
of RMB 18,000 at an interest rate of 6% per annum to a subsidiary of Yingli Group, which was collected in full by Hainan Yingli
in December 2015.
In 2015, Yingli Tianjin made a one-year entrusted loan of RMB
2,000 at an interest rate of 5.35% per annum to Tianjin Yingli PV Power Plant Technology Development Co., Ltd., a subsidiary of
Yingli Group. As of December 31, 2016, our company did not withdraw the entrusted loans.
In 2015, Yingli Tianjin made several one-year entrusted loans
of RMB 49,800 at an interest rate of 5.6% per annum to Yingli (Tianjin) International Trading Ltd. (“TJ International Trading”),
a subsidiary of Yingli Group. As of December 31, 2016, our company did not withdraw the entrusted loans.
In 2016, we also made interest free loans of RMB 347,877 to
Yingli Group and its subsidiaries, which are expected to be collected in 2017. The main purpose of these loans is to allow Yingli
Group and its subsidiaries have enough capital to complete their long-lived assets under construction, such as project assets,
and then dispose these assets to settle our historically cumulated receivables due from Yingli Group and its subsidiaries.
|
(ii)
|
In 2014, we disposed all our equity interest in our subsidiary Yingli (Tianjin) International
Trading Ltd. (“TJ International Trading”) to Tianjin Yingli Bubalus Logistics Co., Ltd., which is a
subsidiary of Yingli Group. The total consideration was RMB 134,167 and gains of RMB 22,271 were recorded in “Other income”.
As of December 31, 2015 and 2016, the related proceeds for the disposal have not been collected.
|
In December 2014, Yingli Shuntong (Beijing).International Freight
Agency Co., Ltd. was sold to Tianjin Yingli Bubalus Logistics Co., Ltd., which is a subsidiary of Yingli Group for the consideration
of RMB 12,439, and gains of RMB 1,672 was recorded in “Other income”.
In 2016, we disposed all our interest in our subsidiary Datong
Lichuang New Energy Resources Co. Ltd. to Yingli PV Group for the consideration of RMB 1,000, and gains of RMB 29,682 was recorded
in other income. All the consideration proceeds have been received by us in 2016.
In 2016, we disposed all our interest in our subsidiary Chengdu
Yaoneng New Energy Resources Co., Ltd. to Beijing Yaoying New Energy Resources Co., Ltd. for the consideration of RMB 826, and
gains of RMB 291 was recorded in “Other income”. All the consideration proceeds have been received by us in 2016.
(d)
|
In 2012, Yingli Lixian entered into a financial lease with a subsidiary of Yingli Group, and paid RMB 4,490 and RMB 7,510 deposits during the years ended December 31, 2012 and 2013, respectively, for guarantee of the transaction. In 2012, Fine Silicon entered into a financial lease with a subsidiary of Yingli Group, and paid RMB 10,000 deposits for guarantee of the transaction. In August 2013, Yingli China entered into a sales-lease back transaction with a subsidiary of Yingli Group and paid RMB 10,000 deposits for guarantee of the lease. These deposits will be returned when the transactions were completed, and are recorded in due from related parties as of December 31, 2012, and are reclassified to long-term portion of amounts due from a related party as of December 31, 2015 and 2016.
|
(e)
|
The balance as of December 31, 2015 and 2016 mainly represents the prepayments to subsidiaries of Yingli Group for the construction of plants, which is included in property, plant and equipment in the Consolidated Balance Sheets.
|
(f)
|
We entered into entrusted construction contract with Yingli PV Group. Under the general term of the contract, Yingli PV Group built 23 project assets of 222.4MW in total for us with total amount of RMB 825,748 in 2014. In September 2015, we entered into an agreement with Yingli PV Group to terminate the above-mentioned construction contract and deconsolidated all the project assets under the VIE structure. The loss of RMB 6,852, which was the difference between the consideration of RMB 554,452 and the net book value of the VIEs of RMB561,304, (comprised of total assets of RMB 1,886,045 net of related liabilities of RMB 1,324,741), of was recognized in the Consolidated Statements of Comprehensive Loss upon the disposal of VIE in 2015. Upon disposal, accounts receivables from these VIEs due to sales of PV modules were reclassified from accounts receivables from subsidiaries, which was eliminated when preparing the consolidation, to accounts receivables from related parties; meanwhile, RMB 554,452 of receivables in relation to consideration of disposal of VIE from related parties were net-off by payables to the related parties for the initial capital injection into the VIEs when VIE were incorporated.
|
(g)
|
We pledged our assets of total amount of RMB 147,600 and provided guarantee to back up the RMB781,830 (US$120,694) and RMB 433,264 (US$ 62,403) bank borrowing of Yingli Group as of December 31, 2015 and 2016, respectively.
|
(h)
|
We received guarantee from the Yingli Group of total amount of RMB 2,386,307 and RMB 2,263,334 (US$ 325,988) as of December 31, 2015 and 2016, respectively.
|
(i)
|
We entered into several financing lease agreement with related party controlled by Yingli Group. As of December 31, 2015 and 2016, the total outstanding payable within one year was RMB 57,248 and RMB 51,808 (US$ 7,462) over one year was RMB 242,267and RMB 267,367 (US$38,509), respectively.
|
Employment Agreements
See “Item 6.C. Directors, Senior
Management and Employees — Board Practices — Employment Agreements”.
Stock Incentive Plan
The 2006 Stock Incentive Plan was adopted
by our shareholders and board of directors in December 2006 and was amended in May 2007 and August 2009. The 2006
Stock Incentive Plan provides for the grant of options, limited stock appreciation rights and other stock-based awards such as
restricted shares. The purpose of the plan is to aid us and our affiliates in recruiting and retaining key employees, directors
or consultants of outstanding ability and to motivate such employees, directors or consultants to utilize their best efforts on
behalf of us and our affiliates by providing incentives through the granting of awards. Our board of directors believes that our
long-term success is dependent upon our ability to attract and retain talented individuals who, by virtue of their ability, experience
and qualifications, make important contributions to our business. See “Item 6.B. Directors, Senior Management and Employees
— Compensation of Directors and Executive Officers — 2006 Stock Incentive Plan”.
|
C.
|
Interests of Experts
and Counsel
|
Not applicable.
ITEM 8.
FINANCIAL
INFORMATION
|
A.
|
Consolidated Statements
and Other Financial Information
|
See “Item 18. Financial Statements”.
Legal and Administrative Proceedings
We may from time to time become a party
to various legal or administrative proceedings arising in the ordinary course of our business.
On June 21, 2010, we commenced an
arbitration proceeding against International Commercial E Industrial, S.A., or INCEISA, a Spanish Solar product distributor, at
the International Court of Arbitration of the International Chamber of Commerce. We commenced the arbitration seeking recovery
of certain unpaid accounts receivable of approximately US$7.04 million and €14.47 million by INCEISA under the terms of a
written settlement agreement. On October 11, 2011, the arbitral tribunal granted an award directing INCEISA to pay us over
US$2.29 million and €15.98 million, respectively, as damages for breach of contractual obligations, as well as associated
legal and arbitration cost. As of the date of this annual report, we are still in the process of registering and enforcing such
award in Spain in accordance with relevant rules and regulations. In November 2014, the local court finally recognized
the arbitration award in favor of us and we are currently enforcing the award against INCEISA.
In October 2012, we received notice
of an antitrust and unfair competition lawsuit filed by Solyndra, LLC (a U.S.-based solar company) against us and our subsidiary,
Yingli Green Energy Americas, Inc., or Yingli Americas, and two other China-based solar manufacturers in the U.S. District
Court for the Northern District of California. We and Yingli Americas filed our joint motion to dismiss all of the claims in an
amended complaint by Solyndra’s liquidation trustee with our co-defendants (Suntech Power Holdings Co., Ltd., Suntech
America, Inc., Trina Solar Ltd. and Trina Solar (U.S.) Inc.) in early March 2013. On April 9, 2014, we received
an order denying defendants’ joint motion to dismiss Solyndra’s claims. In February 2016, we entered into an agreement
to settle these claims, or the Settlement Agreement. According to the Settlement Agreement, we and Yingli Americas paid US$7.5
million to settle Solyndra’s claims. If the annual total sales of PV modules from us and all of our affiliates in any single
calendar year between 2016 to 2018 to the United States and Canada and any of their respective territories or districts equal or
exceed 800 megawatts, we will pay Solyndra a single additional payment of US$10 million. The Settlement Agreement was approved
by United States Bankruptcy Court for the District of Delaware, which is responsible for adjudicating the Solyndra bankruptcy,
in March 2016. The aforementioned lawsuit against us has been dismissed with prejudice, and under the Settlement Agreement, Solyndra
has released us and all of our affiliates from any further claims based on the same or any related facts or allegations. In 2015,
we recognized provisions of settlement fee of US$7.5 million (RMB48.7 million) and we didn’t recognize any provisions for
the conditional additional payment of US$10 million (RMB64.8 million) since it is not probable that a liability has been incurred.
We made the payment of US$7.5 million in 2016.
In October 2013, we received notice
of an antitrust lawsuit with similar claims filed by another U.S.-based solar company, Energy Conversion Devices Liquidation Trust,
or ECD, through its liquidating trustee, against us and the same China-based solar manufacturers in the U.S. District Court
of the Eastern District of Michigan. On April 18, 2014, we and our co-defendants (Suntech America, Inc., Trina Solar Ltd. and Trina
Solar (U.S.) Inc.) filed a joint motion to dismiss all of ECD’s claims. On October 31, 2014, the U.S. District Court
of the Eastern District of Michigan granted the joint motion dismissing all claims. ECD brought a motion for reconsideration, which
was denied on August 20, 2015. ECD brought two separate motions, in December 2014 and August 2015, each to alter or amend the judgment
and for leave to file an amended complaint, both which were denied by September 2015. ECD appealed to the U.S. Court of Appeals
for the Sixth Circuit, which unanimously affirmed the trial court’s dismissal of ECD’s claims in August 2016. ECD filed
a petition for a writ of certiorari to the U.S. Supreme Court, which was denied on April 17, 2017, ending the litigation.
In May and June 2015, two individual plaintiffs
respectively filed purported class action securities fraud lawsuits against us, our chairperson and chief executive officer, Mr.
Liansheng Miao, and our director and chief financial officer, Mr. Yiyu Wang, in the U.S. District Court for the Central District
of California, both alleging, among other things, that we made false and misleading statements and failed to disclose certain material
financial information. In October 2015, the cases were consolidated, and the court appointed lead plaintiffs and lead counsel.
In November 2015, lead plaintiffs filed a consolidated amended complaint. The amended complaint contended that we and certain of
our officers and directors made false or misleading statements between December 2, 2010 and May 15, 2015 regarding (i) the Chinese
government’s Golden Sun program, which provided subsidies for solar projects in China; and (ii) our accounts receivable attributable
to Chinese customers. The sole claim in that complaint was for violation of Section 10(b) of the Securities Exchange Act of 1934.
In December 2015, we filed a motion to dismiss the consolidated suit, and, on May 10, 2016, the Court granted that motion with
leave to amend. On June 24, 2016, lead plaintiffs filed a new complaint, again alleging that, between December 2, 2010 and May
15, 2015, Yingli’s officers made false or misleading statements regarding Golden Sun and accounts receivables. This complaint
added an additional claim against Mr. Miao and Mr. Wang for violation of Section 20(a) of the Exchange Act. On August 8, 2016,
we again filed a motion to dismiss the suit, and, on March 15, 2017, the Court again dismissed the plaintiffs’ claims with
leave to amend. The plaintiffs filed a second amended complaint on April 24, 2017. The Court set a briefing schedule requiring
the filing of our motion to dismiss by May 30, 2017, plaintiffs’ opposition by July 5, 2017, and our reply by July 19, 2017.
A hearing on the motion is set for August 14, 2017. It is premature at this stage of the litigation to evaluate the likelihood
of favorable or unfavorable outcomes. Our company intends to defend vigorously against all allegations.
In the past years, we signed several agreements and amendments
with a supplier to provide certain service for us. Due to certain quality control issues related to the supplier and substantial
changes in the market, we and this supplier had disputes over the performance of the contracts and our payments of accounts receivable
to the supplier. In May 2013, the supplier informed us that it would like to cease the recovery service and claimed compensation.
In July 2014, we filed litigation against this supplier for breach of contract and claimed damages against this supplier. In September
2015, the supplier also filed litigation against us for the default in performance of contract and claimed compensation. The Provincial
High People’s Court consolidated these two disputes in January 2016, in accordance with our request. At the end of December
2016, the court issued judgments as to these two disputes and we were informed of the judgments in January 2017, in which the court
ruled that the agreements and amendments with the supplier shall be rescinded, and we shall pay compensation to the supplier. All
other claims of us and the supplier were rejected. At this time, both we and the supplier have appealed to the Supreme People’s
Court, so no judgments of the Provincial High People’s Court have yet taken effect. The Supreme People’s Court has not
held any hearing yet. We believe that the supplier’s claims lack merit. As such, we are hopeful that the judgment from the Provincial High People’s Court will be overturned in our favor. However,
considering the uncertainties involved in the appeals process, we made a provision of RMB59 million, representing the entire amount
awarded to the supplier by the initial judgment from the Provincial High People’s Court. Nevertheless, such provision does
not constitute, and should not be interpreted or viewed in any manner as, any recognition by us of the merit of any aspect of the
judgment from the Provincial High People’s Court. Accordingly, we recorded an accrual for the amount of compensation to the
supplier in the year ended December 31, 2016.
With respect to anti-dumping and anti-subsidy
investigations of CSPV wafers, cells, and modules from China initiated by the EU in 2012, the European Commission accepted an undertaking,
or the Undertaking, made by a group of Chinese PV products exporters (including us) jointly with the China Chamber of Commerce
for Import and Export of Machinery and Electronic Products, or CCCME. Pursuant to the Undertaking, the Chinese exporters undertook
to limit their exports of solar panels to the EU and set prices above a minimum price, in exchange for the EU agreeing to forgo
the imposition of anti-dumping duties on these solar panels from China. CCCME is responsible for allocating the quota among these
exporters, and we have been allocated a portion of the quota. On December 5, 2013, the Council of European Union adopted the
final findings of the European Commission and imposed anti-dumping and anti-subsidy duties on CSPV modules and key components (i.e.
cells) originating in or consigned from People’ s Republic of China. Wafers were excluded from the product scope. The anti-dumping
duty rates ranged from 27.3% to 64.9%, while the anti-subsidy duty rates from 0% to 11.5%. The rates applicable to us are 35.5%
and 6.3%, respectively. The definitive duties will be imposed for a two-year period starting from December 6, 2013. At the
same time, the Council of European Union also confirmed the acceptance by European Commission of the Undertaking.
In December 2015, the EU Commission initiated
an expiry review of the anti-dumping measure and the EU Commission has initiated ex officio a partial interim review as to whether
the maintenance of the anti-dumping measure is in the Union’s interest. In March 2017, as the result of these reviews, the
EU Commission determined and proposed that the anti-dumping measure shall be maintained and extended for 18 months.
On November 7, 2012, the U.S. International
Trade Commission (ITC) determined that CSPV modules produced from Chinese cells are materially injuring the U.S. CSPV cells and
modules industry. The U.S. Department of Commerce, or the DOC, issued its final determinations on the rates of the anti-dumping,
or AD, and countervailing duties, or CVD, on October 10, 2012, which became effective upon issuance of the final anti-dumping
and countervailing duties orders in early December 2012. As a result of such final determinations, we, as a voluntary respondent,
are subject to an average aggregated AD/CVD rate of 29.18%. However, this average aggregated AD/CVD rate might be subject to change
due to the administrative review process initiated by DOC in early 2014. We were mandatory respondent in the first administrative
review of the anti-dumping duty order and obtained an anti-dumping rate of 0.79% in the final determination in July 2015. As one
of the non-mandatory respondents in the first administrative review of the countervailing duty order, we obtained a countervailing
duty rate of 20.94% in July 2015. In February 2015, the DOC initiated the second administrative review of the AD/CVD duty order.
We are a mandatory respondent in the second administrative review of the anti-dumping duty order and obtained an anti-dumping duty
of 12.19% in the final determination in June 2016. We were not part of the second administrative review of the countervailing duty
order and therefore the final result of the second administrative review of the countervailing duty order is inapplicable to us.
On February 3, 2016, the DOC initiated the
third administrative review of the anti-dumping duty order (“Solar 1ADAR3”) covering the period of December 1, 2014
to November 30, 2015 and the third administrative review of the countervailing duty order (“Solar 1 CVD AR3”) covering
the period of January1, 2014 to December 31, 2014 of CSPC whether or not assembled into modules (certain solar cells and panels)
from the PRC. Subject merchandise includes CSPV, modules or panels, whether or not partially or fully assembled into other products,
including, but not limited to modules, laminates, and building integrated materials. On December 22, 2016, the DOC published
its preliminary determination of the AD review and the dumping margins for the entities covered by this review are from 7.72% to
238.95%. As a separate rate company in this review, the AD margin applicable to us is 13.97%. On January 9, 2017, the DOC published
its preliminary determination of the CVD review and the countervailable subsidy rates for the entities covered by this review are
from 12.48% to 20.98%. Since the final results of this review are the basis for the assessment of anti-dumping duties on period
of review, or POR, entries and for future deposits of estimated anti-dumping duties, upon issuance of the final results of this
review, the DOC will determine, and Customs and Border Protection, or CBP, CBP shall assess, anti-dumping duties on all appropriate
entries covered by this review. The DOC will likely issue the final determination for this review in July 2017. For CVD review,
both Yingli and Solar World withdrew the CVD review requests within 90 days of the date of publication of the notice of initiation,
and therefore, we are no longer subject to CVD review and the entries of subject merchandise into the United States during the
CVD AR3 review period are to be liquidated at the CVD rates applicable at the time of entry and CBP will collect cash deposits
of estimated CVDs at the most recent CVD countervailable rate applicable to us (20.94%).
On February 13, 2017, the DOC initiated
the fourth administrative review of the anti-dumping duty order (“Solar 1 AD AR4”) covering the period of December
1, 2015 to November 30, 2016 and the third administrative review of anti-dumping duty order (“Solar 1 CVD AR4”) covering
the period of January1, 2015 to December 31, 2015 of CSPC whether or not assembled into modules (certain solar cells and panels)
from the PRC. On the same day, we, as a listed party, were required by the DOC to file an anti-dumping Quantity & Value, or
Q&V, questionnaire, and the response to which would be the basis for the DOC to select mandatory respondents. We have filed
the anti-dumping Q&V and provided all documents required by the DOC. The mandatory respondent selection result for this AD
administrative review and CVD administrative review has not been issued.
On January 23, 2014, the DOC initiated
a parallel AD investigation into CSPV products from Mainland China and Taiwan and CVD investigation into CSPV products from Mainland
China. The products concerned are CSPV cells, and modules, laminates and/or panels consisting of CSPV cells, whether or not partially
or fully assembled into other products, including building integrated materials. Subject merchandise also includes modules, laminates
and/or panels assembled in Mainland China and Taiwan consisting of CSPV cells that are completed or partially manufactured within
a customs territory other than Mainland China and Taiwan, using ingots, wafers that are manufactured in Mainland China and Taiwan,
or cells where the manufacturing process begins in Mainland China and Taiwan and is completed in other countries (hereinafter “Solar
II”). On December 23, 2014, the DOC published its confirmative final determination on these investigations by imposing
punitive AD tariffs ranging from 26.71% to 165.04% and CVD tariffs ranging from 27.64% to 49.21%. As a separate rate company in
these investigations, the AD and CVD tariffs applicable to our company will be 52.31% and 38.43%, respectively. On February 10,
2015, the ITC issued its final injury determinations by confirming injury to the U.S. CSPV module industry by Chinese CSPV module
manufacturers. As a result of these determinations of the DOC and ITC, Chinese modules integrating cells from third countries will
be subject to the new AD and CVD tariffs when exported to the US. Although we have very limited sales of modules to the U.S. incorporating
third country cells, such determinations may adversely affect our business flexibility in the U.S. market and our business in the
U.S. may be materially and adversely impacted.
In April 2016, the DOC initiated the
first administrative review for the anti-dumping measure and countervailing measure for Solar II for certain Chinese exporters.
In February 2017, the DOC issued a preliminary determination as to its first administrative review of the AD and CVD measures..
The preliminary result for the Chinese exporters included in the first administrative review of the anti-dumping measure was 14.70%,
and the preliminary result for the Chinese exporters included in the first administrative review of the countervailing measure
was 13.93%. Our company was not included in either the AD or CVD first administrative review and therefore the result of such reviews
will not affect the rates applicable to our company.
In February 2017, the U.S. petitioner
requested a second administrative review for the anti-dumping measure and countervailing measure for Solar II for certain Chinese
exporters, including our company. The DOC has not yet initiated such administrative reviews.
On March 6 and March 12, 2014,
Hainan Yingli received notices from the Department of Land, Environment and Resources of Hainan Province and Haikou Municipal Environmental
Protection Bureau, respectively, requesting Hainan Yingli to (i) suspend partially its production lines, and (ii) apply
for new environmental impact assessments for the increase in its production capacity due to equipment upgrades. See “Item
4.B. Business Overview — Environmental Matters”.
Dividend Policy
Since our incorporation, we have never
declared or paid any dividends, nor do we have any present plan to pay any cash dividends on our ordinary shares in the foreseeable
future.
Our board of directors has complete discretion
on whether to pay dividends, subject, in certain cases, to the approval of our shareholders. Even if our board of directors decides
to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and
surplus, general financial condition, contractual restrictions and other factors that our board of directors may deem relevant.
If we pay any dividends, we will pay our ADS holders to the same extent as if they were holders of our ordinary shares, subject
to the terms of the deposit agreement, including the fees and expenses payable under the deposit agreement. Cash dividends on our
ordinary shares, if any, will be paid in U.S. dollars.
We are a Cayman Islands holding company and
substantially all of our income, if any, will be derived from dividends we receive directly or indirectly from our operating subsidiaries
located in the PRC. PRC regulations currently permit payment of dividends only out of accumulated profits, if any, as determined
in accordance with PRC accounting standards and regulations. In addition, in the discretion of their respective board of directors,
Tianwei Yingli is required to allocate a portion of its after-tax profits to its reserve fund, enterprise development fund and
employee bonus and welfare fund, and Yingli China is required to allocate at least 10% of its after-tax profits to its reserve
fund until the cumulative amount of such reserve fund reaches 50% of its registered capital, as well as to its employee bonus and
welfare fund. These reserve funds may not be distributed as cash dividends. Furthermore, if any of our PRC subsidiaries incurs
debt in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to
us.
Under the EIT Law and its implementation
rules issued by the State Council, both of which became effective on January 1, 2008, dividends from our PRC subsidiaries
to Yingli Green Energy and Yingli International may be subject to a withholding tax rate of 10%, unless each of Yingli Green Energy
and Yingli International are deemed to be a PRC “resident enterprise”.
Moreover, the EIT Law and its implementation
rules specify that an income tax rate of 10% will be applicable to dividends payable to non-PRC investors who are considered as
“non-resident enterprises” which have no establishment inside the PRC, or derive income not substantially connected
with their establishments inside the PRC, to the extent such dividends are derived from sources within the PRC. We are a Cayman
Islands holding company and substantially all of our income may be derived from dividends we receive directly or indirectly from
our operating subsidiaries located in the PRC. If we declare dividends on such income, it is unclear whether such dividends will
be deemed to be derived from sources within the PRC under the EIT Law and its implementation rules, and be subject to the 10% income
tax. See “Item 10.E. Taxation — People’s Republic of China Taxation”.
We have not experienced any significant
changes since the date of our audited consolidated financial statements included in this annual report.
ITEM 9.
THE OFFER AND LISTING
|
A.
|
Offer and Listing Details.
|
The ADSs, each representing one of our
ordinary shares, have been listed on the NYSE since June 8, 2007 under the symbol “YGE”. The table below shows,
for the periods indicated the high and low market prices on the NYSE for the ADSs and all prices have been retroactively adjusted
to reflect the current ADS-to-ordinary share ratio of one ADS to ten ordinary shares, which became effective on December 28, 2015,
for all periods presented.
|
|
Market Price per
ADS
|
|
|
|
High
|
|
|
Low
|
|
Annual Highs and Lows
|
|
|
|
|
|
|
|
|
2012
|
|
|
62.7
|
|
|
|
12.5
|
|
2013
|
|
|
81.3
|
|
|
|
17.0
|
|
2014
|
|
|
74.5
|
|
|
|
18.5
|
|
2015
|
|
|
24.2
|
|
|
|
3.3
|
|
2016
|
|
|
5.24
|
|
|
|
2.52
|
|
Quarterly Highs and Lows
|
|
|
|
|
|
|
|
|
First Quarter 2015
|
|
|
24.7
|
|
|
|
18.5
|
|
Second Quarter 2015
|
|
|
21.1
|
|
|
|
9.4
|
|
Third Quarter 2015
|
|
|
11.9
|
|
|
|
3.3
|
|
Fourth Quarter 2015
|
|
|
8.8
|
|
|
|
3.8
|
|
First Quarter 2016
|
|
|
5.0
|
|
|
|
3.2
|
|
Second Quarter 2016
|
|
|
5.24
|
|
|
|
3.02
|
|
Third Quarter 2016
|
|
|
4.4
|
|
|
|
3.56
|
|
Fourth Quarter 2016
|
|
|
4.07
|
|
|
|
2.52
|
|
First Quarter 2017
|
|
|
2.90
|
|
|
|
1.85
|
|
Second Quarter 2017 (through May 11, 2017)
|
|
|
3.35
|
|
|
|
2.07
|
|
Monthly Highs and Lows
|
|
|
|
|
|
|
|
|
October 2016
|
|
|
4.07
|
|
|
|
3.78
|
|
November 2016
|
|
|
3.79
|
|
|
|
3.21
|
|
December 2016
|
|
|
3.23
|
|
|
|
2.52
|
|
January 2017
|
|
|
2.85
|
|
|
|
2.65
|
|
February 2017
|
|
|
2.83
|
|
|
|
2.66
|
|
March 2017
|
|
|
2.69
|
|
|
|
1.85
|
|
April 2017
|
|
|
3.35
|
|
|
|
2.07
|
|
May 2017 (through May 11, 2017)
|
|
|
2.74
|
|
|
|
2.23
|
|
The closing price for the ADSs on the NYSE on May 11, 2017 was
US$2.4 per ADS.
On February
15, 2017, we announced that we had received notification from the NYSE of our company’s non-compliance with the continued
listing standards of the NYSE because our average market capitalization has been less than US$50 million over a consecutive 30
trading-day period and our last reported shareholders’ equity was less than US$50 million. In order to maintain continued
listing on the NYSE, our company has submitted a plan to the NYSE demonstrating how it intends to regain compliance with the NYSE’s
continued listing standards within eighteen months of the notification from the NYSE. The NYSE staff will then evaluate the plan
to determine whether our company has made a reasonable demonstration of an ability to come into conformity with the listing standard
within eighteen months. Should our company not meet the specified criteria within that period, our ADSs may be subject to trading
suspension and possible delisting from the NYSE. See “Item 3.D. Risk Factors — Risks Related to our ADSs —
We have fallen below the continued listing requirements of the New York Stock Exchange, and if we
cannot regain compliance in time, our ADSs may be delisted and the liquidity and the trading price of our ADSs could be materially
and adversely affected”.
Not Applicable.
The ADSs, each representing one of our
ordinary shares, have been listed on the NYSE since June 8, 2007 under the symbol “YGE”.
Not Applicable.
Not Applicable.
Not Applicable.
ITEM 10.
ADDITIONAL INFORMATION
Not Applicable.
|
B.
|
Memorandum and Articles
of Association
|
We incorporate by reference into this annual
report the description of our third amended and restated memorandum of association contained in our F-1 registration statement
(File No. 333-142851), as amended, initially filed with the SEC on May 11, 2007. Our shareholders adopted our third amended
and restated memorandum and articles of association by unanimous resolutions on May 11, 2007.
We have not entered into any material contracts
other than in the ordinary course of business and other than those described in “Item 4. Information on the Company”
or elsewhere in this annual report.
Foreign Currency Exchange
Foreign currency exchange in China is primarily
governed by the following rules:
|
·
|
Foreign Currency Administration
Rules (1996), as amended; and
|
|
·
|
Administration Rules of
the Settlement, Sale and Payment of Foreign Exchange (1996).
|
Under the Foreign Currency Administration
Rules, the foreign exchange incomes of domestic entities and individuals can be remitted into China or deposited abroad, subject
to the conditions and time limits to be issued by the PRC State Administration of Foreign Exchange, or SAFE. According to the Foreign
Currency Administration Rules, the Renminbi is convertible for current account items, including the distribution of dividends,
interest payments, trade and service-related foreign exchange transactions. Conversion of Renminbi for capital account items, such
as direct investments, loans, securities investments, derivative transactions and repatriation of investments, however, is still
subject to the approval of, and/or the registration with, SAFE or its local branches.
Under the Administration Rules of
the Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises may only buy, sell and/or remit foreign currencies
at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital
account item transactions, obtaining approval from SAFE or its local branches. Capital investments by foreign-invested enterprises
outside of China are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and the National Development
and Reform Commission or their local counterparts. Currently, the PRC laws and regulations do not provide clear criteria as to
how to obtain approval from SAFE. SAFE and its local branches have broad discretion as to whether to issue an approval.
Cayman Islands Taxation
The Cayman Islands currently levies no
taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of
inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands
except for stamp duties which may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands.
The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions
in the Cayman Islands.
We have, pursuant to Section 6 of
the Tax Concessions Law (1999 Revision) of the Cayman Islands, obtained an undertaking from the Governor-in-Council that:
|
(a)
|
no law which is enacted in the Cayman Islands imposing
any tax to be levied on profits, income or gains or appreciations shall apply to us or our operations:
|
|
(b)
|
the aforesaid tax or any tax in the nature of estate
duty or inheritance tax shall not be payable on our ordinary shares, debentures or other obligations.
|
The undertaking that we have obtained is
for a period of 20 years from August 15, 2006.
People’s Republic of China Taxation
Under the “Enterprise Income Tax
Law of the PRC,” or the EIT Law, which took effect as of January 1, 2008, enterprises established under the laws of
non-PRC jurisdictions but whose “de facto management bodies” are located in the PRC are considered “resident
enterprises” for PRC tax purposes and are generally subject to the uniform 25% enterprise income tax rate as to their worldwide
income. Under the implementation rules for the EIT Law, a “de facto management body” is defined as a body that
has substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties
and other factors of an enterprise. On April 22, 2009, the State Administration of Taxation promulgated a circular which sets
out criteria for determining whether “de facto management bodies” are located in China for overseas incorporated, domestically
controlled enterprises. However, as this circular only applies to enterprises incorporated under laws of foreign countries or regions
that are controlled by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine
the location of “de facto management bodies” for overseas incorporated enterprises that are controlled by individual
PRC residents like us and some of our subsidiaries. Therefore, although substantially all of our management is currently located
in the PRC, it is unclear whether PRC tax authorities would require or permit our overseas registered entities to be treated as
PRC resident enterprises. If the PRC tax authorities determine that Yingli Green Energy and some of our subsidiaries, such as Yingli
International, Yingli Capital, Yingli Hong Kong, Cyber Power and Cyber Lighting, are PRC resident enterprises, we and such subsidiaries
may be subject to the enterprise income tax at the rate of 25% as to our global income. In April 2009, the State Administration
of Taxation issued Circular Guoshuihan 2009 No. 203 (“Circular 203”) stipulating that entities which qualified
for “High and New Technology Enterprise”, or “HNTE” status should apply with the relevant tax authorities
to enjoy the reduced EIT rate of 15.0% provided under the EIT Law starting from the year when the HNTE certificate becomes effective.
In addition, an entity which qualified for HNTE status can continue to enjoy its remaining tax holiday from January 1, 2008
provided that it has obtained the HNTE certificate according to the new recognition criteria set by the EIT Law and the relevant
regulations.
Moreover, the implementation rules for
the EIT Law provide that a withholding tax rate of 10% is generally applicable to dividends paid to non-PRC investors who are “non-resident
enterprises” and a withholding tax rate of 20% is generally applicable for non-PRC individual investors to the extent such
dividends are derived from sources within the PRC, unless any such non-PRC investor’s jurisdiction of incorporation has a
tax treaty with China that provides for a different withholding arrangement. Furthermore, a circular issued by the MOF and the
State Administration of Taxation on February 22, 2008 stipulates that undistributed earnings generated prior to January 1,
2008 are exempt from enterprise income tax. We are a Cayman Islands holding company, Yingli International is a British Virgin Islands
intermediate holding company and Cyber Lighting is a Hong Kong intermediate holding company. The Cayman Islands and the British
Virgin Islands where such holding companies are incorporated do not have a tax treaty with China. According to the Arrangement
between Mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal
Evasion with respect to Tax on Income entered into in August 2006, or the Mainland and the Hong Kong Taxation Arrangement
and its relevant regulations, subject to the confirmation of the in-charge local tax authority, dividends paid by a foreign-invested
enterprise in China to its direct holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5%,
if the foreign investor is the “beneficial owner” and owns directly at least 25% of the equity interest of the foreign-invested
enterprise. The State Administration of Taxation promulgated the Notice on How to Understand and Determine the Beneficial Owners
in Tax Agreement in October 2009, or Circular 601, which provides guidance for determining whether a resident of a contracting
state is the “beneficial owner” of an item of income under China’s tax treaties and tax arrangements. According
to Circular 601, a beneficial owner generally must be engaged in substantive business activities. An agent or conduit company will
not be regarded as a beneficial owner and, therefore, will not qualify for treaty benefits. The conduit company normally refers
to a company that is set up for the purpose of avoiding or reducing taxes or transferring or accumulating profits. Substantially
all of our income may be derived from dividends we receive from our operating subsidiaries located in the PRC. Thus, dividends
for earnings accumulated beginning on January 1, 2008 payable to us by our subsidiaries in China, if any, will be subject
to a 10% income tax or, in the case of the dividends paid to Cyber Lighting, 5% income tax (subject to the confirmation of the
local tax authority) if we are considered as “non-resident enterprises” under the EIT Law.
Under the existing implementation rules of
the EIT Law, it is unclear what will constitute income derived from sources within the PRC and therefore dividends paid by us to
our non-PRC resident ADS holders and ordinary shareholders may be deemed to be derived from sources within the PRC and therefore
be subject to the 10% PRC withholding tax for non-PRC investors who are non-resident enterprises and 20% PRC withholding tax for
non-PRC investors who are individuals. Any gain realized on the transfer of the ADSs or ordinary shares by our non-PRC resident
ADS holders and ordinary shareholders may be subject to the 10% or 20% PRC income tax if such gain is regarded as income derived
from sources within the PRC.
In view of the issuance of Circular 601,
it remains unclear whether any dividends to be distributed by us to our non-PRC shareholders and ADS holders whose jurisdiction
of incorporation has a tax treaty with China providing for a different withholding arrangement will be entitled to the benefits
under the relevant withholding arrangement.
Certain United States Federal Income Tax Consequences
The following summary describes certain
United States federal income tax consequences to U.S. Holders (defined below) of the purchase, sale, and ownership of our ordinary
shares or ADSs as of the date hereof. Except where noted, this summary deals only with ordinary shares and ADSs held as capital
assets. As used herein, the term “U.S. Holder” means a beneficial owner of an ordinary share or ADS that is for United
States federal income tax purposes:
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an individual citizen or
resident of the United States;
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a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to United States federal income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.
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This summary does not represent a detailed
description of all of the United States federal income tax consequences which may be applicable to you in light of your particular
circumstances or if you are subject to special treatment under the United States federal income tax laws, including if you are:
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a dealer in securities or currencies;
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a financial institution;
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a regulated investment company;
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a real estate investment trust;
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a tax-exempt organization;
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a person holding our ordinary shares or ADSs as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;
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a trader in securities that has elected the mark-to-market method of accounting for your securities;
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a person liable for alternative minimum tax;
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a person who owns or is deemed to own 10% or more of our voting stock;
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a United States expatriate;
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a partnership or other pass-through entity for United States federal income tax purposes; or
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a person whose “functional currency” is not the United States dollar.
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If a partnership (or other entity treated
as a partnership for United States federal income tax purposes) holds our ordinary shares or ADSs, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership
holding our ordinary shares or ADSs, you should consult your tax advisors.
The discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions
thereunder as of the date hereof. These authorities may be replaced, revoked or modified, perhaps retroactively, so as to result
in United States federal income tax consequences different from those discussed below. In addition, this summary is based, in part,
upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will
be performed in accordance with their terms.
This summary does not contain a detailed
description of all the United States federal income tax consequences to you in light of your particular circumstances and does
not address the Medicare tax on net investment income or the effects of any state, local or non-United States tax laws.
If you
are considering the purchase, ownership or disposition of our ordinary shares or ADSs, you should consult your own tax advisors
concerning the United States federal income tax consequences to you in light of your particular situation as well as any consequences
arising under the laws of any other taxing jurisdiction
.
If you hold ADSs, for United States federal
income tax purposes, you generally will be treated as the owner of the underlying ordinary shares that are represented by such
ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to United States federal income tax.
The following discussion assumes that we
are not, and will not become, a passive foreign investment company, or PFIC, for United States federal income tax purposes as discussed
below.
Distributions on ADSs or
Ordinary Shares
The gross amount of distributions on the
ADSs or ordinary shares (including amounts withheld to reflect any PRC withholding taxes) will be taxable as dividends, to the
extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles.
Such income (including withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively
received by you, in the case of the ordinary shares, or by the depositary, in the case of ADSs. Such dividends will not be eligible
for the dividends received deduction allowed to corporations under the Code.
With respect to certain non-corporate U.S.
Holders, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign
corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on shares (or
ADSs representing such shares) that are readily tradable on an established securities market in the United States. United States
Treasury Department guidance indicates that depositary shares such as the ADSs (which are listed on the NYSE), but not our ordinary
shares, are treated as readily tradable on an established securities market in the United States for these purposes. Thus, while
we believe that the ADSs currently should be considered readily tradable on an established securities market in the United States
for these purposes, we do not believe that dividends that we pay on our ordinary shares that are not represented by ADSs currently
meet the conditions required for these reduced tax rates. There can be no assurance that the ADSs will be considered readily tradable
on an established securities market in later years. A qualified foreign corporation also includes a foreign corporation that is
eligible for the benefits of certain income tax treaties with the United States. In the event that we are deemed to be a PRC “resident
enterprise” under PRC tax law (see “— People’s Republic of China Taxation”), we may be eligible for
the benefits of the income tax treaty between the United States and the PRC, and if we are eligible for such benefits, dividends
we pay on our ordinary shares, regardless of whether such shares are represented by ADSs, may be eligible for the reduced rates
of taxation. Non-corporate holders that do not meet a minimum holding period requirement during which they are not protected from
the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of
the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In
addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with
respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period
has been met. You should consult your own tax advisors regarding the application of these rules given your particular circumstances.
Non-corporate U.S. Holders will not be
eligible for the reduced rates of taxation applicable to any dividends received from us if we are a PFIC in the taxable year in
which such dividends are paid or in the preceding taxable year.
Under the PRC tax law, if the dividends
paid by us are deemed to be derived from sources within the PRC, you may be subject to PRC withholding taxes on dividends paid
to you with respect to the ADSs or ordinary shares. Subject to certain conditions and limitations, PRC withholding taxes on dividends,
if any, generally will be treated as foreign taxes eligible for credit against your United States federal income tax liability.
For purposes of calculating the foreign tax credit, dividends paid on the ADSs or ordinary shares will be treated as income from
sources outside the United States and will generally constitute passive category income. Further, in certain circumstances, if
you have held ADSs or ordinary shares for less than a specified minimum period, or are obligated to make payments with respect
to positions in substantially similar or related property, you will not be allowed a foreign tax credit for foreign taxes imposed
on dividends paid on the ADSs or ordinary shares. The rules governing the foreign tax credit are complex. You should consult
your own tax advisors regarding the availability of the foreign tax credit under your particular circumstances.
To the extent that the amount of any distribution
exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax
principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of
the ADSs or ordinary shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by you on
a subsequent disposition of the ADSs or ordinary shares), and the balance in excess of adjusted basis will be taxed as capital
gain recognized on a sale or exchange. However, we do not expect to calculate earnings and profits in accordance with United States
federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as discussed
above).
Sale, Exchange or Other Disposition of ADSs
or Ordinary Shares
For United States federal income tax purposes,
you will recognize taxable gain or loss on any sale or exchange of ADSs or ordinary shares in an amount equal to the difference
between the amount realized for the ADSs or ordinary shares and your tax basis in the ADSs or ordinary shares. Such gain or loss
will generally be capital gain or loss. Capital gains of non-corporate U.S. Holders (including individuals) derived with respect
to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is
subject to limitations. Any gain or loss recognized by you will generally be treated as United States source gain or loss. However,
in the event that we are deemed to be a PRC “resident enterprise” under PRC tax law (see “— People’s
Republic of China Taxation”), we may also be treated as a PRC tax resident for purposes of the income tax treaty between
the United States and the PRC. If any PRC tax were to be imposed on any gain from the disposition of the ADSs or ordinary shares
and if you are eligible for the benefits of the treaty, you may elect to treat such gain as PRC source gain under the treaty. If
you are not eligible for the benefits of the treaty or you fail to make the election to treat any gain as PRC source, then you
generally would not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of the ADSs or ordinary
shares unless such credit can be applied (subject to applicable limitations) against tax due on other income derived from foreign
sources.
You are urged to consult your tax advisors
regarding the tax consequences if a foreign withholding tax is imposed on a disposition of ADSs or ordinary shares, including the
availability of the foreign tax credit under your particular circumstances.
Passive Foreign Investment Company
We believe that for U.S. federal income
tax purposes we were not a PFIC for our taxable year ended on December 31, 2017, and we do not expect to become one for our
current taxable year or in the future, although there can be no assurance in this regard. If, however, we are or become a PFIC,
you could be subject to additional United States federal income taxes on gain recognized with respect to the ADSs or ordinary shares
and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules. Non-corporate
U.S. Holders will not be eligible for reduced rates of taxation on any dividends received from us, if we are a PFIC in the taxable
year in which such dividends are paid or in the preceding taxable year. You are urged to consult your tax advisors concerning the
United States federal income tax consequences of holding ADSs or ordinary shares if we are considered a PFIC in any taxable year.
Information Reporting and Backup Withholding
In general, information reporting will
apply to dividends in respect of the ADSs or ordinary shares and the proceeds from the sale, exchange or other disposition of the
ADSs or ordinary shares that are paid to you within the United States (and in certain cases, outside the United States), unless
you are an exempt recipient. Backup withholding may apply to such payments if you fail to provide a taxpayer identification number
or certification of other exempt status or fail to report in full dividend and interest income. Backup withholding is not an additional
tax and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United
States federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.
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F.
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Dividends and Paying
Agents
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Not Applicable.
Not Applicable.
We have filed this annual report, including
exhibits, with the SEC. As allowed by the SEC, in Item 19 of this annual report, we incorporate by reference certain information
we previously filed with the SEC. This means that we can disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report.
You may read and copy this annual report,
including the exhibits incorporated by reference in this annual report, at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices in New York, New York and Chicago, Illinois.
You can also obtain copies of this annual report, including the exhibits incorporated by reference in this annual report, from
the SEC’s Public Reference Room and regional offices upon payment of a duplicating fee.
The SEC also maintains a website at www.sec.gov
that contains reports and other information regarding registrants that file electronically with the SEC. Our annual report and
some of the other information submitted by us to the SEC may be accessed through this web site.
As a foreign private issuer, we are exempt
from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and
officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained
in Section 16 of the Exchange Act.
In accordance with NYSE Rule 203.01,
we will post this annual report on our website
www.yinglisolar.com
. In addition, we will provide hardcopies of our annual
report to shareholders, including ADS holders, free of charge upon request.
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I.
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Subsidiary Information
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Not Applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk
Most of our sales are denominated in Euros
or U.S. dollars, while a substantial portion of our costs and expenses is denominated in Renminbi, Euros and U.S. dollars. Under
relevant PRC regulations, we are required to convert the foreign currencies we receive into Renminbi within specified time periods
and prior to disbursement.
Fluctuations in currency exchange rates
could have a significant effect on our financial stability due to a mismatch among various foreign currency-denominated assets
and liabilities. Fluctuations in exchange rates, particularly among the U.S. dollar, Euro and Renminbi, affect our net profit margins
and would result in foreign currency exchange gains or losses on our foreign currency denominated assets and liabilities. Our exposure
to foreign exchange risk primarily relates to foreign currency exchange gains or losses resulting from timing differences between
the signing of sales contracts or raw material supply contracts and the receipt of payment and the settlement or disbursement relating
to these contracts. For example, the depreciation of the Euro against the Renminbi, such as in the third quarter and the fourth
quarter of 2014 and the first quarter of 2015, has adversely affected and could continue to adversely affect our total net revenues.
As of December 31, 2016, we held an
equivalent of RMB2,572 million (US$370 million) in accounts receivable and prepayments to suppliers (excluding the non-current
portion), of which an equivalent of RMB365 million (US$53 million) were denominated in U.S. dollars and RMB165 million (US$24 million)
were denominated in Euros. As the substantial majority of our sales of our products and purchases of our raw materials are denominated
in U.S. dollars and Euros, any significant fluctuations in the exchange rates between the Renminbi and the U.S. dollar and/or the
Euro could have a material and adverse effect on our results of operations. Moreover, we had significant monetary assets and liabilities
denominated in U.S. dollars and Euros as of December 31, 2016, which consisted mainly of accounts receivable, prepayments
to suppliers and accounts payable. Fluctuations in foreign exchange rates could also have a material adverse effect on the value
of these monetary assets and liabilities denominated in U.S. dollars and Euros. Generally, appreciation of the Renminbi against
the U.S. dollar and Euro will result in foreign exchange losses for monetary assets denominated in U.S. dollars and Euros and foreign
exchange gains for monetary liabilities denominated in U.S. dollars and Euros. Conversely, depreciation of the Renminbi against
the U.S. dollar and Euro will generally result in foreign exchange gains for monetary assets denominated in U.S. dollars and Euros
and foreign exchange losses for monetary liabilities denominated in U.S. dollars and Euro.
Without taking into account the effect
of the potential use of hedging or other derivative financial instruments, we estimate that a 10% appreciation of the Renminbi
based on the foreign exchange rate on December 31, 2016 would result in our holding Renminbi equivalents of RMB329 million
(US$47 million) for our accounts receivable and prepayments to suppliers denominated in U.S. dollars as of December 31, 2016.
These amounts would represent net loss of RMB36 million (US$5 million) for our accounts receivable and prepayment to suppliers
denominated in U.S. dollars as of December 31, 2016. Conversely, we estimate that a 10% depreciation of the Renminbi would
result in our holding Renminbi equivalents of RMB402 million (US$58 million) for our accounts receivable and prepayments to suppliers
denominated in U.S. dollars as of December 31, 2016. These amounts would represent net income of RMB37 million (US$5 million)
for our accounts receivable and prepayment to suppliers denominated in U.S. dollars as of December 31, 2016.
Without taking into account the effect
of the potential use of hedging or other derivative financial instruments, we estimate that a 10% appreciation of the Renminbi
based on the foreign exchange rate on December 31, 2016 would result in our holding Renminbi equivalents of RMB148 million
(US$21 million) for our accounts receivable and prepayments to suppliers denominated in Euro as of December 31, 2016. These
amounts would represent net loss of RMB16 million (US$2 million) for our accounts receivable and prepayment to suppliers denominated
in Euros as of December 31, 2016. Conversely, we estimate that a 10% depreciation of the Renminbi would result in our holding
Renminbi equivalents of RMB181 million (US$26 million) for our accounts receivable and prepayments to suppliers denominated in
Euros as of December 31, 2016. These amounts would represent net income of RMB17 million (US$2 million) for our accounts receivable
and prepayment to suppliers denominated in Euros as of December 31, 2016.
Yingli Green Energy’s functional
currency is U.S. dollars. Assets and liabilities of Yingli Green Energy are translated into our reporting currency, the Renminbi,
using the exchange rate on the balance sheet date. Revenues and expenses are translated into our reporting currency, the Renminbi,
at average rates prevailing during the year. The gains and losses resulting from the translation of financial statements of Yingli
Green Energy are recognized as a separate component of accumulated other comprehensive income within shareholders’ equity.
The functional currency of our PRC subsidiaries is the Renminbi. Tianwei Yingli translates transactions denominated in other currencies
into Renminbi and recognizes any foreign currency exchange gains and losses in our statement of comprehensive income (loss).
In 2014, our net foreign currency exchange
loss was RMB243.4 million, increased from RMB32.2 million in 2013, which was mainly due to depreciation of the U.S. dollar and
the Euro against the Renminbi. However, the depreciation of Renminbi against the U.S. dollar and the Euro in 2015 caused our foreign
currency exchange loss to decrease to RMB132.7 million in 2015 from RMB243.4 million in 2014. In 2016, we recorded a foreign currency
exchange gain of RMB6.0 million (US$0.9 million) mainly due to appreciation of Japanese Yen and Euro appreciated against Renminbi
in 2016, which was substantially offset by a currency exchange loss caused by the depreciation of Renminbi against the U.S. dollar
in 2016. In addition, we have entered into hedging and foreign currency forward arrangements to limit our exposure to foreign currency
exchange risk. We expect that we will continue to be exposed to foreign currency exchange risk to the extent that our hedging and
foreign currency forward arrangements do not cover all of our expected revenues denominated in foreign currencies. We cannot predict
the effect of exchange rate fluctuations on our foreign exchange gains or losses in the future. We may continue to reduce the effect
of such exposure through foreign currency forward or other similar arrangements, but because of the limited availability of such
instruments in China, we cannot assure you that we will always find a hedging arrangement suitable to us, or that such derivative
activities will be effective in managing our foreign exchange risk. The value of your investment in our company will be affected
by the foreign exchange rate between U.S. dollars and Renminbi. For example, a decline in the value of the Renminbi against the
U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the dividends Tianwei Yingli may pay us in
the future and the value of your investment in us, all of which may have a material adverse effect on the value of the ADSs.
Interest Rate Risk
Our exposure to interest rate risk primarily
relates to our interest expenses incurred by our short-term and long-term borrowings and interest income generated by excess cash
invested in demand deposits. Such interest-earning instruments carry a degree of interest rate risk. As of December 31, 2016,
we had RMB9,010 million (US$1,298 million) in outstanding short-term borrowings (including the current portion of medium-term notes
and long-term debt), nil in outstanding medium-term notes and RMB2,524 million (US$363 million) in outstanding long-term debt (excluding
the current portion). We have not used any derivative financial instruments to manage our interest rate risk exposure due to the
lack of such financial instruments in China. We have not been exposed nor do we anticipate being exposed to material risks due
to changes in interest rates. However, our future interest expense may increase due to changes in interest rates prevailing in
the open market. If market interest rates for short-term demand deposits increase in the near future, such increase may cause the
amount of our interest income to rise. A hypothetical 10% increase in the average interest rate for our bank borrowings would result
in an increase of approximately RMB730 million (US$105 million) in interest expense in 2016.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES
Not Applicable.
Not Applicable.
Not Applicable.
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American Depositary
Shares
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Fees and Charges Our ADS
Holders May Have to Pay
The depositary may charge each person to
whom ADSs are issued, including, without limitation, issuances against deposits of ordinary shares, issuances in respect of share
distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances
pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and
each person surrendering ADSs for withdrawal of deposited securities or whose ADRs are cancelled or reduced for any other reason,
US$5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The
depositary may sell (by public or private sale) sufficient securities and property received in respect of a share distribution,
rights and/or other distribution prior to such deposit to pay such charge.
The following additional
charges will be incurred by our ADS holders, by any party depositing or withdrawing ordinary shares or by any party surrendering
ADSs and/or to whom ADSs are issued (including, without limitation, issuances pursuant to a stock dividend or stock split declared
by us or an exchange of stock regarding the ADSs or the deposited securities or a distribution of ADSs), whichever is applicable:
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a fee of up to US$0.02 per ADS for any cash distribution made pursuant to the deposit agreement;
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a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;
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an aggregate fee of US$0.04 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions);
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a fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents (including, without limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the ordinary shares or other deposited securities, the sale of securities (including, without limitation, deposited securities), the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which fees and charges shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions);
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a fee for the distribution or sale of securities, such fee being in an amount equal to the fee for the execution and delivery of ADSs referred to above which would have been charged as a result of the deposit of such securities (treating all such securities as if they were ordinary shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto;
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stock transfer or other taxes and other governmental charges;
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cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares;
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transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities;
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in connection with the conversion of foreign currency into U.S. dollars, JPMorgan Chase Bank, N.A. shall deduct out of such foreign currency the fees, expenses and other charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in connection with such conversion, and JPMorgan Chase Bank, N.A. and/or its agent may act as principal for such conversion of foreign currency; and
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fees of any division, branch or affiliate of the depositary utilized by the depositary to direct, manage and/or execute any public and/or private sale of securities under the deposit agreement.
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We will pay all other charges and expenses
of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and
the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.
Fees and Other Payments Made by the Depositary to Us
The depositary anticipates providing us
with certain amounts which may or may not be tied to those fees charged by the depositary in respect of the ADR program. Such
amounts will be upon such terms and conditions as we and the depositary may agree from time to time. In 2016, we received from
the depositary US$1.40 million relating to the ADS program.
The accompanying notes are an integral part of these consolidated
financial statements.
The accompanying notes are an integral part of these consolidated
financial statements.
The accompanying notes are an integral part of these consolidated
financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated
financial statements.
The accompanying notes are an integral part of these consolidated
financial statements.
Notes to Consolidated Financial Statements
(Amounts in thousands, except share and
per share data)
|
(1)
|
Organization and Description of Business
|
Yingli Green Energy Holding Company Limited (“Yingli
Green Energy”) is incorporated in the Cayman Islands and was established on August 7, 2006. Yingli Green Energy and
its subsidiaries (collectively, the “Company”) are principally engaged in the design, development, marketing, manufacture,
installation and sale of photovoltaic (“PV”) products in the People’s Republic of China (“PRC”) and
overseas markets.
|
(2)
|
Summary of Significant Accounting Policies and Significant Concentrations and Risks
|
|
(a)
|
Basis of Presentation
|
The accompanying consolidated financial statements
of the Company have been prepared and presented in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”).
The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are
dependent on, among other things, the Company’s ability to operate profitably and to generate cash flows from operations,
and the ability to pursue financing arrangements, including the renewal or rollover of its bank borrowings, to support its working
capital requirements and its obligations and commitments on loans and borrowings when they become due.
The following factors raise
substantial doubt about the Company’s ability to continue as a going concern:
|
·
|
For the year ended December 31, 2016, the Company incurred a net loss of RMB 2,118,969 (US$ 305,195).
|
|
·
|
As of December 31, 2016, the Company had a total deficit attributable to the Company of RMB 15,428,426 (US$ 2,222,156) and
a deficit in working capital of RMB 7,471,576 (US$ 1,076,131).
|
|
·
|
As of December 31, 2016, the Company had cash, cash equivalents and restricted cash of RMB 868,439 (US$ 125,081), short-term
borrowings, including medium-term notes past due and current portion of medium-term notes and long-term debt of RMB 9,010,205(US$
1,297,739) and long-term debts of RMB 2,523,621(US$ 363,477) and non-current medium-term notes of nil.
|
|
·
|
As of December 31, 2016 and from the date of issuance of these statements, Baoding Tianwei Yingli New Energy Resources Co.,
Ltd. (“Tianwei Yingli”), one of the Company’s major manufacturing subsidiaries, had RMB 1,943,707 (US$ 279,952)
and approximately RMB 1,993,518 (US$ 287,126) medium term notes overdue, including principal and interest, respectively.
|
|
·
|
As of December 31, 2016 and from the date of issuance of these statements, the Company had RMB 222,331 (US$ 32,022) and approximately
RMB 190,967 (US$ 27,505) of short-term borrowings overdue, included principal and interest, respectively.
|
|
·
|
As of December 31, 2016, except for those loans and debts mentioned above, total short term loans expected to be repaid within
one year is RMB 7,080,959 (US$ 1,019,870).
|
The liquidity of the Company is primarily dependent
on its ability to generate adequate cash flows from operations, to renew or rollover its short-term borrowings and to obtain adequate
external financings to support its working capital and meet its obligations and commitments when they become due.
The Company has carried out a review of its cash flow
forecast for the twelve months from the date of issuance of these statements. In preparing the cash flow forecast, the Company's
management has considered historical cash requirements of the Company, the Company's expected debt repayment obligations in 2017
and beyond, the Company’s plan to further reduce operating costs and expenses, the Company's plan to receive cash from disposal
of certain equity investments, as well as the alternative financing plans discussed in detail below. The Company's management also
made the assumption about the numbers of shipments of modules and gross profit margin.
The Company is currently exploring a variety of alternative
financing plans to improve the Company’s liquidity and financial position as follows:
Form a Special Committee and Introducing Strategic
Investors
The Company issued a press release on March 7, 2017
and stated that, in order to properly consider the Company's options with respect to and ultimately resolve the debt repayment
issues faced by the Company's principal subsidiaries, the Company's board of directors has formed a special committee (the "Special
Committee") comprised solely of independent directors to assess the Company's operating and financial situation and evaluate,
develop and recommend one or more strategic alternatives and financing plans potentially workable to the Company in order to improve
its debt structure.
The Company is also in negotiation proactively with
certain investors for potential strategic investments in the Company or its major subsidiaries.
Such financing plan and strategic investments, if successfully
completed, will further increase the liquidity of the Company and improve its debt-to-equity ratio.
Debt Restructuring
On May 3, 2017, the Company has paid the RMB300 million
of RMB-denominated five-year medium-term notes issued by Yingli China in 2012 (the “2012 MTNs”) with full principle
and accrued interests totaling RMB318 million when they matured. As such, Yingli China has discharged all of its payment obligations
under the 2012 MTNs. As of the date of issuance of these statements, the Company had medium-term notes of RMB 1,757,000 outstanding
(please refer to note (10)). Out of the total RMB 1,757,000, medium-term notes of RMB 357,000 were due on October 13, 2015 (the
“2010 MTNs”); medium-term notes of RMB 1,400,000 were due on May 12, 2016 (the “2011 MTNs”), the holders
of these medium-term notes are collectively referring to as “Notes Holders”. The Company has had meetings with the
Notes Holders and other creditors several times and is in negotiation with the Note Holders for the repayment schedule of the medium-term
notes. The Company has had negotiations with the Notes Holders and other creditors for the ways of repayment of its debts, such
as 1) introduction of strategic investors to invest in the Company or the Company's subsidiaries, 2) introduction of new creditors
to grant new borrowings to the Company.
Also, as part of the Company’s plan to improve
liquidity, for year ended December 31, 2016, the Company successfully negotiated with certain suppliers, and these suppliers agreed
to waive partial amount of the long ageing accounts payables. Total amount waived by the suppliers in 2016 as a result of the settlement
was RMB 22,165 (US$ 3,192), which was included in Other Income in the Consolidated Statements of Comprehensive Loss.
Renewal or Rollover of Borrowings and other Financing
Arrangements
The Company has maintained good relationships with
its lending banks and other financial institutions in China. While there can be no assurance that the Company will be able to refinance
its short-term borrowings as they become due, historically, the Company has renewed or rolled over most of its short-term bank
and other borrowings upon their maturity dates and has assumed it will continue to be able to do so. As of March 31, 2017, the
Company has successfully renewed or rolled over RMB 255.7 million (US$ 36.8 million) out of RMB 9,010.2 million (US$ 1,297.7 million)
short-term borrowings outstanding as of December 31, 2016 and has assumed it will continue to be able to do so for the foreseeable
future. Based on the Company's historical experience, the roll-over requests will be approved, provided that the Company submits
the required supporting documentation upon due dates.
In addition, the Company has obtained financing through
other arrangements, such as failed sale and lease back of certain machinery and equipment and financing in the form of sale and
repurchase of certain equity interest in its subsidiary, in substance, they are financing in nature and recorded as liabilities.
Based on the management’s assessment, there can
be no assurance, however, that such expected financing plans will be successfully completed on terms acceptable to the Company,
or effectively implemented within one year after the date that the consolidated financial statements are issued, or when implemented,
it will mitigate the relevant conditions or events that raise substantial doubt about the Company's ability to continue as a going
concern. The Company’s financing plans for its continuing operations, even if successful, may not result in sufficient cash
flow to finance and maintain its business. Facts and circumstances including recurring losses, negative working capital, net cash
outflows, and uncertainties on the repayment of the debts raise substantial doubt about the Company’s ability to continue
as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
|
(b)
|
Principles of Consolidation
|
The accompanying consolidated financial statements
include the accounts of Yingli Green Energy and its subsidiaries. For consolidated subsidiaries where the Company’s
ownership in the subsidiary is less than 100%, the equity interest not held by the Company is presented as non-controlling interests.
All significant inter-company balances and transactions have been eliminated upon consolidation.
The Company applies the guidance codified in Accounting
Standard Codification 810, Consolidations (“ASC 810”) on accounting for VIEs and their respective subsidiaries, which
requires certain variable interest entities to be consolidated by the primary beneficiary of the entity in which it has a controlling
financial interest. A VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk
is not sufficient to permit the entity to finance its activities without additional financial support; (b) as a group, the holders
of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right
to receive expected residual returns, or (c) an equity investor has voting rights that are disproportionate to its economic interest
and substantially all of the entity’s activities are on behalf of the investor. Accordingly, the financial statements of
the VIEs and VIEs’ subsidiaries are consolidated into the Company’s financial statements.
In 2014, the Company signed several contracts with
Yingli PV Investment Group Co., Ltd. (“Yingli PV Group”) to construct all project assets on behalf of the Company. Each
project asset is owned by a special purpose entity which is owned 100% by Yingli PV Group. According to the aforementioned contracts,
1) The Company could claim the ownership of these PV projects at any time during the PV project construction progress by demanding
Yingli PV Group to transfer its 100% equity interests in these project asset companies to the Company; 2) if PV stations are sold
to a third party as authorized by the Company, the Company would enjoy all income generated from the sales of the PV station; or
3) if the Company does not claim the ownership, the Company would enjoy all income generated from the operation of the PV station
in the future. Given the terms of these contracts, these entities are VIEs and Yingli PV Group is acting as an agent of the Company.
The Company is the primary beneficiary of these VIEs as it has both the ability to make the significant decisions of the VIEs and
also, the right to the economic interests of the VIEs. Total numbers of project assets entities being consolidated under the
contract aforementioned were 23 as of December 31, 2014.
In 2014, the Company entered into two separate agreements
with a related party to dispose the Company’s 100% equity interest in two subsidiaries. The disposal gain of RMB 23,943,
representing the difference between total combined consideration of RMB 146,606 and total combined net book value of these two
subsidiaries of RMB 122,663, comprised of total assets of RMB 182,286 net of related liabilities of RMB 59,623, was recognized
in the “Other Income” in the Consolidated Statements of Comprehensive Loss of 2014 upon the disposal of these subsidiaries.
In September 2015, the Company entered into an agreement
with Yingli PV Group to terminate the above-mentioned construction contracts and the Company was no longer entitled to any rights
or undertook any obligations under the aforementioned contracts. As a result, the Company disposed all the project assets under
the VIE structure to Yingli PV Group. Total consideration for disposal of all entities under the VIE structure was RMB 554,452,
which was based on the fair value of these VIEs. The disposal loss of RMB 6,852, the difference between the consideration and the
net book value of the VIEs of RMB 561,304, (comprised of total assets of RMB 1,886,045 net of related liabilities of RMB 1,324,741)
was recognized in the Consolidated Statements of Comprehensive Loss upon the disposal of project assets in 2015.
In 2015, the Company entered into three separate agreements
with three entities unrelated to the Company to dispose the Company’s 100% equity interest in three subsidiaries with project
assets. The disposal gain of RMB 28,430 (US$ 4,389), representing the difference between total combined consideration of RMB 30,002
(US$ 4,631) and total combined net book value (including unrealized profits) of these three subsidiaries of RMB 1,572 (US$ 243,
comprised of total assets of RMB 180,752 net of related liabilities of RMB 179,180), was recognized in the Consolidated Statements
of Comprehensive Loss of 2015 upon the disposal of project assets.
In 2016, the Company entered into four separate agreements
with two entities unrelated to the Company, and two related parties to dispose the Company’s 100% equity interest in four
subsidiaries. The disposal gain of RMB 34,339 (US$ 4,946), representing the difference between total combined consideration of
RMB 5,026 (US$ 724) and total combined negative net book value (including unrealized profits of RMB29,332 on inter-company sales)
of these four subsidiaries of RMB 29,313 (US$ 4,222), comprised of total assets of RMB 53,411 net of related liabilities of RMB
82,724, was recognized in the “Other Income” in the Consolidated Statements of Comprehensive Loss of 2016 upon the
disposal of these subsidiaries.
|
(c)
|
Significant Concentrations
and Risks
|
Revenue concentrations
The Company’s business depends substantially
on government incentives given to its customers. In many countries in which the Company sells its products, the market of the Company’s
products would not be commercially viable on a sustainable basis without government incentives. This is largely in part caused
by the cost of generating electricity from solar power currently exceeding and that is expected to continue to exceed the costs
of generating electricity from conventional energy sources. The Company generated approximately 88%, 93% and 97% of its total net
revenues for the years ended December 31, 2014, 2015 and 2016, respectively, from sales to customers in countries with known
government incentive programs for the use of solar products. A significant reduction in the scope or discontinuation of government
incentive programs would have a materially adverse effect on the demand of the Company’s products.
A significant portion of the Company’s net revenues
are from customers located in the PRC, Japan, the United States of America (“USA”), Turkey, France, Germany and England.
Revenues from customers located in the PRC, Japan, the USA, Turkey, France, Germany and England are as follows:
|
|
Year ended
|
|
|
|
|
|
|
December 31,
2014
|
|
|
% of net
revenue
|
|
|
December 31,
2015
|
|
|
% of net
revenue
|
|
|
December 31, 2016
|
|
|
% of net
revenue
|
|
|
|
RMB
|
|
|
|
|
|
RMB
|
|
|
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRC
|
|
|
4,550,915
|
|
|
|
35
|
%
|
|
|
4,078,476
|
|
|
|
41
|
%
|
|
|
4,932,284
|
|
|
|
710,397
|
|
|
|
59
|
%
|
Japan
|
|
|
2,487,949
|
|
|
|
19
|
%
|
|
|
2,723,800
|
|
|
|
27
|
%
|
|
|
2,363,239
|
|
|
|
340,377
|
|
|
|
28
|
%
|
USA
|
|
|
2,301,496
|
|
|
|
18
|
%
|
|
|
1,248,536
|
|
|
|
12
|
%
|
|
|
513,690
|
|
|
|
73,987
|
|
|
|
6
|
%
|
England
|
|
|
998,203
|
|
|
|
8
|
%
|
|
|
80,255
|
|
|
|
1
|
%
|
|
|
88,129
|
|
|
|
12,693
|
|
|
|
1
|
%
|
Turkey
|
|
|
118,305
|
|
|
|
1
|
%
|
|
|
550,799
|
|
|
|
5
|
%
|
|
|
69,956
|
|
|
|
10,076
|
|
|
|
1
|
%
|
France
|
|
|
191,071
|
|
|
|
1
|
%
|
|
|
363,635
|
|
|
|
4
|
%
|
|
|
1,477
|
|
|
|
213
|
|
|
|
-
|
|
Germany
|
|
|
671,534
|
|
|
|
5
|
%
|
|
|
170,518
|
|
|
|
2
|
%
|
|
|
3,089
|
|
|
|
445
|
|
|
|
-
|
|
Others
|
|
|
1,607,904
|
|
|
|
13
|
%
|
|
|
749,767
|
|
|
|
8
|
%
|
|
|
404,235
|
|
|
|
58,221
|
|
|
|
5
|
%
|
Total
|
|
|
12,927,377
|
|
|
|
100
|
%
|
|
|
9,965,786
|
|
|
|
100
|
%
|
|
|
8,376,099
|
|
|
|
1,206,409
|
|
|
|
100
|
%
|
The Company derived significant revenue from sales
outside of the PRC. As a result, the Company’s financial performance could be affected by events such as changes in foreign
currency exchange rates, trade protection measures and changes in regional or worldwide economic or political conditions.
Management currently expects that the Company’s
operating results will, for the foreseeable future, continue to depend on the sale of PV modules to a relatively small number of
customers. The Company’s relationships with such key customers have been developed over a short period of time and are generally
in their preliminary stages. Any factors adversely affecting the business operations of these customers could have a material adverse
effect on the Company’s business and results of operations.
In 2014, 2015 and 2016, sales to the top five customers
accounted for approximately 13.9%, 19.4% and 10.7%, respectively, of the Company’s net revenues. There is no individual customer
accounting for 10% or more of total revenues for the years ended December 31, 2014, 2015 and 2016.
As of December 31, 2015 and 2016, the top five
outstanding accounts receivable balances (net of provisions) accounted for approximately 27.6% and 16.3%, respectively, of the
Company’s total outstanding accounts receivable. One individual customer had accounts receivables balances that accounted
for 12.3% of the total balance as of December 31, 2015. No individual customer has accounts receivables balances that accounted
for more than 10% of the total balance as of December 31, 2016.
Dependence on suppliers
Polysilicon is the most important raw material used
in the production of the Company’s PV products. To maintain competitive manufacturing operations, the Company depends on
timely delivery by its suppliers of polysilicon in sufficient quantities. The Company’s failure to obtain sufficient
quantities of polysilicon in a timely manner could disrupt its operations, prevent it from operating at full capacity or limit
its ability to expand as planned, which will reduce the growth of its manufacturing output and revenue.
In order to secure a stable supply of polysilicon and
other raw materials, the Company makes prepayments to certain suppliers. Such amounts are recorded as prepayments to suppliers,
prepayments to related party suppliers (included in “Amounts due from and prepayments to related parties”), and “Long-term
prepayments to suppliers” in the Company’s consolidated balance sheets and amounted to RMB 1,212,614 and RMB 992,569
(US$ 142,959) as of December 31, 2015 and 2016, respectively. The Company makes the prepayments without receiving
collateral for such payments. As a result, the Company’s claims for such prepayments would rank only as an unsecured
claim, which exposes the Company to the credit risks of the suppliers. As of December 31, 2015 and 2016, advances, net of
any allowance, made to an individual supplier in excess of 10% of total prepayments to the suppliers are as follows:
|
|
December 31,
|
|
|
|
|
2015
|
|
|
2016
|
|
|
|
Location
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A
|
|
Singapore
|
|
|
224,029
|
|
|
|
239,327
|
|
|
|
34,470
|
|
Supplier B
|
|
South Korea
|
|
|
158,613
|
|
|
|
141,227
|
|
|
|
20,341
|
|
Supplier C
|
|
Germany
|
|
|
277,392
|
|
|
|
238,242
|
|
|
|
34,314
|
|
Total
|
|
|
|
|
660,034
|
|
|
|
618,796
|
|
|
|
89,125
|
|
The Company obtains some equipment to be used in its
manufacturing process from a small number of selected equipment suppliers. In addition, some equipment has been customized based
on the Company’s specifications, is not readily available from multiple vendors and would be difficult to repair or replace.
If any of these suppliers were to experience financial difficulties or go out of business, the Company may have difficulties in
repairing or replacing its equipment in the event of any damage to the manufacturing equipment or a breakdown of the production
process. The Company’s ability to deliver products timely would suffer, which in turn could result in order cancellations
and loss of revenue. A supplier’s failure to deliver the equipment in a timely manner with adequate quality and on terms
acceptable to the Company could delay its capacity expansion of manufacturing facilities and otherwise disrupt its production schedule
or increase its costs of production. The Company made deposits of RMB 81,828 and RMB 78,652(US$ 11,328) as of December 31,
2015 and 2016, respectively, for the purchase of equipment without receiving collateral for such payments. As a result, the Company’s
claims for such payments would rank only as an unsecured claim, which exposes the Company to the credit risks of the equipment
suppliers.
Concentrations of cash balances held at financial
institutions
Cash balances include:
|
|
December 31, 2015
|
|
|
December 31, 2016
|
|
|
|
RMB
equivalents
|
|
|
RMB
equivalents
|
|
Cash and cash equivalents held by PRC entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominated in RMB
|
|
|
296,853
|
|
|
|
155,174
|
|
Denominated in U.S. dollar (US$)
|
|
|
480,052
|
|
|
|
23,450
|
|
Denominated in European monetary unit (EURO)
|
|
|
5,350
|
|
|
|
337
|
|
Denominated in Japanese Yen (JPY)
|
|
|
—
|
|
|
|
11
|
|
Denominated in Great Britain Pound (GBP)
|
|
|
5
|
|
|
|
—
|
|
Denominated in other currencies:
|
|
|
—
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents held by non-PRC entities
|
|
|
|
|
|
|
|
|
Denominated in US$
|
|
|
200,671
|
|
|
|
253,089
|
|
Denominated in EURO
|
|
|
76,295
|
|
|
|
24,135
|
|
Denominated in JPY
|
|
|
156,147
|
|
|
|
30,579
|
|
Denominated in GBP
|
|
|
8,151
|
|
|
|
3,563
|
|
Denominated in other currencies:
|
|
|
17,225
|
|
|
|
16,126
|
|
Total cash and cash equivalents
|
|
|
1,240,749
|
|
|
|
506,642
|
|
|
|
December 31, 2015
|
|
|
December 31, 2016
|
|
|
|
RMB
equivalents
|
|
|
RMB
equivalents
|
|
Restricted cash held by PRC entities
|
|
|
|
|
|
|
|
|
Denominated in RMB
|
|
|
218,669
|
|
|
|
165,711
|
|
Denominated in US$
|
|
|
21,768
|
|
|
|
28,741
|
|
Denominated in EURO
|
|
|
8,872
|
|
|
|
9,137
|
|
Denominated in other currencies:
|
|
|
—
|
|
|
|
—
|
|
Restricted cash held by non-PRC entities
|
|
|
|
|
|
|
|
|
Denominated in US$
|
|
|
96,054
|
|
|
|
148,930
|
|
Denominated in EURO
|
|
|
1,455
|
|
|
|
2,236
|
|
Denominated in JPY
|
|
|
—
|
|
|
|
4,768
|
|
Denominated in other currencies:
|
|
|
108
|
|
|
|
2,274
|
|
Total restricted cash
|
|
|
346,926
|
|
|
|
361,797
|
|
The bank deposits with financial institutions in the
PRC are uninsured by any government authority. To limit exposure to credit risk relating to bank deposits, the Company primarily
places bank deposits with large financial institutions in the PRC with acceptable credit rating. As of December 31, 2015
and 2016, the Company had cash balances at one and one PRC individual financial institutions, respectively, that held cash balances
in excess of 10% of the Company’s total cash balances. These bank deposits collectively accounted for approximately 34.4%
and 11.05% of the Company’s total cash balances as of December 31, 2015 and 2016, respectively. Management believes
that these financial institutions are of high credit quality.
The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported
amounts of assets and liabilities as well as with respect to the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant items subject to such estimates and assumptions include the fair values of
assets acquired and liabilities assumed in business acquisitions, the useful lives of property, plant and equipment and intangibles
with definite lives, recoverability of the carrying values of property, plant and equipment, and intangible assets, the fair value
of share-based payments, the collectability of accounts receivable, the realizability of inventories, prepayments and deferred
income tax assets, the fair values of financial and equity instruments, the accruals for warranty obligations and loss contingency,
and provision for inventory purchase commitments. The current economic environment has increased the degree of uncertainty
inherent in those estimates and assumptions.
The Company’s reporting currency is the Renminbi
("RMB"). Assets and liabilities of foreign companies whose functional currency is not RMB are translated into RMB
using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the
year. Gains and losses resulting from the translation of financial statements of foreign companies are recorded as a separate component
of accumulated other comprehensive income within shareholders' equity.
Transactions denominated in currencies other than the
functional currency are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated into the functional currency using the applicable exchange
rates at the balance sheet date. The resulting exchange differences are recorded in “foreign currency exchange gains
(losses)” in the Consolidated Statements of comprehensive Loss. Transaction gains and losses resulting from intercompany
foreign currency transactions that are of a long-term investment nature are treated in the same manner as translation adjustments
and therefore excluded from the determination of net loss.
RMB is not freely convertible into foreign currencies.
All foreign exchange transactions involving RMB must take place either through the People’s Bank of China (“PBOC”)
or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions
are the rates of exchange quoted by the PBOC.
For the convenience of readers, certain 2016 RMB amounts
have been translated into U.S. dollar amounts at the rate of RMB 6.943 to US$1.00, the noon buying rate in the City of New York
for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as
of December 31, 2016. No representation is made that RMB amounts could have been, or could be, converted into U.S. dollars
at that rate or at any other certain rate on December 31, 2016, or at any other date.
|
(f)
|
Cash, Cash equivalents
and Restricted Cash
|
Cash and cash equivalents consist of cash on hand,
cash in bank accounts, and interest bearing savings accounts with an initial term of three months or less.
Restricted cash of RMB 346,926 and RMB 361,797 (US$ 52,109)
as of December 31, 2015 and 2016, respectively, represents bank deposits for securing letters of credit and letters of guarantee
granted to the Company, primarily for the purchase of inventory and equipment and the guarantee of the offshore bank borrowings.
Such letters of credit and letters of guarantee expire within one year. The cash flows from bank deposits as the guarantee of the
offshore bank borrowings are reported within cash flows for financing activities in the consolidated statements of cash flows. The
cash flows from the bank deposits relating to purchases of inventory and equipment are reported within cash flows from operating
activities and investing activities in the consolidated statements of cash flows, respectively.
Accounts receivable are recorded at the invoiced amount
and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability
of its customers to make required payments. The allowance for doubtful accounts is based on a review of specifically identified
accounts and aging data. Judgments are made with respect to the collectability of accounts receivable balances based on historical
collection experience, customer specific facts and current economic conditions. Account balances are charged off against the
allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Sale of Accounts Receivable
In 2014 and 2016, the Company entered into agreements
to sell without recourse certain accounts receivable to several PRC banks. The buyers were responsible for servicing the receivables.
The accounts receivables were determined to be legally isolated from the Company and its creditors, even in the event of bankruptcy
or other receivership and the Company had surrendered control over the transferred receivables. As a result, the accounts receivables
were considered sold and were therefore derecognized. The Company received proceeds from the sale of accounts receivable of RMB
188,117 and RMB 7,412 (US$1,068) for the years ended December 31, 2014 and 2016, respectively, and had included the proceeds in
net cash provided by operating activities in the consolidated statements of cash flows. The Company recorded a loss on the sale
of accounts receivable of RMB 8,885 and RMB 357 (US$51) for the years ended December 31, 2014 and 2016, respectively, which was
included in “General and administrative expense”. There was no such transaction occurred in 2015.
Inventories are stated at the lower of cost or market.
Cost is determined by using the weighted-average cost method. Cost of work-in-progress and finished goods are comprised of direct
materials, direct labour, and an allocation of related manufacturing overhead based on normal operating capacity.
Adjustments are recorded to write down the carrying
amount of any obsolete and excess inventory to its estimated net realizable value. Certain factors could impact the realizable
value of inventory, so the Company continually evaluates the recoverability based on assumptions about customer demand and market
conditions. The evaluation may take into consideration historical usage, expected demand, anticipated sales price, new product
development schedules, the effect new products might have on the sale of existing products, product obsolescence, customer concentrations,
and other factors. The write-down is equal to the difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required that could negatively impact the Group’s gross margin and
operating results. If actual market conditions are more favorable, the Company may have higher gross margin when products that
have been previously written down are eventually sold. Inventory write-downs due to the lower of cost or market assessment amounted
to RMB 4,208, RMB 31,930 and RMB 89,147 (US$ 12,840) for the years ended December 31, 2014, 2015 and 2016, respectively, and were
recorded as cost of revenues in the Consolidated Statements of Comprehensive Loss.
|
(i)
|
Prepayments to Suppliers
|
Advance payments for the future delivery of raw materials
are made based on written purchase orders detailing product, quantity, pricing and are classified as “prepayments to suppliers”
in the consolidated balance sheets. The Company’s supply contracts grant the Company the right to inspect products prior
to acceptance. The amount in the balance of the “prepayments to suppliers” is reclassified to “inventories”
when inventory is received and passes quality inspection. Such reclassifications of RMB 340,007, RMB 318,132and RMB 496,885 (US$
71,566) for the years ended December 31, 2014, 2015 and 2016, respectively, are not reflected as cash outflows from operating
activities as they were paid in prior periods. As of December 31, 2015 and 2016, total long-term prepayments, net of
any allowance, made by the Company to suppliers prior to 2015 was RMB 555,520 and RMB 343,591 (US$ 49,487), respectively, representing
prepayments to suppliers for long-term supply agreements with deliveries scheduled to commence beyond the next twelve months at
each respective balance sheet date.
For the years ended December 31, 2014, 2015 and 2016,
provisions of nil, RMB 522,050 and RMB 10,672 (US$ 1,537) were recognized against the prepayments to suppliers with inventory firm
purchase commitment, respectively. See note (19) to the consolidated financial statements. In addition,for the year ended December
31, 2016, due to several suppliers failing to fulfill their delivery obligations and each was in financial difficulty, after assessment,
the Company also made total provision of RMB113,416 (US$16,335) against the prepayments to these suppliers, such provision was
recorded in General and Administrative expenses in the Consolidated Statement of Comprehensive Loss.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
is provided over the estimated useful lives of the asset, taking into consideration any estimated residual value, using the straight-line
method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book
value and proceeds received thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and
betterments are capitalized. The estimated useful lives of property, plant and equipment are as follows:
Buildings
|
|
30 years
|
|
Machinery and equipment
|
|
4 -25 years
|
|
Furniture and fixtures
|
|
3 -5 years
|
|
Motor vehicles
|
|
8 -10 years
|
|
Depreciation of property, plant and equipment attributable
to manufacturing activities is capitalized as part of the cost of inventory production, and expensed to cost of revenues when the
inventory is sold.
Cost incurred in the construction of new facilities,
including progress payments and deposits, interest and other costs relating to the construction, are capitalized and transferred
out of construction in progress and into their respective asset categories when the assets are ready for their intended use, at
which time depreciation commences.
Leases
Leases where substantially all the rewards and risks
of ownership of assets remain with the leasing company are accounted for as operating leases. Other leases are accounted for as
capital leases. Payments made under operating leases, net of any incentives received by the Company from the leasing company, are
charged to the consolidated statements of comprehensive loss on a straight-line basis over the lease periods.
Leases that qualify as capital leases are recorded
at the lower of the fair value of the asset or the present value of the future minimum lease payments over the lease term generally
using the Company’s incremental borrowing rate. Assets leased under capital leases are included in property, plant and equipment
and generally are depreciated over the lease term. Lease payments under capital leases are recognized as a reduction of the capital
lease obligation and interest expense.
For a sale-leaseback transaction, an analysis is performed
to determine if the Company can record a sale and remove the assets from the balance sheet and recognize the lease; and if so,
to determine whether to record the lease as either an operating or capital lease. If the Company has continued involvement beyond
a normal lease, the lease is accounted for as a capital lease transaction and the assets and related financing obligation are recognized
on the balance sheet. The Company’s assets under the capital lease transaction were derecognized upon sale at the net
book value and rebooked at the financed amount; and the differences between the net book value derecognized and the rebooked financed
amount of the assets were deferred and amortized over the lease term. Accordingly, the asset is depreciated over its estimated
useful life in accordance with the Company’s policy.
When the assets transaction does not qualify as a sale-leaseback
transaction, it will be treated as a financing transaction.
If the sale-leaseback transactions involve asset other
than real estate, those are evaluated to determine whether they are considered integral with real estate, in which case the sale-leaseback
rules related to real estate are applied.
Refer to note (16) to the consolidated financial statement.
Project assets
Project assets consist primarily of costs relating
to solar power projects in various stages of development that are capitalized prior to the completion of the solar power project.
These costs include modules, installation and other development costs.
If a project is completed and begins commercial operation
prior to entering into a sales agreement, which is at the point when the solar power plant is connected to grids and begins to
generate electricity, costs capitalized in the construction of solar power plants under development will be transferred to solar
power plants upon completion and when they are ready for its intended use. Any income generated by such project is accounted for
as revenue. Depreciation is provided over the estimated useful lives of the projects assets (20-25 years), taking into consideration
any estimated residual value, using the straight-line method, and expensed to cost of revenues.
As of December 31, 2016, project assets with carrying
value of RMB 68,104(US$ 9,809) were under construction, and project assets with carrying value of RMB 603,941 (US$ 86,986) had
completed construction and started power generation.
For the years ended December 31, 2014, 2015 and 2016,
revenue related to the projects assets from power generation were RMB 2,015, RMB 30,836 and RMB 31,556 (US$ 4,545), respectively;
deprecation and other related cost of the project assets, which was recorded as “Cost of revenue”, was RMB 2,365, and
RMB 37,855, and RMB 31,847(US$ 4,587), respectively.
Other Intangible Assets
Trademarks that have an indefinite useful life are
not amortized, but instead are tested for impairment at least annually.
Intangible assets, other than trademarks, are amortized
on a straight-line basis over the estimated useful lives of the respective assets. The Company’s amortizable intangible assets
consist of technical know-how, customer relationships, order backlog and short-term supplier agreements with the following estimated
useful lives:
Technical know-how
|
|
5.5-6 years
|
|
Customer relationships
|
|
5.5-6 years
|
|
Order backlog
|
|
1-1.5 years
|
|
Short-term supply agreements
|
|
0.5 year
|
|
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant, and equipment
and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested
for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group
to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash
flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined
through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals,
as considered necessary.
Intangible assets that are not subject to amortization
are tested annually for impairment at December 31, and are tested for impairment more frequently if events and circumstances
indicate that the asset might be impaired. For intangible assets that are not subject to amortization, an impairment loss is recognized
to the extent that the carrying amount exceeds the asset’s fair value.
For the years ended December 31, 2015 and 2016, a total
impairment loss against property, plant and equipment amounted to RMB 3,804,116 and RMB 1,277,373(US$ 183,980) was recognized in
the Consolidated Statements of Comprehensive Loss, respectively. Please refer to note (5) for details.
Government grant
Government grants are recorded in the balance sheet
when they are received and that the Company will comply with the conditions attaching to them.
Government grants, which are obtained by the Company
for the purposes of purchase, construction or acquisition of the long-term assets, will be recorded as “Deferred other income”
and included in “Deferred other income” in the Consolidated Balance Sheets and are depreciated or amortized evenly
over the useful lives of the related assets.
For the years ended December 31, 2014, 2015 and
2016, the Company received government grants of RMB 80,849, RMB 74,581 and RMB 20,981 (US$ 3,022), respectively, related to
the construction of the solar power plants and the procurement of machineries, which were recognized as deferred other income.
The grants amortized and recorded in “Other income” in the Consolidated Statement of Comprehensive loss amounted to
RMB 49,557, RMB 56,935 and RMB 49,362 (US$ 7,110) for the years ended December 31, 2014, 2015 and 2016, respectively.
Government grants other than those related to assets,
will be recorded as “Deferred other income” and recognized and recorded in “Other income” in the Consolidated
Statement of Comprehensive loss in the period in which the related expenses are recognized if the grants are intended to compensate
for future expenses or losses, and otherwise recognized and recorded in “Other income” in the Consolidated Statement
of Comprehensive loss for the current period if the grants are used to compensate for expenses or losses that have been incurred.
|
(k)
|
Land and Land Use Rights
|
Land represents the cost of land acquired outside
the PRC with indefinite useful life.
Land use rights represent the cost of rights to use
land in the PRC. Land use rights are carried at cost and charged to expense on a straight-line basis over the respective periods
of the rights of 45 - 50 years.
Investments in entities where the Company does not
have a controlling financial interest, but has the ability to exercise significant influence over the operating and financial policies
of the investees, are accounted for using equity method accounting. Under the equity method accounting, the Company’s share
of the investees’ results of operations is included in “Equity in Income/Loss of Affiliates” in the Company’s
Consolidated Statements of Comprehensive Loss. Equity investments are accounted for under cost method when the Company does not
have the ability to exercise significant influence over the operating and financial policies of the investees. Under the cost method
of accounting, the Company records an investment in the equity of an investee as cost, and recognizes as income dividends received
that are distributed from net accumulated earnings of the investee since the date of acquisition. The Company does not have available-for-sale
investment.
In case the Company sells modules to its equity method
investee, the profit derived from the transaction is eliminated to the extent of the Company’s shares in that investee, and
the income is credited against “Investments in affiliated companies” in the Consolidated Balance Sheets and deferred
until the project assets are ultimately sold to external customers.
The Company recognizes a loss when there is a loss
in value of an equity investment which is other than a temporary decline. The process of assessing and determining whether an impairment
on a particular equity investment is other than temporary requires a significant amount of judgment. To determine whether an impairment
is other-than-temporary, management considers whether the Company has the ability and intent to hold the investment until recovery
and whether evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. Evidence
considered in this assessment includes the reasons for the impairment, the severity and duration of the decline in value, any change
in value subsequent to year end, and forecasted performance of the investee.
In accordance with the relevant laws and regulations
of the PRC, PRC enterprises are required to transfer 10% of their after tax profit, as determined in accordance with PRC accounting
standard and regulations to a general reserve fund until the balance of the fund reaches 50% of the registered capital of the enterprise.
The transfer to this general reserve fund must be made before distribution of dividends. As of December 31, 2015 and
2016, the PRC subsidiaries of the Company had appropriated RMB 500,164 and RMB 500,719(US$ 72,119), respectively, to the general
reserve fund, which is restricted from being distributed to the Company, and if applicable, to the non-controlling interests.
|
(n)
|
Derivative Financial
Instruments and Hedging Activities
|
The Company recognizes all derivative instruments as
either assets or liabilities in the balance sheet at their respective fair values. For derivatives designated in hedging relationships,
changes in the fair value are either offset through earnings against the change in fair value of the designated hedged item attributable
to the risk being hedged or recognized in accumulated other comprehensive income, to the extent the derivative is effective at
offsetting the changes in cash flows being hedged until the hedged item affects earnings.
The Company enters into derivative contracts that it
intends to designate as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to
a recognized asset or liability (cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship
and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature
of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively
and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both
at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships
are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated
and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported
as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged
transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components
excluded from the assessment of effectiveness are recognized in current earnings. The maximum term over which the Company
is hedging exposures to the variability of cash flows for forecasted transaction is 12 months.
The Company discontinues hedge accounting prospectively
when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative
expires or is sold, terminated, or exercised, the cash flow hedge is designated because a forecasted transaction is not probable
of occurring, or management determines to remove the designation of the cash flow hedge.
In all situations in which hedge accounting is discontinued
and the derivative remains outstanding, the Company continues to carry the derivative at its fair value on the balance sheet and
recognizes any subsequent changes in its fair value in in the Consolidated Statement of Comprehensive loss. When it is probable
that a forecasted transaction will not occur, the Company discontinues hedge accounting and recognizes immediately in the Consolidated
Statement of Comprehensive loss gains and losses that were accumulated in other comprehensive income related to the hedging relationship.
No such activities was made by the Company for years
ended December 31, 2015 and 2016.
The Company measures the cost of employee services
received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs
over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.
The Company estimates grant date fair value using the Black Scholes-Merton option pricing model. The Company recognizes compensation
cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service
period for the entire award, net of estimated forfeitures, provided that the cumulative amount of compensation cost recognized
at any date at least equals the portion of the grant date value of such award that is vested at that date. Forfeiture rates
are estimated based on historical and future expectations of employee turnover rates.
Revenue is recognized when persuasive evidence of an
arrangement exists, delivery of the product has occurred, the fee is fixed or determinable and collectability is reasonably assured. These
criteria are determined in relation to the sale of the Company’s products or services as follows:
For all sales, the Company requires a contract or purchase
order which specified pricing, quantity and product specifications.
For sales of PV modules from PRC to foreign customers,
delivery of the products occurs at the point the product is delivered to the named port of shipment, which is when the risks and
rewards of ownership are transferred to the customer. For sales of PV modules to domestic customers in PRC or by foreign subsidiaries,
delivery of the product occurs at the point the product is received by the customer, which is when the risks and rewards of ownership
have been transferred.
Sales of PV systems consist of the delivery, assembly
and installation of PV modules, related power electronics and other components. The Company considers the PV system to be delivered,
and the risks and rewards of ownership transferred, when installation of all components is complete and customer acceptance is
received. Customer acceptance is evidenced by a signed project acceptance document. The assembly and installation of PV systems
is short, generally lasting between 1 to 3 months, and requires advance payments from the customer.
The Company recognizes revenue for solar power station
constructed for commercial customers according to ASC 605-35,
Revenue Recognition—Construction-Type and Production Type
Contracts
. Revenue is recognized on a percentage-of-completion basis, based on the ratio of total costs incurred to date
to total projected costs. Provisions are made for the full amount of any anticipated losses on a contract-by-contract basis. The
Company recognized nil loss for these types of contracts for the years ended December 31, 2014, 2015 and 2016. Costs
in excess of billings are recorded where costs recognized are in excess of amounts billed to customers of purchased commercial
solar power stations. Costs in excess of billings as of December 31, 2015 and 2016 amounted to RMB 24,912 and RMB 14,962(US$
2,155), respectively, and are included in accounts receivable in the consolidated balance sheets.
Starting in 2015, the Company provides PV cell / PV
module processing services to customers. Under certain of these processing service arrangements, the Company purchases raw materials
from a customer and agrees to sell a specified quantity of PV cells / PV modules produced from such materials back to the same
customer. The Company recognizes revenue from these processing transactions on a net basis, that is, the revenue is recorded based
on the amount received for PV cells / PV modules sold less the amount paid for the raw materials purchased from the customer.
For revenue from electricity generation, the Company
recognizes revenue when persuasive evidence of a power purchase arrangement with the power grid company exists, electricity has
been generated and been transmitted to the grid and the electricity generation records are reconciled with the grid companies,
the price of electricity is fixed or determinable and the collectability of the resulting receivable is reasonably assured.
For sales of raw materials, PV cells and wafers, delivery
occurs at the point the product is delivered to the customer, which is when the risks and rewards of ownership have been transferred.
Delivery is evidenced by a signed customer acceptance form.
Shipping and handling fees billed to customers are
recorded as revenues, and the related shipping or delivery costs of RMB 311,356, RMB 239,519 and RMB 148,959 (US$ 21,454)
are recorded as selling expenses for the years ended December 31, 2014, 2015 and 2016, respectively.
Advance payments received from customers for future
sale of inventory are recognized as advances from customers in the consolidated balance sheets. Advances from customers are recognized
as revenues when the conditions for revenue recognition described above have been satisfied. Advances from customers have been
recognized as a current liability because the amount at each balance sheet date is expected to be recognized as revenue within
twelve months.
In 2010 – 2012, a government subsidy project
called “Golden Sun” program was proposed by the Ministry of Finance of PRC (“MOF”), to support and encourage
PV stations installation. PV station owners could apply for a “Golden Sun” subsidy for the PV station to be constructed
and solar companies may bid for the project as target vendors who would be authorized to supply PV modules to qualified PV station.
According to detail implementation guidance, the government will give subsidy to each qualified PV station owners and the PV station
owners’ obligation was to make sure that qualified PV stations would be successfully connected to national electric grid
and pass the acceptance check by authorized supervisor appointed by the government (“government acceptance check”)
within the period required by the government.
Instead of paying full subsidy to PV station owners
directly, the government should pay partial subsidy to qualified suppliers on behalf of PV station owners as advance before the
commencement of construction of PV stations. Yingli China was a successful bidder as the qualified supplier for “Golden Sun”
program. For year ended December 31, 2015, as agreed with local government of Hebei Province, due to that certain PV stations didn’t
start construction and passed the government acceptance check within the required period, subsidy with RMB 286,277 that was received
in 2010 would be clawed back. The Company therefore reclassified the government subsidy from “Advances from customers”
to payables. As of year ended December 31, 2015 and 2016, payables in relation to “Golden Sun” program remained RMB
286,277 (US$ 41,232).
The sales of the subsidiaries in the PRC are subject
to Value added tax (“VAT”) at a general rate at 17%, some of these subsidiaries have also been approved to use the
“exempt, credit, refund” method on goods exported providing a tax refund at certain rate. Input VAT on purchases of
raw materials and certain fixed assets can be deducted from output VAT. As of December 31, 2015 and 2016, VAT recoverable
represents the net difference between output and deductible input VAT and tax refund to be collected.
|
(q)
|
Research and Development
|
Research and development costs are expensed as incurred.
Its research and development costs consist primarily of compensation and related costs for personnel, material, supplies, equipment
depreciation and laboratory testing costs.
|
(r)
|
Employee Benefits Plans
|
Pursuant to the relevant PRC regulations, the Company
is required to make contributions for each PRC employee at a rate of 20% on a standard salary base as determined by the local Social
Security Bureau, to a defined contribution retirement program organized by the local Social Security Bureau. In addition, the Company
is also required to make contributions for each PRC employee at rates of 6%-11%, 1%-2%, 5%-12% and 0.9%-1.7% of standard salary
base for medical insurance benefits, unemployment, housing fund and other statutory benefits, respectively. Total amount of
contributions for the years ended December 31, 2014, 2015 and 2016 was RMB 263,104, RMB 229,452 and RMB 193,111 (US$ 27,814),
respectively.
Before September 30, 2011, the Company’s
multicrystalline PV modules are typically sold with a two or five-year limited warranty for defects in materials and workmanship,
and a 10-year and 25-year warranty guaranteeing 90% and 80% of initial power generation capacity, respectively. Effective October 1,
2011, the Company implemented a new and improved warranty terms for multicrystalline PV module that guarantees 91.2% and 80.7%
of initial power generation capacity for 10 years and 25 years, respectively. Further, in respect of monocrystalline Panda
PV module, the Company guarantees 98.0%, 92.0% and 82.0% of initial power generation for the first year, 10 years and 25 years,
respectively. In addition, based on customers’ specific requirements, the Company provides the multicrystalline PV modules
with linear-based warranty which guarantees each year’s power output during the twenty-five-year warranty period. The Company
bears the risk of warranty claims long after the Company has sold its products and recognized revenues. The Company has sold PV
modules since January 2003, and none of the Company’s PV modules has been in use for the entire warranty periods. In
connection with the Company’s PV system sales in the PRC, the Company provides a one- to five- year warranty against defects
in the Company’s modules, storage batteries, controllers and inverters.
The Company performs industry-standard testing to test
the quality, durability and safety of the Company’s products. As a result of such tests, management believes the quality,
durability and safety of its products are within industry norms. Management’s estimate of the amount of its warranty obligation
is based on the results of these tests, consideration given to the warranty accrual practice of other companies in the same industry
and the Company’s expected failure rate and future costs to service failed products. The Company’s warranty obligation
will be affected by its estimated product failure rates, the costs to repair or replace failed products and potential service and
delivery costs incurred in correcting a product failure. Consequently, the Company accrues the equivalent of 1% of gross revenues
as a warranty liability to accrue the estimated cost of its warranty obligations. To the extent that actual warranty costs differ
significantly from estimates, the Company will revise its warranty provisions accordingly.
Actual warranty costs are charged against the accrued
warranty liability. Warranty expense is recorded as selling expense.
Changes in the carrying amount of accrued
warranty liability are as follows:
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
666,946
|
|
|
|
748,428
|
|
|
|
792,139
|
|
|
|
114,092
|
|
Warranty provision for the current year
|
|
|
120,780
|
|
|
|
84,520
|
|
|
|
84,924
|
|
|
|
12,232
|
|
Warranty costs incurred or claimed
|
|
|
(39,298
|
)
|
|
|
(40,809
|
)
|
|
|
(35,257
|
)
|
|
|
(5,078
|
)
|
Total accrued warranty cost
|
|
|
748,428
|
|
|
|
792,139
|
|
|
|
841,806
|
|
|
|
121,246
|
|
Less: accrued warranty cost, current portion
|
|
|
40,903
|
|
|
|
38,869
|
|
|
|
37,462
|
|
|
|
5,396
|
|
Accrued warranty cost, excluding current portion
|
|
|
707,525
|
|
|
|
753,270
|
|
|
|
804,344
|
|
|
|
115,850
|
|
|
(t)
|
Firm Purchase Commitment
|
The Company entered into several long-term fixed price
contracts to purchase polysilicon to ensure an adequate supply of polysilicon to operate its plants. These contracts represent
firm purchase commitments which are evaluated for potential market value losses. For the years ended December 31, 2014, 2015 and
2016, provision for reserve for inventory purchase commitments recognized was nil, RMB 77,705 and RMB 90,300 (US$ 13,006), respectively.
For the years ended December 31, 2014, 2015 and 2016, provision for prepayments in relation to inventory purchase commitments recognized
was nil, RMB 522,050 and RMB 10,672(US$ 1,537). See note (19) to the consolidated financial statements.
Income taxes are accounted for under the asset and
liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and any tax loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred income tax assets and liabilities of a change in tax rates or tax laws is recognized in the
consolidated statements of comprehensive loss in the period the change in tax rates or tax laws is enacted. A valuation allowance
is provided to reduce the amount of deferred income tax assets if it is considered more likely than not that some portion or all
of the deferred income tax assets will not be realized.
The Company recognizes in the consolidated financial
statements the impact of an unrecognized tax benefit, if the position is not more likely than not of being sustained upon examination,
based on the technical merits of the position. Recognized income tax benefits are measured at the largest amount that is greater
than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment
occurs. The Company’s accounting policy is to accrue interest and penalties related to unrecognized tax benefits, if
and when required, as interest expense and general and administrative expenses, respectively, in the consolidated statements of
comprehensive loss.
|
(v)
|
Commitments and Contingencies
|
Liabilities for loss contingencies arising from claims,
assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred
and the amount can be reasonably estimated.
The Company is exposed to risks associated with liability
claims in the event that the use of the PV products the Company sells results in injury. The Company does not maintain any
third-party liability insurance coverage other than limited product liability insurance or any insurance coverage for business
interruption. As a result, the Company may have to pay for financial and other losses, damages and liabilities, including, those
in connection with or resulting from third-party product liability claims and those caused by natural disasters and other events
beyond the Company’s control, out of its own funds, which could have a material adverse effect on its financial conditions
and results of operations.
The Company uses the management approach in determining
reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s
chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for
determining the Company’s reportable segments. Management has determined that the Company has only one operating segment.
In accordance with FASB ASC Topic 260, Earnings Per
Share, basic earnings per share is computed by dividing net income attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing
net income attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by
the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the year. Ordinary equivalent
shares consist of the ordinary shares issuable upon the exercise of outstanding share options (using the treasury stock method). Potential
dilutive securities are not included in the calculation of dilutive earnings per share if the impact is anti-dilutive.
|
(y)
|
Fair Value Measurements
|
The Company utilizes valuation techniques that maximize
the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value
based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous
market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes
between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 Inputs: Unadjusted quoted
prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 Inputs: Other than quoted
prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially
the full term of the asset or liability.
Level 3 Inputs: Unobservable
inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing
for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements
involving significant unobservable inputs (Level 3 measurements). The level in the fair value hierarchy within which a fair value
measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
See note (8) to the consolidated financial statements.
|
(z)
|
Reclassification of
comparative figures
|
Certain comparative figures have been reclassified
to conform to the current year presentation.
|
(aa)
|
Recently Issued Accounting
Standards
|
In May 2014, the FASB issued ASU No. 2014-09, Revenue
from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements
in ASC Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. The new standard will require the Company to
separate performance obligations within a contract, determine total transaction costs, and ultimately allocate the transaction
costs across the established performance obligations. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts
with Customers” (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year.
As a result, ASU 2014-09 will become effective for the Company beginning in fiscal 2018 under either full or modified retrospective
adoption, with early adoption permitted as of the original effective date of ASU 2014-09. The Company has set up an implementation
team that is currently in the process of analyzing each of the Company’s revenue streams in accordance with the new revenue
standard to determine the impact on the Company’s consolidated financial statements. The Company plans to continue the evaluation,
analysis, and documentation of its adoption of ASU 2014-09 (including those subsequently issued updates that clarify ASU 2014-09’s
provisions) throughout 2017 as the Company works towards the implementation and finalizes its determination of the impact that
the adoption will have on its consolidated financial statements. The Company expects to adopt the new revenue recognition guidance
in the first quarter of 2018.
In August 2014, the FASB issued ASU No. 2014-15,
“Presentation of Financial Statements — Going Concern”. This standard requires management to evaluate for each
annual and interim reporting period whether it is probable that the reporting entity will not be able to meet its obligations as
they become due within one year after the date that the financial statements are issued. If the entity is in such a position, the
standard provides for certain disclosures depending on whether or not the entity will be able to successfully mitigate its going
concern status. This guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual
periods beginning after December 15, 2016. The Company adopted this standard during the fourth quarter of 2016 for related disclosure.
In November 2015, the FASB issued ASU 2015-17, "Income
Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. This ASU amends existing guidance to require that deferred
income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior guidance
which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified
balance sheet. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim
periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual period. Additionally,
the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods
presented. The Company plans to apply the new guidance retrospectively in 2017. The impact of adopting this guidance is not expected
to be material to the consolidated financial statements given the Company’s deferred tax amounts.
In January 2016, the FASB issued ASU 2016-01, “Financial
Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities”. The amended guidance (i) requires
equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the
investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to
disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for
financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the
portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when
the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments
and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial
asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years,
or calendar 2018 for the Company. The amended guidance should be applied by means of a cumulative-effect adjustment to the balance
sheet as of the beginning of the fiscal year of adoption. The impact of adopting this guidance is not expected to be material to
the consolidated financial statements.
In February 2016, the FASB issued
ASU 2016-02, “Leases (Topic 842)”. Under the new guidance, lessees will be required to recognize a lease liability
and a lease asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet. The update
also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for the Company
from calendar 2019 and from the first interim period of calendar 2019, with earlier application permitted. The Company is evaluating
the impact of the adoption of this update on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-06, Contingent
Put and Call Options in Debt Instruments. The amendments in this Update apply to all entities that are issuers of or investors
in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options.
The Amendments in this Update clarify the requirements for assessing whether contingent call (put) options that can accelerate
the payment of principal on debt instruments are clearly and closely related to their debt hosts, which is one of the criteria
for bifurcating an embedded derivative. An entity performing the assessment under the amendments in this Update is required to
assess the embedded call (put) options solely in accordance with the four-step decision sequence. Consequently, when a call (put)
option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a
call (put) option is related to interest rates or credit risks. The amendments are an improvement to GAAP because they eliminate
diversity in practice in assessing embedded contingent call (put) options in debt instruments. For public companies, the amendments
in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal
years. An entity should apply the amendments in this Update on a modified retrospective basis to existing debt instruments as of
the beginning of the fiscal year for which the amendments are effective. The Company is currently assessing the potential significant
effects of these changes on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No.
2016-07, Simplifying the Transition to the Equity Method of Accounting. The amendments in this Update eliminate the
requirement that when an investment qualified for use of the equity method as a result of an increase in the level of
ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained
earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that
the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional
interest in the investee to the current basis of the investor's previous held interest and adopt the equity method of
accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the
equity method of accounting, no retroactive adjustment of the investment is required. The amendments in this Update require
that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting
recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the
investment becomes qualified for use of the equity method. The amendments in this Update are effective for all entities for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be
applied prospectively upon their effective date to increase in the level of ownership interest or degree of influence that
result in the adoption of the equity method. Earlier application is permitted. The Company is currently assessing the
potential significant effects of these changes on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation
— Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which outlines new provisions
intended to simplify various aspects related to accounting for share-based payments and their presentation in the financial statements.
The Company currently plans to implement this ASU as required in the first quarter of calendar 2017. The Company does not expect
that the adoption will have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires
a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to
be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial
asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The standard is effective
for the Company from calendar 2020, with early adoption permitted for calendar 2019. The Company has yet to commence an evaluation
of the impact of the adoption of this standard on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, “Classification
of Certain Cash Receipts and Cash Payments (Topic 230)." Current GAAP is unclear or does not include specific guidance on
how to classify certain transactions in the statement of cash flows. This ASU is intended to reduce diversity in practice in how
eight particular transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective for interim and annual
reporting periods beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted
in the same period. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply the guidance
retrospectively for an issue, the amendments related to that issue would be applied prospectively. The Company is currently assessing
the potential significant effects of these changes on the Company’s consolidated financial statements.
Accounts receivable is summarized as follows:
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,002,721
|
|
|
|
2,625,703
|
|
|
|
378,180
|
|
Less: Allowance for doubtful accounts
|
|
|
(527,335
|
)
|
|
|
(529,120
|
)
|
|
|
(76,209
|
)
|
Total accounts receivable, net
|
|
|
2,475,386
|
|
|
|
2,096,583
|
|
|
|
301,971
|
|
The following table presents the movement of the allowance
for doubtful accounts:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
(286,997
|
)
|
|
|
(250,514
|
)
|
|
|
(527,335
|
)
|
|
|
(75,952
|
)
|
Additions
|
|
|
(228,835
|
)
|
|
|
(414,759
|
)
|
|
|
(61,482
|
)
|
|
|
(8,855
|
)
|
Reversal of allowance for doubtful accounts
|
|
|
59,464
|
|
|
|
10,414
|
|
|
|
66,586
|
|
|
|
9,590
|
|
Write-off of accounts receivable
|
|
|
205,854
|
|
|
|
127,524
|
|
|
|
5,204
|
|
|
|
750
|
|
Reversal of partial accounts receivable written off in prior years
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,093
|
)
|
|
|
(1,742
|
)
|
Ending balance
|
|
|
(250,514
|
)
|
|
|
(527,335
|
)
|
|
|
(529,120
|
)
|
|
|
(76,209
|
)
|
Allowance for doubtful accounts was provided based
on a number of factors, including some customers’ financial conditions and creditworthiness. For year ended December 31,
2016, allowance for doubtful accounts was provided against receivables from certain customers who encountered financial difficulties
and against certain customers who delayed payments to the Company.
As part of its ongoing control procedures, management
monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. Credit terms are
normally four months from the date of billing. For certain customers the Company requires an advance payment before the sale is
made. Such advance payments are reported as “advances from customers” in the Company’s consolidated balance
sheets and amounted to RMB 725,170 and RMB 278,106 (US$ 40,056) as of December 31, 2015 and 2016, respectively. The Company
also requires certain customers to secure payment by a letter of credit issued by the customers’ banks. Letters of credit
have terms less than 90 days. Until the letter of credit is drawn and the amount is paid, the amount due from the customer is recorded
as accounts receivable. As of December 31, 2015 and 2016, 33.5% and 23.9%, respectively, of accounts receivable were denominated
in currencies other than the RMB.
As of December 31, 2015 and 2016, the Company
has pledged accounts receivable with a total carrying amount of RMB 128,917 and nil, respectively, to secure short-term bank borrowings.
Inventories by major category consist of the following:
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
318,852
|
|
|
|
302,664
|
|
|
|
43,593
|
|
Work-in-progress
|
|
|
351,432
|
|
|
|
454,331
|
|
|
|
65,437
|
|
Finished goods
|
|
|
814,030
|
|
|
|
557,839
|
|
|
|
80,345
|
|
Total inventories
|
|
|
1,484,314
|
|
|
|
1,314,834
|
|
|
|
189,375
|
|
Inventory write-downs due to the lower of cost or market
assessment amounted to RMB 4,208, RMB 31,930 and RMB 89,147 (US$ 12,840) for the years ended December 31, 2014, 2015
and 2016, respectively, and were recorded as cost of revenues in the Consolidated Statements of Comprehensive Loss. Inventory write-downs
of RMB 89,147(US$ 12,840) in 2016 were mainly due to significant drop of selling price of PV modules in 2016.
|
(5)
|
Land, Property, Plant
and Equipment
|
Land, property, plant and equipment consist
of the following:
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Land
|
|
|
20,788
|
|
|
|
24,693
|
|
|
|
3,557
|
|
Buildings
|
|
|
3,829,922
|
|
|
|
3,830,017
|
|
|
|
551,637
|
|
Machinery and equipment
|
|
|
14,564,201
|
|
|
|
14,828,021
|
|
|
|
2,135,679
|
|
Furniture and fixtures
|
|
|
106,325
|
|
|
|
93,255
|
|
|
|
13,432
|
|
Motor vehicles
|
|
|
94,725
|
|
|
|
77,227
|
|
|
|
11,123
|
|
Less: Accumulated depreciation
|
|
|
(6,070,955
|
)
|
|
|
(6,822,294
|
)
|
|
|
(982,615
|
)
|
Less: Impairment
|
|
|
(6,118,378
|
)
|
|
|
(7,293,644
|
)
|
|
|
(1,050,503
|
)
|
Subtotal
|
|
|
6,426,628
|
|
|
|
4,737,275
|
|
|
|
682,310
|
|
Construction in progress
|
|
|
419,854
|
|
|
|
141,811
|
|
|
|
20,425
|
|
Total land, property, plant and equipment, net
|
|
|
6,846,482
|
|
|
|
4,879,086
|
|
|
|
702,735
|
|
Due to the significant decrease in shipment, gross
profit margins and lower-than-expected utilization of production facilities, the Company determined a two-step impairment analysis
was required in the middle of 2015. In step one of the impairment analysis, the estimated future undiscounted net cash flows expected
to be generated by the assets over their remaining estimated useful lives were based on certain assumptions, such as forecasts
of future operating results, gross margin and expected future growth rates. The estimated undiscounted future cash flows generated
by the equipment used to produce solar products were less than their carrying value, which required the step two of the impairment
test. In the step two of the impairment analysis, the Company estimated the fair value of the long lived assets based on discounted
cash flow analysis using market participants’ assumptions, such as forecasts of future operating results, discount rates
commensurate with the risk involved, and expected future growth rates. The carrying value of the equipment was reduced to fair
value based on the discounted cash flow analysis. As a result, an impairment loss of RMB 3,804,116 related to buildings, machinery
and equipment and shared assets in all solar production lines (including production lines of ingot, wafer, cell and module), was
provided for the year ended December 31, 2015. In late 2016, as a result of significant decrease of market selling price and lower-than-expected
utilization of production facilities, the Company performed an annual two-step impairment analysis and a further impairment loss
of RMB1, 277,373 (US$ 183,980) was provided against buildings, machinery and equipment and shared assets in all solar production
lines for the year ended December 31, 2016.
Depreciation expense on property, plant and equipment
and project assets was allocated to the following expense items:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
1,292,586
|
|
|
|
1,086,392
|
|
|
|
839,005
|
|
|
|
120,842
|
|
Selling expenses
|
|
|
16,475
|
|
|
|
7,530
|
|
|
|
5,048
|
|
|
|
727
|
|
General and administrative expenses
|
|
|
48,963
|
|
|
|
60,268
|
|
|
|
32,232
|
|
|
|
4,642
|
|
Research and development expenses
|
|
|
30,260
|
|
|
|
20,515
|
|
|
|
11,107
|
|
|
|
1,600
|
|
Total depreciation expense
|
|
|
1,388,284
|
|
|
|
1,174,705
|
|
|
|
887,392
|
|
|
|
127,811
|
|
For the year ended December 31, 2016, due to the impairment
loss of RMB3,804,116 was recorded during the middle of 2015, total depreciation expenses for the year decreased by approximately
RMB530.0million (US$ 76.3million).
The Company capitalized interest costs as
a component of the cost of construction in progress as follows:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost capitalized
|
|
|
8,624
|
|
|
|
37,452
|
|
|
|
880
|
|
|
|
127
|
|
Interest cost charged against income
|
|
|
1,015,871
|
|
|
|
977,176
|
|
|
|
663,217
|
|
|
|
95,523
|
|
Total interest cost incurred
|
|
|
1,024,495
|
|
|
|
1,014,628
|
|
|
|
664,097
|
|
|
|
95,650
|
|
As of December 31, 2015 and 2016, the Company
had pledged property, plant and equipment with a total carrying amount of RMB 4,001,055 and RMB 3,182,852 (US$ 458,426), respectively,
to secure bank borrowings.
In December 2014, Yingli China sold certain machinery
and equipment with carrying amount of RMB 405,282 to a third party for cash consideration of RMB 400,000, and simultaneously entered
into a three-month contract to lease back the assets. The remaining useful lives of leased machinery and equipment were approximately
7 years. Pursuant to the terms of the contract, Yingli China is required to pay to the third party total lease payments over three
months of RMB 403,191, including both the principle and interest to be paid). Due to the substance of this transaction was short
term financing, the leased machinery and equipment were not derecognized and the financial obligation under this transaction was
recorded as short-term borrowing.
In February 2015, right after Yingli China repaid total
instalment of RMB 400,000 as scheduled in the agreement, Yingli China entered into another contract to sell the same group of machinery
and equipment for cash consideration of RMB 300,000 and simultaneously entered into a one-month contract to lease back the assets.
In March 2015, the Company failed to repay the RMB 300,000 and paid an additional penalty charge of RMB 1,750. In April 2015, Yingli
China fully repaid the RMB 300,000 and again signed a similar contract to sell the same group of machinery and equipment for cash
consideration of RMB 250,000 and simultaneously entered into a two-month contract to lease back the assets. Yingli China failed
to repay RMB 250,000 due in June 2015. From June 2015 to November 2015, total interests and penalty charges paid by Yingli China
due to failure to repay the instalment was RMB 28,000. In December 2015, Yingli China, together with the leasing company and Hainan
Yingli, entered into a contract, in which Hainan Yingli would repay the totaling RMB 250,000 on behalf of Yingli China before April
2016, and Yingli China would offset its receivables due from Hainan Yingli with the same amount. Hainan Yingli paid RMB 75,000
instantly as the contract was signed. As of December 31, 2015, total balance of the borrowing was RMB 175,000. In August 2016,
Hainan Yingli fully repaid the payment obligation.
For year ended December
31, 2016, the Company entered in to several agreements with its suppliers to settle the Company’s long ageing payables to
these suppliers by transferring the equipment owned by the Company and its subsidiaries. The difference, between the total carry
value of equipment surrendered of RMB
15,961 (US$ 2,299) and the total carry value of payables
of RMB
24,998 (US$ 3,600) at the settlement dates, was RMB 9,037 (US$ 1,301), and was included
in general and administrative expenses in the consolidated statements of comprehensive loss.
|
(a)
|
In April 2015, the Land Reserve Center of local government of Baoding City, Hebei Province signed a land re-acquisition and
compensation agreement with Fine Silicon Co., Ltd. (“Fine Silicon”), one of the subsidiaries of the Company, to acquire
land use right related to the idle land of Fine Silicon. After the acquisition, the local government has completed first round
of its auction process and sold part of the land for an aggregate auction price of RMB 1,875.6 million in September 2015. After
deducting required contributions to be made to the local government from the gross proceeds of the auction of the land in the amount
of RMB 258.5 million, the total net proceeds received and expected to be received from the auction were RMB 1,617.1 million. The
local government has paid Fine Silicon RMB 1,370.8 million of the net proceeds in 2015.
|
In 2016, the Company further received RMB 103 million
from local government. For the expected remaining outstanding receivables of RMB 143,016 (US$20,599), as further discussed with
local government in terms of the method of calculation of the contributions, the Company believes the expected remaining amount
will not be paid. As a result, a fully provision of RMB143,016 (US$20,599) was provided by the Company for the year ended December
31, 2016.
For the year ended December 31, 2015, total disposal
gain of RMB 1,167,317 mainly the difference between the total net proceeds of RMB 1,617.1 million and the carry value of the land
use right of RMB 186,111 and the building of RMB 263,624 attached to the land use right, was recognized in relation to the disposal
of land use right and the building attaching to the land use right (Note (2)(j)). The disposal gain was included in “Disposal
gain from long-lived assets and land use right in relation to a subsidiary” in the Consolidated Statements of Comprehensive
Loss. No such disposal gain was recognized for the year ended December 31, 2016.
|
(b)
|
On December 15, 2015, pursuant to the share transfer agreement entered into between Hainan Yingli, one of the subsidiaries
of the Company and other two third parties, Hainan Yingli transferred its 100% equity in Hainan Lvjian Investment Company (“Hainan
Lvjian”) to these two third parties with consideration of RMB 735.0 million, Hainan Lvjian was one of the subsidiaries of
Hainan Yingli. The consideration was determined based on the fair value of Hainan Lvjian and the major asset owned by Hainan Lvjian
was a land use right as discussed in note (12). For the year ended December 31, 2015, total disposal gain of RMB 7,000 was recognized.
The disposal gain was included in “Other income” in the Consolidated Statements of Comprehensive Loss.
|
Among the total consideration of RMB 735,000, RMB 265,000
was received in 2015 and the remaining consideration of RMB 470,000 was received in 2016.
|
(7)
|
Derivative Instruments
and Hedging Activities
|
The Company uses foreign currency forward contracts
to manage its exposure to foreign currency risks arising from sales denominated in foreign currency and uses interest rate related
derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company
does not speculate using derivative instruments.
Foreign Currency
The Company’s principal operating subsidiaries,
Hainan Yingli New Energy Resources Co., Ltd. (“Hainan Yingli”) and Yingli Energy (China) Co., Ltd. (“Yingli China”)
are located in the PRC with the Renminbi being their functional currency, respectively. However, the majority of these two entity’s
sales are in currencies other than Renminbi, primarily the EURO and US$. Any depreciation of the EURO or US$ against the Renminbi
will generally result in foreign exchange losses and adversely affect the Company’s results of operations. With an aim to
reduce its risk exposure, the Company, on a selected basis, enters into forward contracts with financial institutions to forward
sell EURO or US$ when it entered into certain sales contracts denominated in EURO or US$ through its PRC operating subsidiaries.
Some of these foreign currency forward contracts are qualified as foreign currency cash flow hedges at inception, and thus the
change in the fair value of these hedge contracts were initially recognized in accumulated other comprehensive income and reclassified
into the consolidated statements of comprehensive loss in the period that the sale of the related hedged item is recognized or
when hedge accounting is discontinued if the foreign currency forward contracts are no longer effective in offsetting cash flows
attributable to the hedged risk. During the year ended December 31, 2014, the Company entered into foreign currency forward contracts
with a notional amount of EURO 31,760, US$ 27,000 and JPY 2,499,200 against its EURO ,US$ and JPY denominated sales, respectively.
During the year ended December 31, 2015, the Company entered into foreign currency forward contracts with a notional amount of
EURO 80,000, US$ 30,000 and JPY 7,100,000 against its EURO ,US$ and JPY denominated sales, respectively. As of December 31, 2015
and 2016, the Company didn't have outstanding foreign currency forward contracts.
Interest
The Company’s exposure to the risk of changes
in market interest rates primarily relates to its bank borrowings. To finance its business operation and expansion, the Company’s
PRC operating subsidiaries will obtain short-term and long-term bank borrowings. Some of the bank borrowings carry variable interest
rates. Interest expenses on these banking borrowings may increase as a result of change in market interest rates. With an aim to
reduce its interest rate exposure, the Company entered into one long-term interest rate swap contract, with notional amount of
US$70,000, in 2009. As of December 31, 2015 and 2016, the Company didn’t have outstanding interest rate swap contracts.
Cash Flow Hedge Loss or Gain Recognition
The following summarizes the loss (gain), recognized
in the consolidated statement of comprehensive loss, related to derivatives designated and qualifying as cash flow hedges for the
years ended December 31, 2014, 2015 and 2016:
Derivatives in Cash Flow
|
|
Amount of Gain
Recognized in Other
Comprehensive
Income
|
|
|
Location of Gain
Reclassified from
Other
Comprehensive
Income into
|
|
Amount of Gain
Reclassified from
Other Comprehensive
Income into
Loss
|
|
Hedging Relationships
|
|
RMB
|
|
|
US$
|
|
|
Loss
|
|
RMB
|
|
|
US$
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
|
(24,117
|
)
|
|
|
|
|
|
Foreign currency exchange losses
|
|
|
(24,390
|
)
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
|
—
|
|
|
|
|
|
|
Foreign currency exchange losses
|
|
|
(749
|
)
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
|
—
|
|
|
|
—
|
|
|
Foreign currency exchange losses
|
|
|
—
|
|
|
|
—
|
|
Other Derivatives Gains (Losses) Recognition
The following summarizes the losses and the location
in the consolidated statements of comprehensive loss of derivatives not designated as hedging instruments for the years ended December 31,
2014, 2015 and 2016:
|
|
Location of Loss
|
|
Amount of Loss Recognized in Income on
Derivative
|
|
|
|
Recognized in Income
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
on Derivative
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
Interest expense
|
|
|
(81
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
|
|
(81
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(8)
|
Fair Value Measurements
|
The following table presents the placement in the
fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2014,
no such assets and liabilities as of December 31, 2015 and 2016:
|
|
|
|
|
Fair value measurements at
December 31, 2014
|
|
|
|
|
|
|
Quoted prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
markets for
|
|
|
other
|
|
|
Significant
|
|
|
|
|
|
|
identical
|
|
|
observable
|
|
|
unobservable
|
|
|
|
December 31,
|
|
|
assets
|
|
|
inputs
|
|
|
inputs
|
|
|
|
2014
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contract
|
|
|
4,195
|
|
|
|
—
|
|
|
|
4,195
|
|
|
|
—
|
|
Total
|
|
|
4,195
|
|
|
|
—
|
|
|
|
4,195
|
|
|
|
—
|
|
The following table presents the Company’s activity for
liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in ASC Topic
820 for the year ended December 31, 2014. No such activities were made by the Company for the years ended December 31,
2015 and 2016.
Assets and liabilities measured at fair value on a recurring
basis using significant unobservable inputs (Level 3 valuation)
|
|
Liabilities
|
|
|
|
Interest rate swap
|
|
Balance at December 31, 2013
|
|
|
3,733
|
|
Total realized and unrealized losses:
|
|
|
|
|
Included in earnings
|
|
|
81
|
|
Included in other comprehensive income
|
|
|
—
|
|
Settlement
|
|
|
(3,814
|
)
|
Balance at December 31, 2014
|
|
|
—
|
|
Total gain for 2014:
|
|
|
|
|
included in earnings attributable to other current liabilities and accrued expenses held at December 31, 2014
|
|
|
(3,733
|
)
|
The following table presents the placement in the
fair value hierarchy of assets and liabilities that are measured at fair value on a non-recurring basis as of December 31, 2015:
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
Description
|
|
Balance as of
31 December
2015
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
losses
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
6,825,694
|
|
|
|
|
|
|
|
|
|
|
|
6,825,694
|
|
|
|
(3,804,116
|
)
|
The following table presents the placement in the
fair value hierarchy of assets and liabilities that are measured at fair value on a non-recurring basis as of December 31, 2016
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
Description
|
|
Balance as
of
31 December
2016
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
losses
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
4,745,230
|
|
|
|
|
|
|
|
|
|
|
|
4,745,230
|
|
|
|
(5,068,028
|
)
|
The long-lived assets represent property, plant and
equipment for production of multi-crystalline wafers and certain machines (note (6))
In accordance with the provisions of the Impairment
or Disposal of Long-Lived Assets Subsections of FASB Codification Subtopic 360—10, as of December 31, 2016, long-lived assets
held and used with a carrying amount of RMB 6,022,603 (US$ 867,435) were written down to their fair value of RMB 4,745,230(US$
683,455), resulting in an impairment charge of RMB 1,277,373(US$ 183,980), which was calculated based on Level 3 Inputs and included
in “Impairment of long-lived assets” in the Consolidated Statements of Comprehensive Loss.
The Company determined that buildings, machinery and
equipment, land use rights and shared assets in all solar production lines (including production lines of ingot, wafer, cell and
module, hereafter “Solar Production Lines”) were one asset group and subject to be tested for impairment.
The significant unobservable inputs used in the valuation
of the fair value of the asset group subject to impairment are as following:
|
·
|
Weighted average cost of capital, or WACC—The WACCs were determined based on a consideration of such factors as risk-free rate, comparative industry risk, equity risk premium, company size and company-specific factors. The Company used WACC of 15% in the discounted cash flow.
|
|
·
|
Comparable companies—In deriving the discounted cash flow and WACCs, which are used as the discount rates under the discounted cash flow, three to four publicly traded solar companies were selected for reference as market participants.
|
|
(b)
|
Fair Value of Financial
Instruments
|
Management used the following methods and assumptions
to estimate the fair value of financial instruments at the relevant balance sheet dates:
|
·
|
Short-term financial instruments (cash and cash equivalents, restricted cash, accounts receivable, amounts due from related parties, accounts payable, short-term borrowing, and amounts due to related parties) - cost approximates fair value because of the short maturity period.
|
|
|
|
|
·
|
The fair value of past due mid-term notes disclosed above approximates to its carrying amount. As a common practice in China, government normally would take collective efforts to protect state-owned banks' benefits from having non-performing assets. The chance that the Company can avoid from paying the debt in full is very remote, and therefore the Company determined that cost of medium term note should be equal to its fair value where no further discount can be applied.
|
|
·
|
Long-term debt and long-term payable (included in other liabilities) - fair value is based on the amount of future cash flows associated with each debt instrument discounted at the Company’s current borrowing rate for similar debt instruments with comparable terms. As of December 31, 2015 and 2016, the carrying values of the Company’s long term debt and long-term payable approximate their fair values as all the long-term borrowings carries variable interest rates which approximate rates currently offered by the Company’s bankers for similar debt instruments of comparable maturities.
|
|
(9)
|
Investments in affiliated
companies
|
The following table includes the Group’s carrying
amounts and percentages of ownership of the investments in affiliated companies under the equity and cost methods as of December 31,
2016 and the carrying amounts as of December 31, 2015:
|
|
December
|
|
|
December 31, 2016
|
|
|
|
31, 2015
RMB
|
|
|
RMB
|
|
|
Percentage
Ownership
|
|
Investment in affiliated companies under the equity method:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hainan Tianneng Power Co., Ltd. (note b)
|
|
|
60,391
|
|
|
|
—
|
|
|
|
—
|
|
Shanghai Sailing Xili Equity Investment Fund LLP (note f)
|
|
|
143,749
|
|
|
|
126,498
|
|
|
|
50.80
|
%
|
Tongmei Yingli New Energy Industry Co., Ltd. (note g)
|
|
|
30,347
|
|
|
|
30,347
|
|
|
|
30
|
%
|
Shandong Hi-speed Yingli New Energy Co., Ltd. (note i)
|
|
|
16,985
|
|
|
|
15,528
|
|
|
|
35
|
%
|
Solariant Portfolio Two Godo Kaisha (note h)
|
|
|
27,401
|
|
|
|
—
|
|
|
|
—
|
|
Others
|
|
|
13,597
|
|
|
|
13,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in affiliated companies under the cost method:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Jingyi Green Energy Power System Engineering Co., Ltd. (note c)
|
|
|
11,875
|
|
|
|
11,875
|
|
|
|
10
|
%
|
Guokai Siyuan (Beijing)Investment Fund Co., Ltd. (note e)
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
2.97
|
%
|
Others
|
|
|
5,376
|
|
|
|
7,347
|
|
|
|
|
|
Total
|
|
|
459,721
|
|
|
|
355,192
|
|
|
|
|
|
The movements of the investments in affiliated
companies are as follows:
|
|
Balances at
January 1, 2014
|
|
|
Investments
|
|
|
Share of Profits /
(Losses)
|
|
|
Disposal
|
|
|
Others
|
|
|
Balances at December 31,
2014
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Investment
in affiliated companies under the equity method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hainan Tianneng
Power Co., Ltd. (note b)
|
|
|
52,460
|
|
|
|
—
|
|
|
|
2,335
|
|
|
|
—
|
|
|
|
(3,071
|
)
|
|
|
51,724
|
|
Yingli Shuntong (Beijing)
International Freight Agency Co., Ltd. (note d)
|
|
|
1,941
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,941
|
)
|
|
|
—
|
|
|
|
—
|
|
Shanghai Sailing Xili Equity
Investment Fund LLP (note f)
|
|
|
—
|
|
|
|
153,000
|
|
|
|
(90
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
152,910
|
|
Tongmei Yingli New Energy
Industry Co., Ltd.(note g)
|
|
|
—
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
Solariant Portfolio Two
Godo Kaisha (note h)
|
|
|
—
|
|
|
|
7,782
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,782
|
|
Others
|
|
|
—
|
|
|
|
12,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in affiliated companies under the cost method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Jingyi Green Energy
Power System Engineering Co., Ltd. (note c)
|
|
|
11,875
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,875
|
|
Guokai Siyuan (Beijing)Investment
Fund Co., Ltd. (note e)
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
Others
|
|
|
—
|
|
|
|
7,010
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,010
|
|
Total
|
|
|
216,276
|
|
|
|
209,792
|
|
|
|
2,245
|
|
|
|
(1,941
|
)
|
|
|
(3,071
|
)
|
|
|
423,301
|
|
|
|
Balances at
January 1, 2015
|
|
|
Investments
|
|
|
Share of Profits /
(Losses)
|
|
|
Disposal
|
|
|
Others
|
|
|
Balances at December 31,
2015
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Investment
in affiliated companies under the equity method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hainan Tianneng
Power Co., Ltd. (note b)
|
|
|
51,724
|
|
|
|
—
|
|
|
|
8,413
|
|
|
|
—
|
|
|
|
254
|
|
|
|
60,391
|
|
Shanghai Sailing Xili Equity
Investment Fund LLP (note f)
|
|
|
152,910
|
|
|
|
—
|
|
|
|
(9,161
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
143,749
|
|
Tongmei Yingli New Energy
Industry Co., Ltd. (note g)
|
|
|
30,000
|
|
|
|
—
|
|
|
|
347
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,347
|
|
Shandong Hi-speed Yingli
New Energy Co., Ltd (note i).
|
|
|
—
|
|
|
|
17,500
|
|
|
|
(428
|
)
|
|
|
—
|
|
|
|
(87
|
)
|
|
|
16,985
|
|
Solariant Portfolio Two
Godo Kaisha (note h)
|
|
|
7,782
|
|
|
|
20,580
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(961
|
)
|
|
|
27,401
|
|
Others
|
|
|
12,000
|
|
|
|
1,597
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in affiliated companies under the cost method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Jingyi Green Energy
Power System Engineering Co., Ltd. (note c)
|
|
|
11,875
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,875
|
|
Guokai Siyuan (Beijing)Investment
Fund Co., Ltd. (note e)
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
Others
|
|
|
7,010
|
|
|
|
2,921
|
|
|
|
—
|
|
|
|
(4,555
|
)
|
|
|
—
|
|
|
|
5,376
|
|
Total
|
|
|
423,301
|
|
|
|
42,598
|
|
|
|
(829
|
)
|
|
|
(4,555
|
)
|
|
|
(794
|
)
|
|
|
459,721
|
|
|
|
Balances at
January 1, 2016
|
|
|
Investments
|
|
|
Share of Profits /
(Losses)
|
|
|
Disposal
|
|
|
Impairment
|
|
|
Other
|
|
|
Balances at
December 31,
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Investment
in affiliated companies under the equity method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hainan Tianneng
Power Co., Ltd. (note b)
|
|
|
60,391
|
|
|
|
—
|
|
|
|
1,154
|
|
|
|
(61,545
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shanghai Sailing Xili Equity
Investment Fund LLP (note f)
|
|
|
143,749
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,251
|
)
|
|
|
—
|
|
|
|
126,498
|
|
Tongmei Yingli New Energy
Industry Co., Ltd. (note g)
|
|
|
30,347
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,347
|
|
Shandong Hi-speed Yingli
New Energy Co., Ltd (note i).
|
|
|
16,985
|
|
|
|
—
|
|
|
|
(1,457
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,528
|
|
Solariant Portfolio Two
Godo Kaisha (note h)
|
|
|
27,401
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(26,367
|
)
|
|
|
—
|
|
|
|
(1,034
|
)
|
|
|
—
|
|
Others
|
|
|
13,597
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in affiliated companies under the cost method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing Jingyi Green Energy
Power System Engineering Co., Ltd. (note c)
|
|
|
11,875
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,875
|
|
Guokai Siyuan (Beijing)Investment
Fund Co., Ltd. (note e)
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
Others
|
|
|
5,376
|
|
|
|
1,971
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,347
|
|
Total
|
|
|
459,721
|
|
|
|
1,971
|
|
|
|
(303
|
)
|
|
|
(87,912
|
)
|
|
|
(17,251
|
)
|
|
|
(1,034
|
)
|
|
|
355,192
|
|
|
(a)
|
The Company’s 50% equity
investment in Tibet Tianwei Yingli New Energy Resources Co., Ltd. (“Tibetan Yingli”) is accounted for under equity
method. Given the continuing losses sustained by Tibetan Yingli, the Company recorded a full impairment provision of RMB 8,720
for this equity investment during the year ended December 31, 2011. In 2014, 2015 and 2016, Tibetan Yingli continued to incur
losses and the carrying value of the Company’s investment in Tibetan Yingli remained as nil and no further loss was recognized
as of December 31, 2014, 2015 and 2016.
|
|
(b)
|
In September 2009, Yingli China and two other entities, unrelated to the Company, established Hainan Tianneng Power Co., Ltd. (“Hainan Tianneng”). Yingli China contributed RMB 6,000 to acquire a 20% equity interest. In 2011, Yingli China further injected cash of RMB 20,362 while the other investors made proportional cash injection to remain the same ownership interest for each investor. In 2012, the other investors made further capital injection to Hainan Tianneng, which resulted in a decrease of equity interest held by Yingli China to 11.45% as of December 31, 2012. In June and July 2013, Hainan Yingli made capital injections in the amount of RMB 40 million and RMB 12 million respectively, to acquire 18.31% equity interest of Hainan Tianneng in total. Together with the equity interest held by Yingli China (9.35%), the Company (including both Yingli China and Hainan Yingli) holds 27.66% equity interest in Hainan Tianneng as of December 31, 2013 and 2014. In May 2015, one of the other investors made further capital injection to Hainan Tianneng, which resulted in a decrease of equity interest held by the Company to 26.53% as of December 31, 2015. The investment is accounted for under equity method. In December 2016, as discussed in note 15(b), Yingli China and Hainan Yingli transferred all of the equity interest in Hainan Tianneng to the other investor. The total consideration was RMB 95,840 (US$ 13,804) and a gain of RMB 34,295 (US$ 4,940) was recognized in “Other Income” in the Consolidated statement of Comprehensive Loss for year ended December 31, 2016.
|
|
(c)
|
In February 2010, Yingli China and two other entities, unrelated to the Company, established Beijing Jingyi Green Energy Power System Engineering Co., Ltd. Yingli China contributed RMB 10,000 to acquire a 10% equity interest. In July 2011, Yingli China injected cash of RMB 1,875 while the other investors made proportional cash injection to remain the same ownership interest for each investor. The investment is accounted for under cost method.
|
|
(d)
|
In September 2011, Yingli Beijing and a subsidiary of Yingli Group, established Yingli Shuntong (Beijing) International Freight Agency Co., Ltd (“Shuntong Wuliu”). Yingli Beijing contributed RMB 1,470 to acquire 49% equity interest. As of December 31, 2013, the investment is accounted for under equity method. In December 2014, Yingli Beijing disposed all its equity interest in Shuntong Wuliu to Tianjin Yingli Bubalus Logistics Co., Ltd., a related party of the Company. The total consideration was RMB 1,941 and no gain or loss arose from this transaction.
|
|
(e)
|
In November 2012, Yingli China and Hainan Yingli, along with 35 other entities unrelated to the Company, participated in the establishment of Guokai Siyuan (Beijing) Investment Fund Co., Ltd.. The Investment Company’s period of operation is 10 years and its principal activities are to make equity investments to key industries encouraged by the State. The Company contributed RMB 150,000 to acquire a 2.97% equity interest. The investment is accounted for under cost method. The Investment Company’s administrator is SDIC Investment and Development Fund Management Beijing Co., Ltd. Subject to the administrator’s approval and other shareholders’ preemptive rights, the Company can transfer its investment to third parties.
|
|
(f)
|
In August 2014, Yingli China and Shanghai Sailing
Capital Management Co., Ltd. (“Shanghai Sailing”), unrelated to the Company, set up a fund called Shanghai Sailing
Xili Equity Investment Fund LLP (“Sailing Fund”). The capital size of Sailing Fund is of RMB 1,004,000 and its principal
activities are to make equity investments to new energy industries. According to the agreement, Sailing Fund is jointly controlled
by Shanghai Sailing and Yingli China with shares of interest of 49.2% and 50.8%, respectively. As of December 31, 2015, total
capital injected by Yingli China is RMB 153,000 (US$ 23,619) while Shanghai Sailing also made cash injection proportionally
based on the agreed percentage of shares of interest between the parties in Sailing Fund. Therefore, the investment is accounted
for under equity method. In March 2016, all partners of Sailing Fund decided to liquidate Sailing Fund. Due to the liquidation
has not completed, as of December 31, 2016, the investment was still recorded as long term investment, and the Company recorded
an impairment provision of RMB 17,251(US$ 2,485) for this equity investment for the difference between the carry value of the
long term investment and the fair value of the liquidation amount expected to be received.
|
|
(g)
|
In August 2014, Yingli China together with two other entities unrelated to the Company, established Tongmei Yingli New Energy Industry Co., Ltd. Yingli China contributed RMB 30,000 to acquire a 30% equity interest. The investment is accounted for under equity method.
|
|
(h)
|
In July 2013, Yingli Japan, together with two other entities unrelated to the Company, established Solariant Portfolio Two Godo Kaisha (the project“SPC”) to acquire 49.48% equity interest. Yingli Japan made capital contribution of JPY 151,500 (RMB 7,782 equivalent) in 2014. Pursuant to an agreement entered into by all parties in early 2015, SPC transferred SPC’s payables of JPY 395,000 (RMB 20,580 equivalent, US$ 3,177) to Yingli Japan, which was treated as a capital injection, meanwhile, the other two investors also made capital injection to SPC. After the transaction was made, total investment by Yingli Japan was amounted to JPY 546,500 and equity interest owned by Yingli Japan decreased to 37.5%. In July 2015, Yingli Japan together with other two investors of SPC, entered into several agreement to transfer 100% of equity interest of SPC to another entity unrelated to the Company. As of December 31, 2015, due to that the share transfer has not completed, partial consideration of JPY 815,700 (RMB 42,499 equivalent) received was recorded in “Other current liabilities and accrued expenses” in Consolidated Balance Sheets. In 2016, the transaction had been completed and according to the final equity transferring contract, the consideration would be paid through five installment(with the fifth being contingent, as discussed below) and as of December 31, 2016, Yingli Japan had received the first four installment of total JPY 1,565,500 (RMB 89,197 equivalent), and a disposal gain of JPY 1,052,422 (RMB 62,830 equivalent), which was the difference between the carry value of the long term investment at the disposal date and the JPY 1,565,500 ( RMB 89,197 equivalent), was recognized in
“
Other Income
”
in the Consolidated Statements of Comprehensive Loss. The gain was mainly resulted from the unrecognized assets related to the entitlement granted to Solariant for the construction of the project assets. Since the fifth installment of JPY261,800 is contingent and won’t be paid to Yingli Japan until the project asset owned by the SPC is connected to the grid, no receivables and gain of the fifth installment was recognized in 2016.
|
|
(i)
|
In June 2015, Yingli Beijing and two other entities, unrelated to the Company, established Shandong Hi-speed Yingli New Energy Co., Ltd. (“Shandong Hi-speed Yingli”). Yingli Beijing has contributed RMB 17,500 to acquire a 35% common stock equity interest. The investment is accounted for under equity method.
|
Short-term borrowings and current instalments of long-term
debt consist of the following:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed by bank deposits
|
|
|
—
|
|
|
|
30,000
|
|
|
|
4,321
|
|
Guaranteed by related parties
|
|
|
3,871,241
|
|
|
|
4,338,276
|
|
|
|
624,842
|
|
Guaranteed by property, plant and equipment
|
|
|
1,805,607
|
|
|
|
1,335,374
|
|
|
|
192,334
|
|
Guaranteed by accounts receivable
|
|
|
128,917
|
|
|
|
—
|
|
|
|
—
|
|
Guaranteed by third parties
|
|
|
—
|
|
|
|
34,000
|
|
|
|
4,897
|
|
Unsecured loans
|
|
|
711,793
|
|
|
|
404,666
|
|
|
|
58,284
|
|
Subtotal of short-term borrowings*
|
|
|
6,517,558
|
|
|
|
6,142,316
|
|
|
|
884,678
|
|
Current portion of long-term debts (note 10(b))*
|
|
|
849,625
|
|
|
|
810,889
|
|
|
|
116,791
|
|
Current portion of medium-term notes (note (11))
|
|
|
1,757,000
|
|
|
|
2,057,000
|
|
|
|
296,270
|
|
Total short-term borrowings and current portion of long-term debt
|
|
|
9,124,183
|
|
|
|
9,010,205
|
|
|
|
1,297,739
|
|
*Short-term borrowings and current portion of long-term
debts consist of the following:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Short-term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
No breach of loan covenants or no triggering cross default
|
|
|
3,311,873
|
|
|
|
1,852,798
|
|
|
|
266,859
|
|
In breach of loan covenants or
triggering cross default with no waivers from banks
|
|
|
3,205,685
|
|
|
|
4,289,518
|
|
|
|
617,819
|
|
|
|
|
6,517,558
|
|
|
|
6,142,316
|
|
|
|
884,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debts
|
|
|
|
|
|
|
|
|
|
|
|
|
No breach of loan covenants or no triggering cross default
|
|
|
226,330
|
|
|
|
37,012
|
|
|
|
5,331
|
|
In breach of loan covenants and no waiver received from banks
|
|
|
584,448
|
|
|
|
657,835
|
|
|
|
94,748
|
|
In breach of loan covenants with waivers received from banks
|
|
|
38,847
|
|
|
|
116,042
|
|
|
|
16,712
|
|
|
|
|
849,625
|
|
|
|
810,889
|
|
|
|
116,791
|
|
As of December 31, 2016, the Company and its subsidiaries
had 66 outstanding short-term borrowings and current portion of long-term debts classified as current liabilities with financial
covenants and were in breach of the financial covenants under 15 of these loans with an aggregate principal amount of RMB3,540,745(US$509,973).
All of these loans were borrowed by Yingli China and Tianjin Yingli from China Development Bank and the financial covenants breached
were regarding the current ratio, quick ratio, debt-to-asset ratio and debt coverage ratio of Yingli China, and the debt-to-asset
ratio of Tianjin Yingli. Given the original terms of these loans would have matured in the near term and considering the Company’s
continued need for short-term financing, the Company had focused on negotiating with China Development Bank for the extension of
these loans and did not request any separate waiver for breach of financial covenants. As of December 31, 2016, notwithstanding
the failure of Yingli China and Tianjin Yingli to satisfy the relevant financial covenants in the original agreements, China Development
Bank, which was fully aware of the financial condition of Yingli China and Tianjin Yingli, agreed to extend the terms of certain
of these loans by an additional one year upon their maturity with the existing financial covenants. Among the 15 loans mentioned
above, the terms of 13 loans had been extended by written agreements between China Development Bank and Yingli China or Tianjin
Yingli by year ended December 31, 2016, the term of one loan was extended subsequently. All the loans mentioned above were classified
as current liabilities as of December 31, 2016 because they were in breach of loan covenants both before and after extension.
As of December 31, 2016, the breach of financial covenants
mentioned above did not trigger any other cross-default provision under any loan of the Company and its subsidiaries. The Company
and its subsidiaries did not have any cross-default triggered under any of their loans classified as non-current liabilities due
to any other reason either.
As of December 31, 2016, because Yingli China failed
to repay 10 short term loans with total RMB73,156 (US$ 10,537) when such repayments became due in October and November 2016, such
payment default triggered cross-defaults under Yingli China’s 17 other loans classified as current liabilities with aggregate
principal amount of RMB2,377,478 (US$ 342,428). In addition, Hainan Yingli failed to repay a loan with principal amount of RMB99,089
(US$ 14,272) upon its maturity in November 2015, and such payment default triggered cross-defaults under Hainan Yingli’s
four other loans classified as current liabilities with aggregate principal amount of RMB184,720 (US$ 26,605). All the loans mentioned
above were classified as current liabilities as of December 31, 2016 because they either had payment defaults or cross-defaults.
In subsequent period, Yingli China has repaid the short term loan with RMB 73,156. Meanwhile, Hainan Yingli is still in negotiation
with the bank to extend the term.
Short-term borrowings outstanding (including the current
portion of long-term debt) as of December 31, 2015 and 2016 bore a weighted average interest rate of 5.72% and 5.08% per annum,
respectively. All short-term borrowings mature and expire at various times within one year.
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Long-term debt and medium-term notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured loans from China Development Bank
|
|
|
2,888,287
|
|
|
|
3,000,548
|
|
|
|
432,169
|
|
Guaranteed by related parties
|
|
|
45,000
|
|
|
|
33,000
|
|
|
|
4,753
|
|
Secured by multiple assets
|
|
|
322,236
|
|
|
|
300,962
|
|
|
|
43,347
|
|
Medium-term notes (note (11))
|
|
|
2,057,000
|
|
|
|
2,057,000
|
|
|
|
296,270
|
|
Borrowings from other third parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed by property, plant and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
5,312,523
|
|
|
|
5,391,510
|
|
|
|
776,539
|
|
Less: current portion
|
|
|
(2,606,625
|
)
|
|
|
(2,867,889
|
)
|
|
|
(413,062
|
)
|
Total long-term debt and medium-term notes
|
|
|
2,705,898
|
|
|
|
2,523,621
|
|
|
|
363,477
|
|
As of December 31, 2015 and 2016, long-term debts that
were in breach and no breach of loan covenants as following:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Long-term debt::
|
|
|
|
|
|
|
|
|
|
|
|
|
In breach of loan covenants with waivers from banks
|
|
|
898,257
|
|
|
|
865,625
|
|
|
|
124,676
|
|
No breach of loan covenants
|
|
|
1,507,641
|
|
|
|
1,657,996
|
|
|
|
238,801
|
|
Total long-term debt
|
|
|
2,405,898
|
|
|
|
2,523,621
|
|
|
|
363,477
|
|
Long-term loans that breached certain loan covenants
as of December 31, 2016
In October 2011, Tianjin Yingli New Energy Resources
Co., Ltd. (“Tianjin Yingli”) borrowed an eight-year RMB 350,000 loan from China Development Bank at an interest
rate of the five-year Renminbi benchmark loan rate per annum (the “Tianjin Yingli RMB Loan”). The loan is guaranteed
by property, plant and equipment. The Company withdrew RMB 350,000 (US$ 50,410) by the end of December 31, 2016. Based on the amendment
entered into in April 2016, the amended repayment schedule is RMB 600 due in February 2017, RMB 10,000 due in August 2017, RMB
25,000 due in February 2018, RMB 25,000 due in August 2018, RMB 25,000 due in February 2019, RMB 25,000 due in August 2019, RMB
25,000 due in February 2020, RMB 25,000 due in August 2020, RMB 25,000 due in February 2021, RMB 25,000 due in August 2021, RMB
25,000 due in February 2022, RMB 19,000 due in October 2022. As of December 31, 2016, the current and non-current portion of this
long-term borrowing was RMB 10,600 (US$ 1,527) and RMB 244,000 (US$ 35,143), respectively.
The loan agreement for Tianjin Yingli RMB Loan required
Tianjin Yingli to maintain a debt-to-asset ratio (calculated as total liabilities divided by total assets) of no more than 80%.
As of December 31, 2016, Tianjin Yingli was in breach of the financial covenant to maintain a debt-to-asset ratio of less than
80%. China Development Bank granted a written waiver to Tianjin Yingli which waived the requirement regarding Tianjin Yingli’s
debt-to-asset ratio under the loan agreement until June 2018. The waiver did not impose any new financial covenant or require any
prepayment.
In October 2011, Tianjin Yingli borrowed an eight-year
US$100,000 loan from China Development Bank at an interest rate of 6-month LIBOR plus 5.2% per annum. The loan is guaranteed by
property, plant and equipment (the “Tianjin Yingli USD Loan”). The Company withdrew US$100,000 (RMB694, 300) by the
end of December 31, 2016. Based on the first amendment entered into in November 2015, the loan repayment schedule of the loan with
a remaining balance of US$ 70,000 was modified. The original repayment schedule was US$9,000 due in August 2015, US$9,000 due in
February 2016, US$9,000 due in August 2016, US$9,000 due in February 2017, US$9,000 due in August 2017, US$10,000 due in February
2018, US$5,000 due in August 2018, US$5,000 due in February 2019 and US$5,000 due in August 2019. The amended repayment schedule
was US$200 due in April 2016, US$200 due in October 2016, US$10,000 due in April 2017, US$10,820 due in October 2017, US$14,300
due in April 2018, US$11,500 due in October 2018, US$11,500 due in April 2019 and US$11,480 due in October 2019. No other key terms
were changed in the amendment. Based on the second amendment entered into in April 2016, the amended repayment schedule is US$200
due in April 2017, US$3,000 due in October 2017, US$7,000 due in April 2018, US$8,000 due in October 2018, US$8,000 due in April
2019, US$7,000 due in October 2019, US$7,000 due in April 2020, US$7,000 due in October 2020, US$6,000 due in April 2021, US$6,000
due in October 2021, US$6,000 due in April 2022 and US$4,760 due in October 2022. In addition, the interest rate was modified from
6-month LIBOR plus 5.2% per annum to 6-month LIBOR plus 4.5% per annum. As of December 31, 2016, the current and non-current portion
of this long-term borrowing was US$ 3,200 (RMB 22,218) and US$66,760 (RMB 463,515), respectively.
The loan agreement for the Tianjin Yingli USD Loan
required Tianjin Yingli to maintain a current ratio (calculated as total current assets divided by total current liabilities) of
no less than 60%, quick ratio (calculated as total current assets minus inventory and then divided by total current liabilities)
of no less than 50%, debt-to-asset ratio (calculated as total liabilities divided by total assets) of no more than 80%, debt coverage
ratio (calculated as cash available for debt servicing during the period divided by interest and principal payments during the
period) of no less than 150%, and interest coverage ratio (calculated as cash available for interest payment during the period
divided by interest and other fees payable during the period) of no less than 150%. As of December 31, 2016, Tianjin Yingli was
in breach of the financial covenant to maintain a debt-to-asset ratio of less than 80%. China Development Bank granted a written
waiver to Tianjin Yingli which waived the requirement regarding Tianjin Yingli’s debt-to-asset ratio until the end of the
contract term. The waiver did not impose any new financial covenant or require any prepayment.
In October 2011, Hengshui Yingli New Energy Resources
Co., Ltd. (“Hengshui Yingli”) entered into an eight-year US$50,000 loan agreement with China Development Bank
at an interest of 6-month LIBOR plus 5.8% per annum and subject to adjustment annually (the “Hengshui Yingli USD Loan”).
The loan is guaranteed by property, plant and equipment. By the end of December 31, 2016, the Company withdrew US$50,000 (RMB 347,150).
Out of US$ 3,000 due in December 2015, US$ 50 was repaid. Based on the first amendment entered into in December 2015, the loan
repayment schedule of the loan with a remaining balance of US$ 34,950 was modified. The original repayment schedule was US$2,950
due in December 2015, US$4,000 due in June 2016, US$4,000 due in December 2016, US$4,000 due in June 2017, US$4,000 due in December
2017, US$4,000 due in June 2018, US$4,000 due in December 2018, US$4,000 due in June 2019, US$4,000 due in October 2019. The amended
repayment schedule was US$50 due in June 2016, US$50 due in December 2016, US$6,000 due in June 2017, US$6,000 due in December
2017, US$5,620 due in June 2018, US$5,620 due in December 2018, US$5,800 due in June 2019, US$5,810 due in October 2019. No other
key terms were changed in the amendment. Based on the second amendment entered into in March 2016, the interest rate was modified
from 6-month LIBOR plus 5.8% per annum to 6-month LIBOR plus 4.5% per annum. As of December 31, 2016, the current and non-current
portion of this long-term borrowing was US$ 12,000 (RMB 83,316) and US$ 22,850 (RMB 158,648), respectively.
The loan agreement for the Hengshui Yingli USD Loan
required Hengshui Yingli to maintain a debt-to-asset ratio (calculated as total liabilities divided by total assets) of no more
than 75% and debt coverage ratio (calculated as cash available for debt servicing during the period divided by interest and principal
payments during the period) of no less than 130%. As of December 31, 2016, Hengshui Yingli was in breach of the financial covenant
to maintain a debt-to-asset ratio of no more than 75%. China Development Bank granted a written waiver to Hengshui Yingli which
waived the requirement regarding Hengshui Yingli’s debt-to-asset ratio under the loan agreement until the end of the contract
term. The waiver did not impose any new financial covenant or require any prepayment.
Long-term loans that did not breach loan covenants
as of December 31, 2016
In December 2008, Yingli China entered into an eight-year
US$ 70,000 loan agreement at an interest rate of 6-month LIBOR plus 6% per annum with China Development Bank. The loan is guaranteed
by Tianwei Yingli and Mr. Liansheng Miao, the Company’s chairman and CEO, and secured by Yingli China’s property, plant
and equipment. The loan is repayable in annual instalment of US$ 8,000 for the first two years and US$ 9,000 for the remaining
six years, respectively, commencing in December 2009. In December 2015, out of US$ 18,000 that was due, the Company repaid US$
50, and the remaining portion of US$ 17,950 was extended to December 2016 based on the first amendment of loan agreement entered
into in December 2015. Based on the second amendment of the loan agreement entered into in June 2016, the amended repayment schedule
was US$50 due in December 2017, US$8,920 due in December 2018 and US$8,930 due in December 2019. In addition, the interest rate
was modified from 6-month LIBOR plus 6% per annum to 6-month LIBOR plus 3.5% per annum. As of December 31, 2016, the current and
non-current portion of this long-term borrowing was US$50(RMB 347) and US$ 17,850(RMB 123,933), respectively.
In May 2010, Hainan Yingli entered into a five-year
RMB 180,000 loan agreement at an interest rate of the three-five year Renminbi benchmark loan rate per annum with Industrial and
Commercial Bank of China Limited. The loan is guaranteed by the Company and repayable in semi-annual instalment of RMB 20,000 starting
from August 2011. Based on the first amendment of the loan agreement entered into in December 2015, loan of RMB 14,000 that
was due in September 2015 was extended to September 2016. In addition, the interest rate was modified from the three-five year
Renminbi benchmark loan rate per annum to five-year Renminbi benchmark loan rate plus an additional surcharge of 10% per annum.
Based on the second amendment of the loan agreement entered into in September 2016, the amended repayment schedule was RMB 2,000
due in March 2017, RMB 2,000 due in June 2017 and RMB 10,000 due in September 2017. In addition, the interest rate was modified
from five-year Renminbi benchmark loan rate plus an additional surcharge of 10% per annum to the five-year Renminbi benchmark loan
rate. As of December 31, 2016, the current and non-current portion of this long-term borrowing was RMB 14,000(US$ 2,016) and nil,
respectively.
In May 2011, Yingli
China entered into a 42-month RMB 1,160,000 loan agreement with Bank of China and China Citic Bank at an interest rate of the three-five
year Renminbi benchmark loan rate plus an additional surcharge of 5% of the interest rate per annum. By the end of December 31,
2016, the Company withdrew RMB 481,000 (US$ 69,278).The loan is guaranteed by Yingli Green Energy and Yingli Group. As of December
31, 2016, the current and non-current portion of this long-term borrowing was RMB 164,300 (US$ 23,664) and nil, respectively. Out
of the loan of RMB 164,300, loan with RMB 20,000 due in November 2015 was extended to May 2016 based on the first amendment of
the loan agreement entered into in November 2015.
Based on the second amendment of the loan
agreement entered into in June 2016, total loan of RMB 164,300 and interest due in May 2016 was extended to May 2017.
In November 2011, Hainan
Yingli entered into an eight-year RMB 900,000 loan agreement with China Development Bank at an interest rate of the five-year Renminbi
benchmark loan rate per annum. The loan is guaranteed by property, plant and equipment. In May 2013, Hainan Yingli entered
into an amendment to increase this loan credit limit by RMB 282,150. Out of RMB 90,800 due in November 2015, RMB600 was repaid.
Based on the first amendment of the loan agreement entered into in November 2015, the loan repayment schedule of the loan with
a remaining balance of RMB 727,550 had been modified. The original repayment schedule was RMB 90,200 due in November 2015, RMB90,800
due in May 2016, RMB90,800 due in November 2016, RMB90,800 due in May 2017, RMB90,800 due in November 2017, RMB90,800 due in May
2018, RMB90,800 due in November 2018 and RMB92,550 due in July 2019. The amended repayment schedule was RMB600 due in May 2016,
RMB60,000 due in November 2016, RMB110,000 due in May 2017, RMB110,000 due in November 2017, RMB110,000 due in May 2018, RMB110,000
due in November 2018 and RMB226,950 due in July 2019. Based on the second amendment of loan agreement entered into in March 2016,
the amended repayment schedule was RMB100 due in May 2017, RMB100 due in November 2017, RMB60,000 due in May 2018, RMB60,000 due
in November 2018, RMB80,000 due in May 2019, RMB80,000 due in November 2019,RMB80,000 due in May 2020, RMB80,000 due in November
2020, RMB80,000 due in May 2021, RMB80,000 due in November 2021 and RMB127,150 due in July 2020. No other key terms were changed
in the amendment. As of December 31, 2016, the current and non-current portion of this long-term borrowing was RMB 200 (US$ 29)
and RMB 727,150 (US$ 104,731), respectively.
In March 2012,
Hainan Yingli entered into a seven-year US$135,000 loan agreement with China Development Bank at an interest of the three-month
LIBOR plus 5% per annum. The Company withdrew US$135,000 (RMB 937,305) by the end of December 31, 2016 under this agreement. The
loan is guaranteed by property, plant and equipment. Out of US$ 10,600 due in November 2015, US$100 was repaid. Based on the first
amendment entered into in November 2015, the loan repayment schedule of the loan with a remaining balance of US$ 81,900 was modified.
The original repayment schedule was US$10,500 due in November 2015, US$10,600 due in May 2016, US$10,600 due in November 2016,
US$10,600 due in May 2017, US$10,600 due in November 2017, US$10,600 due in May 2018, US$10,600 due in November 2018 and US$7,800
due in July 2019. The amended repayment schedule was US$100 due in May 2016, US$5,000 due in November 2016, US$12,000 due in May
2017, US$12,000 due in November 2017, US$12,000 due in May 2018, US$12,000 due in November 2018 and US$28,800 due in July 2019.
Based on the second amendment entered into in March 2016, the amended repayment schedule was US$30 due in May 2017, US$30 due in
November 2017, US$3,000 due in May 2018, US$3,000 due in November 2018, US$10,000 due in May 2019, US$10,000 due in November 2019,
US$10,000 due in May 2020, US$10,000 due in November 2020, US$10,000 due in May 2021, US$10,000 due in November 2021 and US$15,780
due in July 2022. In addition, the interest rate was modified from the 3-month LIBOR
plus
an additional surcharge of 5% of the interest rate per annum to 3-month LIBOR
plus an additional
surcharge of 4% of the interest rate per annum. No other key terms were changed in the amendment. As of December 31, 2016, the
current and non-current portion of this long-term borrowing was US$ 60 (RMB 417) and US$ 81,780(RMB 567,799), respectively.
In May 2012, Hengshui Yingli entered into an
eight-year RMB 255,000 loan agreement with China Development Bank at an interest of the five- year Renminbi benchmark loan rate
plus an additional surcharge of 10% per annum and subject to adjustment annually. The loan is guaranteed by Yingli China. Out of
RMB 10,000 due in December 2015, RMB300 was repaid. Based on the first amendment of the loan agreement entered into in December
2015, the loan repayment schedule of the loan with a remaining balance of RMB 218,700 was modified. The original repayment schedule
was RMB 9,700 due in December 2015, RMB 15,000 due in June 2016, RMB15,000 due in December 2016, RMB20,000 due in June 2017, RMB20,000
due in December 2017, RMB25,000 due in June 2018, RMB25,000 due in December 2018, RMB30,000 due in June 2019, RMB30,000 due in
December 2019 and RMB29,000 due in May 2020. The amended repayment schedule was RMB300 due in June 2016, RMB300 due in December
2016, RMB15,000 due in June 2017, RMB15,000 due in December 2017, RMB25,000 due in June 2018, RMB25,000 due in December 2018, RMB22,850
due in June 2019, RMB22,850 due in December 2019 and RMB92,400 due in June 2020. Based on the second amendment of the loan agreement
entered into in March 2016, the interest rate was modified from the five- year Renminbi benchmark loan rate plus an additional
surcharge of 10% of the interest rate per annum to the five-year Renminbi benchmark loan rate per annum with no surcharge. No other
key terms were changed in the amendment. As of December 31, 2016, the current and non-current portion of this long-term borrowing
was RMB 30,000 (US$ 4,321) and RMB 188,100 (US$ 27,092), respectively.
In April 2013,
Yingli China entered into a three-year US$55,000 loan agreement with China Development Bank at an interest rate of the 6-month
LIBOR plus 5.2% per annum. By the end of December 31, 2016, the Company withdrew US$55,000 (RMB 381,865) under this agreement.
Based on the amendment of the loan agreement entered into in March 2016, the term of the loan with a balance of US$ 55,000 (RMB
381,865) that was due in April 2016 was extended to April 2017. In addition, the interest rate was modified from the 6-month LIBOR
plus an additional surcharge of 5.2% of the interest rate per annum to the 6-month LIBOR
plus
an additional surcharge of 2.5% of the interest rate per annum. As of December 31, 2016, the current and non-current portion of
this long-term borrowing was US$ 55,000 (RMB 381,865) and nil, respectively.
All amendments mentioned above are not considered
to be trouble debt restructuring because they don’t meet the condition of lenders offering concession to the Company.
In November 2013, Hutubi Yingli Sunshine New
Resources Co. Ltd. (“Yingli Hutubi”) entered into a five-year RMB 22,500 loan agreement with Xinjiang Tianshan Rural
Commercial Bank at a fixed interest rate of 6.4%. This loan is guaranteed by equivalent bank deposits. By the end of December 31,
2016, the Company withdrew RMB 22,500 (US$ 3,241) under this agreement. As of December 31, 2016, the current and non-current portion
of this long-term borrowing was RMB 200 (US$ 29) and RMB 21,700 (US$ 3,125), respectively.
In November 2013, Yingli Hutubi entered into
a six-year RMB 55,000 loan agreement with Xinjiang Tianshan Rural Commercial Bank at a fixed interest rate of 7.9%. This loan is
guaranteed by Yingli Group and secured by solar panels having a market value of RMB 68,800 (US$ 9,909). By the end of December
31, 2016, the Company withdrew RMB 55,000 (US$ 7,922) under this agreement. As of December 31, 2016, the current and non-current
portion of this long-term borrowing was RMB 4,000 (US$ 576) and RMB 15,000 (US$ 2,160), respectively.
In February 2015, Yingli China entered into a two-year
RMB 100,000 loan agreement with Rural Credit Cooperative of Baoding at a fixed interest rate of 7.8% per annum. The loan is guaranteed
by property, plant and equipment. By the end of December 31, 2016, the company withdrew RMB 100,000 (US$14,403) under this agreement.
As of December 31, 2016, the current and non-current portion of this long-term borrowing was RMB 98,000 (US$ 14,115) and nil, respectively.
Long-term Loan repaid
or settled for the years ended December 31, 2014, 2015 and 2016
In July 2010, Yingli China entered into a five-year
RMB 500,000 loan agreement with Bank of Communications Co., Ltd at an interest rate of the five-year Renminbi benchmark loan rates
per annum. The loan is guaranteed by Yingli Group and Yingli Green Energy and secured by Yingli China’s property, plant and
equipment. The loan was repayable in annual instalment of RMB 70,000, RMB 140,000, RMB 170,000, and RMB 120,000 in 2011, 2012,
2013 and 2014, respectively. The loan was fully repaid in 2014.
In March 2011, Yingli China entered into a 45-month
RMB 1,000,000 loan agreement with Bank of Communications Co., Ltd. at an interest rate of the three- to five- year Renminbi benchmark
loan rate plus an additional surcharge of 10% per annum. The loan was secured by property, plant and equipment. The loan was fully
repaid in 2014.
In December 2013, Yingli China entered into a 14-month
RMB 200,000 loan agreement with Zhongyuan Trust Ltd. Company at an interest rate of 9.725%. This loan was guaranteed by related
party’s property, plant and equipment. The bank loan was fully repaid in 2014.
In June 2010, Hainan Yingli entered into a five-year
RMB 220,000 loan agreement with Bank of Communication Co., Ltd at a floating interest rate of the five-year Renminbi benchmark
loan rate as published by the People’s Bank of China plus an additional surcharge of 2.5% per annum. The loan was guaranteed
by Yingli Green Energy and repayable in annual instalments of RMB 55,000 starting from June 2011. The loan was fully repaid in
2015.
In February 2011, Hainan Yingli entered into a five-year
RMB 400,000 loan agreement with China Merchants Bank at an interest rate of the five-year Renminbi benchmark loan rate per annum.
As of December 31 2014, the Company withdrew RMB 368,000 under this agreement. The loan was secured by Hainan Yingli’s property,
plant and equipment. The loan was fully repaid in 2015.
In August 2011, Fine Silicon Co., Ltd. (“Fine
Silicon”) entered into a five-year RMB 500,000 loan agreement with CDB Leasing Co., Ltd. at an interest rate of 6.9% per
annum plus an additional surcharge of 5% of the interest rate per annum. The loan was guaranteed by property, plant and equipment.
The Company withdrew RMB 500,000 by the end of December 31, 2014, under this agreement. As of December 31, 2014, total amount of
this borrowing was RMB 274,828. The loan was fully repaid in 2015.
In May 2015, Dafeng Xinghui Power Development Co.,
Ltd entered into a two-year RMB 20,000 loan agreement with Jiangsu Dafeng Rural Commercial Bank at an interest rate of 7.5% per
annum. The loan was guaranteed by Yingli China and right of charging the electricity fee from produced by its own power plant
and Yingli China. As of December 31, 2016, the loan balance was excluded in the consolidation financial statement due to the disposal
of Dafeng Xinghui Power Development Co., Ltd in October 2016 as stated in note (2) (b).
Future principal payments under the above long-term
borrowings as of December 31, 2016 are as follows
Year ended December 31,
|
|
RMB
|
|
|
US$
|
|
2017
|
|
|
2,867,889
|
|
|
|
413,062
|
|
2018
|
|
|
532,932
|
|
|
|
76,758
|
|
2019
|
|
|
665,189
|
|
|
|
95,807
|
|
2020
|
|
|
538,258
|
|
|
|
77,525
|
|
2021
|
|
|
431,984
|
|
|
|
62,219
|
|
Thereafter
|
|
|
355,258
|
|
|
|
51,168
|
|
Total
|
|
|
5,391,510
|
|
|
|
776,539
|
|
On October 13, 2010, Tianwei Yingli registered
its plan to issue up to RMB 2,400,000 RMB-denominated unsecured five-year medium-term notes (the “Registered Issue”)
with the PRC National Association of Financial Market Institutional Investors (“NAFMII”). The Registered Issue allows
Tianwei Yingli to issue RMB-denominated unsecured five-year medium-term notes in two tranches on the PRC inter-bank debenture market.
The First Tranche Issue with RMB 1,000,000 was completed on October 13, 2010 and matured on October 13, 2015. Tianwei
Yingli had an option to call the notes at the end of the third year after issuance. Upon exercise of the call option, the re-purchase
amount equals to the par value of the notes plus any unpaid interest. The First Tranche bore a fixed annual interest rate of 4.3%
per annum in the first three years, and increased to 5.7% per annum in the remaining two years as Tianwei Yingli chose not to call
the notes on October 13, 2013.
The Company did not exercise the call option at the
end of the third year from issuance and computed the effective interest rate of 4.82% evenly for the entire contract term of 5
years.
On October 13, 2015, total amount of principal and
interests of the first tranche medium-term notes due was RMB 1,000.0 million and RMB 57.0 million, respectively. Yingli repaid
RMB 700.0 million, with the remaining principal of RMB 357.0 million unpaid. According to the meeting held among all holders of
medium-term notes (the “MTN holders”) on November 11, 2015, the Company promised to repay the remaining balance. An
additional penalty charge, which was calculated on the daily basis of 0.021% of the total amount of principal overdue, would be
paid by the Company due to the Company’s failure to repay the medium-term notes on time. As of December 31, 2015, the total
interests payables and penalty charge accrued was RMB 4.5 million and RMB 6.0 million, which was recorded under “Interest
payable”. In 2016, the Company did not repay the remaining principal of RMB 357 million (US$ 51.4 million). As of December
31, 2016, the total penalty charge accrued was RMB 33 million (US$ 4.8 million).
On May 10, 2011, the second tranche of the medium-term
notes with a principal amount of RMB 1,400,000, or the Second Tranche Issue, was issued. The Second Tranche Issue bears a fixed
annual interest rate of 6.15%. Tianwei Yingli failed to repay these medium term notes when they became due on May 12, 2016. As
of December 31, 2016, the total interests payables and penalty charge accrued was RMB 86,100 (US$ 12,401) and RMB 67,620 (US$ 9,739),
which was recorded under "Interest payable".
In March 2012, Yingli China registered its plan
to issue up to RMB 1,500,000 RMB-denominated unsecured three-year and five-year medium-term notes (the “Yingli China Registered
Issue”) with the NAFMII. The Yingli China Registered Issue allows Yingli China to issue RMB-denominated unsecured three-year
and five-year medium-term notes in two tranches on the PRC inter-bank debenture market. On May 3, 2012, the first tranche
issue with RMB 1,200,000 at a fixed annual interest rate of 5.78% and the second tranche issue with RMB 300,000 at a fixed annual
interest of 6.01% were issued with maturity on May 3, 2015 and May 3, 2017, respectively. The first tranche issue with
RMB 1,200,000 was fully paid in 2015 and the second tranche issue with RMB 300,000 was fully paid in 2017.
Issuance costs were deferred on the balance sheet
and amortized over the life of the medium term note. As of December 2015 and 2016, the total balances were RMB 1,595 and RMB
305 (US$ 44) respectively.
|
(12)
|
Payables to non-controlling
interests
|
In November 2012, a third party (“Party
A”) contributed RMB 100,000 to Hainan Yingli to acquire 5.825% equity interest of Hainan Yingli. Pursuant to the agreement
between Yingli China and the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount
of RMB 100,000 plus 5% annual interest in 5 years. As of December 31, 2015 and 2016, the Company recorded the RMB 100,000
of payment obligation in “Long-term payables to non-controlling interest holders” and “Payables to non-controlling
interest holders”, respectively, in the Consolidated Balance Sheets. Under the payment schedule, the RMB 100,000 of payment
obligation for sale and repurchase of 5.825% equity interest of Hainan Yingli will become due in November 2017.
In December 2013, another third party (“Party
B”) contributed RMB 100,000 to Hainan Yingli to acquire 5.50% equity interest of Hainan Yingli. Pursuant to the agreement
between Yingli China and the investor, Yingli China is obligated to purchase such equity interest from the investor in the amount
of RMB 100,000 plus 6.15% annual interest in 2 years. As of December 31, 2015 and 2016, the Company recorded the RMB 100,000
of payment obligation overdue as “Payables to non-controlling interest holders” in the Consolidated Balance Sheet.
The Company is still in negotiation with the third party about the extension of the payment schedule under the relevant agreements.
In November 2015, Party B contributed a land use right
with fair value of RMB 728,116 to Hainan Yingli to acquire 21.84% equity interest of Hainan Yingli. Pursuant to the agreement between
Yingli China and the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount of
RMB 728,116 plus benchmark interest rate within 2 months to 10 years, among which, RMB 23,000 would be paid within two months,
RMB 82,000 would be paid within 3 year, and the remaining of 623,116 would be paid within 10 years. Because of Yingli China’s
contractual obligations to purchase the equity interests from these investors, the equity contributions made by the investors plus
accrued interest have been recorded as liabilities. This land use right was subsequently disposed by Hainan Yingli in December
2015(refer to note 6). As in substance the whole arrangement is financing, proceeds received from the disposal were presented as
financing activities.
As of December 31, 2016, total current and non-current
payables to Party B was RMB 100,000 and RMB 705,116, respectively.
In January 2016, a third party (“Party
C”) contributed RMB 23,000 to Hainan Yingli to acquire 0.90% equity interest of Hainan Yingli. Pursuant to the agreement
between Yingli China and the investor, Yingli China is obligated to repurchase such equity interest from the investor in the amount
of RMB 23,000 plus 19% aggregate interest in 5 years.
Based on the above repurchase schedule, including
principal and interest, RMB 135,339 and RMB 233,135 (US$ 33,578) have been recorded in “Payables to non-controlling interest
holders”, RMB 821,276 and RMB 763,393 (US$ 109,952) have been recorded in “Long-term payables to non-controlling interest
holders” in the Consolidated Balance Sheets as of December 31, 2015 and 2016, respectively.
|
(13)
|
Issuance of ordinary shares
|
On April 25, 2014, the Company completed a public
offering of 25 million American Depositary Shares (each, an “ADS”), each representing one ordinary share (US$ 0.01
par value per share) of the Company, at a price of US$ 3.5 per ADS. The offering resulted in net proceeds of RMB 517,272 (US$ 83,369),
after deducting the placement fees and offering expenses of RMB 21,716 (US$3,500).
On September 30, 2011, the Company announced
that a share repurchase program has been authorized by its board of directors. Under the terms of the approved program, Yingli
Green Energy may repurchase up to US$100 million worth of its issued and outstanding American Depositary Shares (“ADSs”)
from time to time over the next 12 months in the open market or in negotiated transactions, subject to market conditions and other
factors, as well as relevant rules under the Securities Exchange Act of 1934, as amended. As of December 31, 2011, the
Company had repurchased 5,567,021 outstanding ADSs (equivalent to 5,567,021 ordinary shares) from the open market for a total consideration
of RMB 123.8 million under the share repurchase program. In 2012, additional 159,687 outstanding ADSs (equivalent to159, 687 ordinary
shares) were repurchased from open market for a total consideration of RMB 3.5 million under the share repurchase program. There
was no share repurchase in 2014, 2015 and 2016. After ADS ration change as discussed in note (28) in December 2015, as of December 31,
2016, 572,671 outstanding ADSs (equivalent to 5,726,708 ordinary shares) were repurchased total.
|
(15)
|
Non-Controlling Interests
|
Non-controlling interests are summarized as follows:
|
|
December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests in Tianwei Yingli (a)
|
|
|
1,133,232
|
|
|
|
1,134,374
|
|
|
|
163,384
|
|
Non-controlling interests in Hainan Yingli (b)
|
|
|
56,468
|
|
|
|
—
|
|
|
|
—
|
|
Non-controlling interests in Yingli Lixian
|
|
|
8,419
|
|
|
|
4,040
|
|
|
|
582
|
|
Non-controlling interests in Yingli Shenzhen
|
|
|
26,498
|
|
|
|
26,681
|
|
|
|
3,843
|
|
Non-controlling interests in Yingli Greece
|
|
|
(1,696
|
)
|
|
|
(11,082
|
)
|
|
|
(1,596
|
)
|
Non-controlling interests in other subsidiaries
|
|
|
4,612
|
|
|
|
2,165
|
|
|
|
311
|
|
|
|
|
1,227,533
|
|
|
|
1,156,178
|
|
|
|
166,524
|
|
Non-controlling interests excludes those classified
as a liability as discussed in Note (12)
The movements of non-controlling interests during
the years ended December 31, 2014, 2015 and 2016 are as follows:
|
|
For the
Years Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
Balance at beginning of year
|
|
|
1,619,045
|
|
|
|
1,519,045
|
|
|
|
1,227,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution to subsidiaries by non-controlling interests
|
|
|
980
|
|
|
|
18
|
|
|
|
—
|
|
Net loss attributable to non-controlling interests
|
|
|
(101,526
|
)
|
|
|
(298,310
|
)
|
|
|
(21,315)
|
|
Currency translation adjustments of subsidiaries
|
|
|
546
|
|
|
|
10,121
|
|
|
|
11,240
|
|
Purchase of non-controlling interest (b)
|
|
|
—
|
|
|
|
(3,341
|
)
|
|
|
(60,537)
|
|
Derecognize a subsidiary of the Group
|
|
|
—
|
|
|
|
—
|
|
|
|
(743)
|
|
Balance at the end of year
|
|
|
1,519,045
|
|
|
|
1,227,533
|
|
|
|
1,156,178
|
|
|
(a)
|
Prior to FY 2014, Baoding Tianwei Baobian Electric Co., Ltd. (“Tianwei Baobian”), a third party, held 25.99%
equity interest in Tianwei Yingli. In May 2014, the Company, Baoding Tianwei Group Co., Ltd.(“ Tianwei Group”,
another third party unrelated to the Company), and Tianwei Baobian entered into a new joint venture contract and Tianwei Baobian
transferred 7% equity interest in Tianwei Yingli to Tianwei Group. Under a Sino-foreign equity joint venture company contract with
Tianwei Baobian and Tianwei Group, it provides that Tianwei Baobian and/or Tianwei Group will have a right to swap the shares of
the Company with the all but not part shares of the non-controlling interest in Tianwei Yingli. The terms of the swap will be discussed
separately at the time of the swap. The Company does not account for such share swap until a separate agreement is signed that
clearly states the terms and basis of the share swap between the non-controlling shareholders and the Company. Tianwei Baobian
and/or Tianwei Group may exercise this subscription right after certain conditions are satisfied following the completion of the
Company’s IPO. Tianwei Baobian and/or Tianwei Group’s subscription rights to subscribe for newly issued ordinary shares
of the Company in exchange for all but not part of Tianwei Baobian and/or Tianwei Group’s equity interest in Tianwei Yingli
did not have an effect on earnings per share as these rights are contingent upon Tianwei Baobian and/or Tianwei Group obtaining
all necessary approvals from relevant PRC government authorities for acquiring the Company’s ordinary shares in the future.
As of December 31, 2016, Tianwei Baobian and/or Tianwei Group haven’t exercised this subscription right.
|
Subject to applicable laws in the PRC, the Cayman
Islands, any jurisdiction in which the Company’s ordinary shares are listed and any jurisdiction in which a qualified securities
exchange, including the NYSE, is located and further subject to the listing rules of such exchange, Tianwei Baobian and/or
Tianwei Group may exercise the subscription right by sending a written notice to the Company within one month following the first
date on which all conditions listed above are satisfied, accompanied by copies of related approvals and opinion of counsel. Prior
to exercising its subscription right, Tianwei Baobian and/or Tianwei Group is required to retain an asset valuation firm reasonably
acceptable to the Company to obtain a valuation of Tianwei Baobian and/or Tianwei Group’s equity interest in Tianwei Yingli
in accordance with internationally accepted valuation methods and relevant PRC laws and regulations. The valuation report will
need to be acknowledged by both Tianwei Baobian and/or Tianwei Group and the Company. The number of the Company’s new ordinary
shares that the Company is obligated to issue to Tianwei Baobian and/or Tianwei Group upon its exercise of the subscription right
will be calculated. Number of new shares to be issued to Tianwei Baobian and/or Tianwei Group = Total number of the Company’s
shares immediately before the exercise of the subscription right *(Percentage of Tianwei Baobian and/or Tianwei Group’s equity
interest in Tianwei Yingli immediately before the exercise of the subscription right/ Percentage of the Company’s equity
interest in Tianwei Yingli immediately before the exercise of the subscription right)
|
(b)
|
In December 2016, the Company entered into an agreement
with the non-controlling interest holder of Hainan Yingli (“Hainan NCI”) to acquire the remaining 4.25% equity interest
of Hainan Yingli, the consideration was RMB138.4 million, which was based on the fair value of Hainan Yingli. As a result, Hainan
Yingli became a wholly owned subsidiary of the Company. The difference between the consideration of RMB 138.4 million and the
carry value of Non-controlling interest of Hainan at the transaction date of RMB 60.5 million, was recorded in Accumulated deficits
for the year ended December 31, 2016.
|
Contemporaneously, Yingli China together with Hainan
Yingli signed an agreement with Hainan NCI to dispose all of their equity interest of 26.53% in Hainan Tianneng to Hainan NCI,
the consideration was RMB95.8 million. The difference between the consideration of RMB 95.8 million and the carry value of the
long term investment in Hainan Tianneng resulted in a gain of RMB 34,295 (US$ 4,940) was recognized in “Other income”
in the Consolidated Statements of Comprehensive Loss for year ended December 31, 2016.
In addition to the two agreements mentioned above,
Hainan NCI, Hainan Tianneng, Yingli China and Hainan Yingli also signed an agreement to netting off the payables and receivables
among each other. According to the agreement, Yingli China’s payable of RMB 138.4 million to Hainan NCI for purchase of equity
interest of Hainan Yingli, was netted of by total Yingli China and Hainan Yingli’s receivables of RMB 95.8 million from Hainan
NCI as a result of disposal of their equity interests in Hainan Tianneng. The difference between the RMB 95.8 million and RMB 138.4
million was settled by i) Yingli China’s accounts receivables of RMB 40 million due from Hainan Tianneng, which was generated
from sales of PV modules to Hainan Tianneng in past periods and ii) Yingli China’s net cash payment of RMB 2.6 million to
Hainan NCI. The Company classified the net cash payment of RMB 2.6 million as financing activities for the purpose of purchase
of Hainan NCI.
In July 2011, the Company sold certain newly
purchased equipment (“leased assets”) with carrying amount of RMB 91,959 to a third party (the “purchaser-lessor”)
for cash consideration of RMB 90,000 and simultaneously entered into a five-year contract to lease back the leased assets from
the purchaser-lessor. Pursuant to the terms of the contract, the Company is required to pay to the purchaser-lessor quarterly lease
payment over five years and is entitled to obtain the ownership of these equipment at a nominal price upon the expiration of the
lease. The lease is classified as capital lease. In connection with this sale-leaseback transaction, the Company recognized a loss
of approximately RMB 1,959, which is being deferred and amortized in the consolidated statements of comprehensive loss over the
remaining useful lives of the leased assets. The contract expired in 2016 and the Company paid all lease payments under the contract.
In 2012, the Company sold certain solar power generation
equipment with carrying amount of RMB 102,971 to a related party controlled by Yingli Group for cash consideration of RMB 99,000
and simultaneously entered into a eighteen-year contract to lease back the assets from the related party. The remaining useful
lives of leased equipment were approximately 25 years. Pursuant to the terms of the contract, the Company is required to
pay to the related party quarterly lease payments over eighteen years and is entitled to obtain the ownership of these equipment
at a nominal price upon the expiration of the lease. The lease is classified as capital lease. In connection with this sale-leaseback
transaction, the Company recognized a loss of approximately RMB 3,971, which is being deferred and amortized in the consolidated
statements of comprehensive loss over the remaining useful lives of the leased assets. In 2016, terms of the contract was extended
from eighteen years to twenty years and interest rate was lowered down from benchmark interest rate for loan plus 20% to benchmark
interest rate for loan plus 10%, after the Company and the related party entered into amendment of agreement. The minimum lease
payment didn’t change before and after the modification because the payments were spread over more years.
In August 2013, the Company sold certain machinery
and equipment with carrying amount of RMB 99,321 to a related party controlled by Yingli Group for cash consideration of RMB 100,000
and simultaneously entered into an eight-year contract to lease back the assets from the related party. The remaining useful lives
of leased machinery and equipment were approximately 8-10 years. Pursuant to the terms of the contract, the Company is required
to pay to the related party quarterly lease payments over eight years and is entitled to obtain the ownership of these machinery
and equipment at a nominal price upon the expiration of the lease. The lease is classified as capital lease. In connection with
this sale-leaseback transaction, the Company recognized a profit of approximately RMB 679, which is being deferred and amortized
in the consolidated statements of comprehensive loss over the remaining useful lives of the leased assets. In 2016, terms of the
contract was extended from eight years to eleven years and interest rate was lowered down from benchmark interest rate for loan
plus 20% to benchmark interest rate for loan plus 10%, after the Company and the related party entered into amendment of agreement.
The minimum lease payment didn’t change before and after the modification because the payments were spread over more years.
In June 2014, the Company sold certain machinery
and equipment with carrying amount of RMB 109,193 to a related party controlled by Yingli Group for cash consideration of RMB 83,000
and simultaneously entered into a five-year contract to lease back the assets from the related party. The remaining useful lives
of leased machinery and equipment were approximately 2-7 years. Pursuant to the terms of the contract, the Company is required
to pay to the related party quarterly lease payments over five years and is entitled to obtain the ownership of these machinery
and equipment at a nominal price upon the expiration of the lease. The lease is classified as capital lease. In connection with
this sale-leaseback transaction, the Company recognized a loss of approximately RMB 26,193, which is being deferred and amortized
in the consolidated statements of comprehensive loss over the remaining useful lives of the leased assets. For the year ended December
31, 2015, due to lower-than-expected-utilization of the Company’s property, plant and equipment as discussed in note (5),
impairment of RMB 11,657 was allocated against the equipment under this sales-leaseback transaction and all unamortized deferred
expenses with total amount of RMB18,786 was recognized immediately in the consolidated statements of comprehensive loss. For the
year ended December 31, 2016, due to a further impairment made in 2016 as discussed in note (5), a further impairment of RMB 4,664
(US$ 672) was allocated against the equipment under this sales-leaseback transaction.
In November 2012, Lixian Yingli leased certain
machinery and equipment from a related party controlled by Yingli Group. Pursuant to the terms of the contract, the Company is
required to pay to the related party quarterly lease payments over eight years and is entitled to obtain the ownership of these
machinery and equipment at a nominal price upon the expiration of the lease. The lease is classified as capital lease. As of December
31, 2016, the carrying amount of the machinery and equipment related to this capital lease contract is RMB 19,330, and the payable
related to this contract is RMB 93,843. In 2016, terms of the contract was extended from eight years to eleven years and interest
rate was lowered down from benchmark interest rate for loan plus 20% to benchmark interest rate for loan plus 10%, after the Company
and the related party entered into amendment of agreement. The minimum lease payment didn’t change before and after the modification
because the payments were spread over more years.
In March 2015, Yingli Beijing sold a distributed PV
generation project with carrying amount of RMB 19,804 to a third party for cash consideration of RMB 29,096 and simultaneously
entered into a 6 years contract to lease back the assets from the third party by a subsidiary of Yingli Beijing. Pursuant to the
terms of the contract, the Company is required to pay to the third party quarterly lease payments over 6 years and is entitled
to obtain the ownership of the project at a nominal price upon the expiration of the lease. As Yingli Beijing will continue involvement
in the operation of this PV projects, the transaction was a failed sales-leaseback, therefore, it is accounted for as a financing
transaction.
Prior to the termination
of construction contract with Yingli PV Group as discussed in note (2(b)) “Principles of Consolidation”, in April 2015,
one of the Company’s VIE entities, Hanneng Guangping PV Power Development Co., Ltd. (“Hanneng Guangping”), entered
into a 10-year lease agreement with an entity unrelated to the Company (“the lessor”) that, Hanneng Guangping, as a
leasee, would lease PV modules and PV equipment with RMB 220,891 and RMB 117,590, respectively. The PV modules of RMB 220,891 were
sold from Yingli China to the lessor before they were leased to Hanneng Guangping. The PV modules and PV equipment leased to Hanneng
Guangping would be used in the construction of a project asset owned by Hanneng Guangping. As Hanneng Guangping would continue
involvement in the construction and operation of this PV projects, the transaction was a failed sales-leaseback, therefore, it
is accounted for as a financing transaction. The liability related to this financing lease was derecognized upon the termination
of above mentioned construction contract with Yingli PV Group.
The Company didn't conduct
any new transaction in 2016.
As of December 31, 2015 and 2016, the gross amount
of the equipment and related depreciation and impairment charge recorded under capital and financing lease were as follows:
|
|
As of year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
538,417
|
|
|
|
426,903
|
|
|
|
61,487
|
|
Less: accumulated depreciation
|
|
|
(159,612
|
)
|
|
|
(137,839
|
)
|
|
|
(19,853
|
)
|
Impairment on equipment
|
|
|
(90,860
|
)
|
|
|
(92,244
|
)
|
|
|
(13,286
|
)
|
Net Value
|
|
|
287,945
|
|
|
|
196,820
|
|
|
|
28,348
|
|
As of December 31, 2016, future minimum payments
required under non-cancellable capital and financing lease are:
|
|
RMB
|
|
|
US$
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
2017
|
|
|
86,067
|
|
|
|
12,396
|
|
2018
|
|
|
63,422
|
|
|
|
9,135
|
|
2019
|
|
|
52,268
|
|
|
|
7,528
|
|
2020
|
|
|
42,647
|
|
|
|
6,142
|
|
2021
|
|
|
38,757
|
|
|
|
5,582
|
|
Thereafter
|
|
|
120,158
|
|
|
|
17,306
|
|
Total minimum lease payments
|
|
|
403,319
|
|
|
|
58,089
|
|
Less: Amount representing interest
|
|
|
70,352
|
|
|
|
10,133
|
|
Present value of net minimum lease payments
|
|
|
332,967
|
|
|
|
47,956
|
|
Current portion
|
|
|
54,615
|
|
|
|
7,866
|
|
Non-current portion
|
|
|
278,352
|
|
|
|
40,090
|
|
During the years ended December 31, 2014, 2015
and 2016, the Company generated net revenues as the followings.
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Net revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of PV modules
|
|
|
12,179,474
|
|
|
|
8,464,779
|
|
|
|
7,026,074
|
|
|
|
1,011,965
|
|
Sales of PV systems
|
|
|
161,035
|
|
|
|
197,365
|
|
|
|
127,353
|
|
|
|
18,343
|
|
Sales of PV cells, wafers and raw materials
|
|
|
439,622
|
|
|
|
686,056
|
|
|
|
746,261
|
|
|
|
107,484
|
|
Processing fee of PV cells and PV modules
|
|
|
—
|
|
|
|
389,450
|
|
|
|
308,386
|
|
|
|
44,417
|
|
Other revenues
|
|
|
147,246
|
|
|
|
228,136
|
|
|
|
168,025
|
|
|
|
24,200
|
|
Total net revenues
|
|
|
12,927,377
|
|
|
|
9,965,786
|
|
|
|
8,376,099
|
|
|
|
1,206,409
|
|
For the years ended December 31 2015 and 2016,
the Company generated net revenues on sales of electricity of RMB 38,076 and RMB 33,393 (US$ 4,810), respectively, which has been
classified in “Other revenues”.
Since all manufacturing plants are located domestically
in China and the overseas entities are only functioned as sales offices, therefore, no assets by geography warrant for disclosure
since the assets owned by overseas entities are immaterial.
During the years ended December 31, 2014, 2015
and 2016, Other Income consisted of the followings.
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain from disposal of long term investments (note (9))
|
|
|
—
|
|
|
|
—
|
|
|
|
97,124
|
|
|
|
13,989
|
|
Gain from disposal of subsidiaries (note 2(b),6(b))
|
|
|
23,943
|
|
|
|
33,191
|
|
|
|
34,339
|
|
|
|
4,946
|
|
Amortization of government grants received in related to long-term assets (note 2(j))
|
|
|
49,557
|
|
|
|
56,935
|
|
|
|
49,362
|
|
|
|
7,110
|
|
Government grants intended to compensate for future expenses or losses (note 2(j))
|
|
|
42,030
|
|
|
|
52,636
|
|
|
|
29,261
|
|
|
|
4,214
|
|
Gain from extinguishment of accounts payables (note 2(a))
|
|
|
—
|
|
|
|
—
|
|
|
|
22,165
|
|
|
|
3,192
|
|
Others
|
|
|
10,038
|
|
|
|
5,700
|
|
|
|
14,716
|
|
|
|
2,120
|
|
Total other income
|
|
|
125,568
|
|
|
|
148,462
|
|
|
|
246,967
|
|
|
|
35,571
|
|
|
(19)
|
Inventory Purchase Commitments
|
Until the third quarter of 2008, an industry-wide
shortage of high purity polysilicon coupled with growing demand for PV modules caused the increases of polysilicon prices. In order
to ensure the adequate supply of polysilicon, the Company entered into several long-term fixed price supply contracts with Supplier
A, B and C from 2006 to 2011 under which the polysilicon would be delivered from 2009 to 2020. However, from the second quarter
of 2011, the polysilicon price has decreased significantly as the result of increased polysilicon manufacturing capacity and the
pressure from the decreasing average selling price of PV modules.
In October 2013, the Company entered into agreements
with Supplier B to amend the contract and include a price adjustment mechanism that allows the Company and the vendor to renegotiate
purchase price on a quarterly basis within a specified price range set forth in the amendments based on market price.
|
(a)
|
The inventory firm purchase commitment with Supplier A for the years ended December 31, 2014, 2015 and 2016
|
As of December 31, 2013, the total liability recognized
for loss on inventory purchase commitments of RMB 1,244,743, after excluding the portion of RMB 87,134 recorded as a reduction
of “Prepayment to suppliers” related to Supplier C, was all related to the long-term fixed price polysilicon contracts
with Supplier A (refer to note (2) (c)), based on the management’s assessment by applying a methodology similar to that used
in the lower of cost or market evaluation with respect to inventory. The provision was determined by using management’s best
estimates of future purchase prices over the remaining terms of the contracts and applying such estimated purchase prices in the
lower of cost or market evaluation. In estimating the anticipated renegotiated purchase prices, the Company considered the pertinent
terms of each of the long-term supply contracts, the history and progress of renegotiation with the relevant vendors and the actual
price concessions granted, the polysilicon market development based on available industry research data and the likelihood of achieving
different levels of renegotiated prices for future periods. In addition to the estimated renegotiated purchase price, certain other
key assumptions were used in measuring the loss accrual, which included but were not limited to (i) the estimated net realizable
value of the PV modules manufactured from the polysilicon expected to be purchased under the long-term supply contracts; and (ii)
the normal profit margin of the PV modules for purposes of estimating the replacement cost or market price under the lower of cost
or market evaluation. The Company also considered the quantities that were required to be purchased and amounts due on take or
pay arrangements, as well as the history and progress of renegotiation with the relevant vendors and the actual concessions granted
in developing the amount of the estimated loss contingencies.
In the years ended December 31, 2014, 2015 and 2016,
after management’s assessment by using the same methodology mentioned above, no additional contingency losses for inventory
firm purchase commitment with Supplier A was determined to be required. However, due to significant fluctuation in the foreign
exchange rates between the RMB and US$ in 2015 and 2016 and given that the inventory purchase commitment to Supplier A is dominated
in US dollar, which is different from the related entities’ functional currency, a foreign exchange re-measurement loss of
RMB 77,705 and RMB 90,300 (US$13,006) was recorded as additional provision and was recorded in “Provision for reserve for
inventory purchase commitments” for the years ended December 2015 and 2016, respectively. No such provision was needed in
2014 since the foreign exchange rate was stable and the provision caused by the foreign exchange rate fluctuation was immaterial.
As of December 31, 2014, 2015 and 2016, the total
reserve for inventory purchase commitment of Supplier A was RMB 1,244,743, RMB 1,322,448 and RMB 1,412,748 (US$ 203,478), respectively.
Based on the stated delivery schedules through the end of 2014, 2015 and 2016, RMB 13,042, nil and nil were in “Other current
liabilities and accrued expenses”, respectively, and the remaining balance of RMB 1,231,701, RMB 1,322,448 and RMB 1,412,748
(US$ 203,478)were recorded in “Reserve for inventory purchase commitments” as of December 31, 2014, 2015 and 2016,
respectively. The following table presents the movement of the liability for inventory purchase commitment:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
(1,244,743
|
)
|
|
|
(1,244,743
|
)
|
|
|
(1,322,448
|
)
|
|
|
(190,472
|
)
|
Additions
|
|
|
—
|
|
|
|
(77,705
|
)
|
|
|
(90,300
|
)
|
|
|
(13,006
|
)
|
Ending balance
|
|
|
(1,244,743
|
)
|
|
|
(1,322,448
|
)
|
|
|
(1,412,748
|
)
|
|
|
(203,478
|
)
|
In entering into its inventory purchase contracts
with Supplier A, the Company made prepayments as described in note 2(c). As of December 31, 2015 and 2016, total balance of prepayments
made to Supplier A was RMB 224,029 and RMB 239,327 (US$34,500). In 2014, 2015 and 2016, due to the anti-dumping duty and anti-subsidy
investigation against Solar-Grade Polysilicon launched by the Ministry of Commerce of the People’s Republic of China, the
Company did not make any purchases from the Supplier A under the above-mentioned long-term fixed price supply contract, which was
entered into in 2011 and was effective from 2013 to 2020. The Company received invoices from Supplier A under its take-or-pay obligation
for failing to take the shipments from 2013 to 2016 and is currently in discussion with the Supplier A to seek an acceptable solution
to both parties in accordance with the long-term supply contract. According to the long-term supply contracts entered into between
the Company and Supplier A, the minimum purchase amount approximates US$1.6 billion in total. The Company believes that, it is
probable the Company will execute the agreements due to the “take or pay” obligation, which requires the Company to
pay full amount to Supplier A according to the purchase and payment schedule listed in the agreements with Supplier A, regardless
of whether the Company actually purchases raw materials from Supplier A. In addition, the Company also believes that based upon
the status of the negotiations with Supplier A, as of December 31, 2015 and 2016, it is reasonably assured that i) these prepayments
are not legally forfeited; ii) these prepayments could be utilized for deliveries once the Company starts purchasing from Supplier
A. As a result, the Company believes that the total prepayments could be utilized for deliveries once the Company starts purchasing
from Supplier A, therefore there was no need to make a reserve against the prepayments to Supplier A as of December 31, 2015 and
2016.
|
(b)
|
The inventory firm purchase commitment with Supplier C for the years ended December 31, 2014, 2015 and 2016
|
As described in note 2(c), the Company also has prepayments
with respect to another supplier, Supplier C, for the purchase of polysilicon. As of December 31, 2013, a provision of RMB 87,134
has been recorded as a reduction of “Prepayment to suppliers” in relation to the failure to purchase the stated quantities
under the long-term fixed price supply contracts with Supplier C.
In 2015, the Company failed to purchase from Supplier
C the stated quantities under the long-term fixed price supply contracts as the Company’s management determined after taking
into consideration all relevant factors that it would be in the Company’s best interest not to accept those deliveries when
they were due. As a result, because the contract has been substantially executed, the vendor claimed that certain advance payments
had been forfeited. Unlike the take or pay obligation for Supplier A described in Note 18(a), if the Company fails to take the
full amount of the agreed annual quantity in any calendar year, the Company does not have to pay for the remaining annual commitment,
but rather only forfeits the unutilized portion of the prepayment related to that year. Further, the Company does not have the
right to utilize this prepayment for deliveries in the following years. Accordingly, a provision of RMB 71,266 was made against
the forfeited advance payments as December 31, 2015. In 2015, the Company made a further assessment and estimated that for the
Company’s best interest, the Company would continue not to purchase from Supplier C the stated quantities in the remaining
execution period of these long-term fixed price supply contracts. As a result, an additional impairment of RMB 450,784 was provided
as of December 31, 2015 based on the estimated shortage between the contractual procurement volume and the estimated procurement
volume in the remaining execution period.
For year ended December 31, 2016, the Company made
an additional true-up provision of RMB 10,672 (US$1,537), based on the difference between the actual shortage of the purchase volume
in 2016 and the estimated purchase volume.
The following table presents the movement of the reserve
against inventory purchase prepayments for Supplier C:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
(87,134
|
)
|
|
|
(87,134
|
)
|
|
|
(609,184
|
)
|
|
|
(87,741
|
)
|
Additions
|
|
|
—
|
|
|
|
(522,050
|
)
|
|
|
(10,672
|
)
|
|
|
(1,537
|
)
|
Ending balance
|
|
|
(87,134
|
)
|
|
|
(609,184
|
)
|
|
|
(619,856
|
)
|
|
|
(89,278
|
)
|
As of December 31, 2015 and 2016, total impairment
provided against prepayments to Supplier C in relation to inventory purchase commitments was RMB 609,184 and RMB 619,856 (US$ 89,278),
respectively. As of December 31, 2016, total remaining unreserved prepayments to Supplier C was RMB 238,242 (US$34,314), which
represents the management’s best estimation on the recoverability of the prepayments.
|
(20)
|
Arrangements with third party vendors to operate certain production facilities
|
Since late 2015, the
Company contracted with several vendors to allow them to operate certain of the Company’s polysilicon ingot and wafer production
facilities with a term of one year. These vendors pay the Company a monthly fee to operate these production facilities, reimburse
the Company the salaries of the Company’s staff members employed at such facilities and utilities incurred for the operation
of the facilities, and cover all other manner of operating, ancillary, and raw material expenses of such production. As part of
the arrangement, the Company agrees to purchase all of the wafers so produced by the vendors. For the year ended December 31, 2015
and 2016, total amounts received for the use of the production facilities and the reimbursements of the salaries of the Company’s
staff members employed at such facilities and utilities incurred for the operation of the facilities were RMB 180million and RMB
431 million (US$ 62 million),
respectively. Considering these amounts were in fact a reimbursement
of the depreciation, salaries and utilities cost related to inventory purchased from these vendors, it was recorded in cost of
revenue as a reduction of actual costs incurred.
Cayman Islands and British Virgin Islands
Under the current laws of the Cayman Islands and British
Virgin Islands, the Company is not subject to tax on income or capital gains. In addition, upon any payment of dividend by
Yingli International, no British Virgin Islands withholding tax is imposed.
PRC
The Company’s PRC subsidiaries file separate
income tax returns. The Company’s PRC subsidiaries are subject to PRC income tax at the statutory rate of 25% under
the new Enterprise Income Tax Law (the “new EIT law”), except for the followings.
|
·
|
In 2008, Tianwei Yingli was recognized by the Chinese government as a “High and New Technology Enterprise” (“HNTE”) under the new EIT law and its relevant regulations.
|
In 2011, Tianwei Yingli renewed its HNTE qualification,
which entitled it to the preferential income tax rate of 15% for 2012 and 2013. In 2014, Tianwei Yingli renewed its HNTE qualification
again, which extended its entitlement to the preferential income tax rate of 15% to 2016.
|
·
|
Yingli China was recognized by the Chinese government as a HNTE under the new EIT law and its relevant regulations, which entitled it to the preferential income tax rate of 15% from 2011 to 2013. In 2014, Yingli China renewed its HNTE qualification, which entitled it to the preferential income tax rate of 15% from 2014 to 2016.
|
|
·
|
In 2011, Hainan Yingli was recognized by the Chinese government as a HNTE under the new EIT law and its relevant regulations. Being a HNTE located in the Hainan Special Economic Zone, Hainan Yingli is entitled to a 2+3 tax holiday starting from the year in which it first generates operating income. Hainan Yingli elected and was approved to commence its 2+3 tax holiday in 2011. Therefore, Hainan Yingli is entitled to income tax exemption for 2011 and 2012 and subject to the reduced income tax rate of 12.5% from 2013 to 2015. Since the tax holiday ended in 2015, Hainan Yingli was entitled to the preferential income tax rate of 15% in 2016.
|
|
·
|
In 2013, Yingli Tianjin, Yingli Lixian and Yingli Hengshui were recognized by the Chinese government as HNTE under the new EIT law and its relevant regulations, which entitled them to the preferential income tax rate of 15% from 2013 to 2015. In 2016, Yingli Tianjin, Yingli Lixian and Yingli Hengshui renewed their HNTE qualification, which entitled them to the preferential income tax rate of 15% for 2016 to 2018.
|
Subject to reapplication or renewal, except for Tianwei
Yingli, the other subsidiaries included Yingli China, Hainan Yingli, Yingli Tianjin, Yingli Lixian and Yingli Hengshui’s
HNTE status will enable them to continue to enjoy the preferential income tax rate. Management believes that these subsidiaries
except for Tianwei Yingli meet all the criteria for the reapplication of HNTE status.
The domestic project assets are entitled to a 3+3
tax holiday starting from the year in which their first generates operating income. The domestic project assets elected and were
approved to commence their 3+3 tax holiday. Therefore, the domestic project assets are entitled to income tax exemption for the
first three years starting from the year in which their first generates operating income and subject to the reduced income tax
rate of 12.5% in the following three years.
Other countries
The followings are the major tax jurisdictions where
the Company’s non-PRC subsidiaries are subject to income taxes:
|
·
|
Yingli Green Energy Europe GmbH (“Yingli Europe”) and Yingli Green Energy South East Europe GmbH (formerly known as Yingli Green Energy Greece Sales GmbH) (“Yingli South East Europe”), are located in Germany and subject to a corporation income tax rate of 15% plus a solidarity surcharge of 5.5% on corporation income taxes. In addition, Yingli Europe and Yingli South East Europe are subject to a trade income tax rate of 17.15% and 12.775%, respectively. The aggregate statutory income tax rate in Yingli Europe and Yingli South East Europe are 32.975% and 28.6%, respectively.
|
|
·
|
Yingli Green Energy Americas, INC (“Yingli U.S.”),
is located in New York city of the United States of America and is subject to a federal corporation tax rate of 34% and a state
corporation tax rate of 6.6%, resulting in an aggregate income tax rate of 38.4%.
|
The components of profit/(loss) before income taxes
for the years ended December 31, 2014, 2015 and 2016 are as follows:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cayman Islands
|
|
|
(319,552
|
)
|
|
|
(121,803
|
)
|
|
|
(37,180
|
)
|
|
|
(5,355
|
)
|
PRC
|
|
|
(886,685
|
)
|
|
|
(4,973,255
|
)
|
|
|
(1,918,803
|
)
|
|
|
(276,366
|
)
|
U.S.
|
|
|
28,700
|
|
|
|
22,543
|
|
|
|
(71,133
|
)
|
|
|
(10,245
|
)
|
Other foreign countries
|
|
|
(136,320
|
)
|
|
|
(94,301
|
)
|
|
|
(61,404
|
)
|
|
|
(8,844
|
)
|
Total loss before income taxes
|
|
|
(1,313,857
|
)
|
|
|
(5,166,816
|
)
|
|
|
(2,088,520
|
)
|
|
|
(300,810
|
)
|
Income tax expense/(benefit) in the consolidated statements
of comprehensive loss consists of the following:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRC
|
|
|
67,776
|
|
|
|
11,764
|
|
|
|
329
|
|
|
|
47
|
|
U.S.
|
|
|
22,536
|
|
|
|
9,367
|
|
|
|
6,664
|
|
|
|
960
|
|
Other foreign countries
|
|
|
387
|
|
|
|
14,155
|
|
|
|
3,263
|
|
|
|
470
|
|
Total current income tax expense
|
|
|
90,699
|
|
|
|
35,286
|
|
|
|
10,256
|
|
|
|
1,477
|
|
Deferred income tax expense/(benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRC
|
|
|
(7,500
|
)
|
|
|
695,702
|
|
|
|
—
|
|
|
|
—
|
|
U.S.
|
|
|
(2,922
|
)
|
|
|
203
|
|
|
|
2,517
|
|
|
|
363
|
|
Other foreign countries
|
|
|
9,446
|
|
|
|
—
|
|
|
|
122
|
|
|
|
17
|
|
Total deferred income tax expense/(benefit)
|
|
|
(976
|
)
|
|
|
695,905
|
|
|
|
2,639
|
|
|
|
380
|
|
Total income tax expense/(benefit)
|
|
|
89,723
|
|
|
|
731,191
|
|
|
|
12,895
|
|
|
|
1,857
|
|
Reconciliation between the provisions for income tax
computed applying the statutory CIT and the Group’s effective tax rate:
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
Computed expected tax expense/(benefit)
|
|
|
(25
|
)%
|
|
|
(25
|
)%
|
|
|
(25
|
)%
|
PRC tax rate differential, preferential rate
|
|
|
4.48
|
%
|
|
|
10.07
|
%
|
|
|
7.34
|
%
|
Tax rate differential for non-PRC entities
|
|
|
7.19
|
%
|
|
|
2.18
|
%
|
|
|
1.56
|
%
|
Tax holiday
|
|
|
(0.08
|
)%
|
|
|
0.50
|
%
|
|
|
0.00
|
%
|
Research and development tax credit
|
|
|
(2.03
|
)%
|
|
|
(0.39
|
)%
|
|
|
(0.66
|
)%
|
Non-deductible expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff welfare in excess of allowable limits
|
|
|
0.17
|
%
|
|
|
0.29
|
%
|
|
|
0.68
|
%
|
Share based compensation
|
|
|
0.67
|
%
|
|
|
0.06
|
%
|
|
|
0.02
|
%
|
Entertainment expenses
|
|
|
0.10
|
%
|
|
|
0.02
|
%
|
|
|
0.04
|
%
|
Change in valuation allowance
|
|
|
15.88
|
%
|
|
|
25.50
|
%
|
|
|
16.62
|
%
|
Dividend withholding tax
|
|
|
(0.04
|
)%
|
|
|
(0.00
|
)%
|
|
|
0.01
|
%
|
Others*
|
|
|
5.50
|
%
|
|
|
0.92
|
%
|
|
|
0.01
|
%
|
Actual income tax expense/(benefit)
|
|
|
6.84
|
%
|
|
|
14.15
|
%
|
|
|
0.62
|
%
|
*For the year ended December 31, 2014, the Company
recorded an out of period adjustment to increase income tax expense that is immaterial to the current and prior years
in the amount of RMB 34,352.
The following table sets forth the effect of preferential
tax on China operations, including PRC tax holiday for the year ended December 31, 2014 and PRC tax rate differential, preferential
rate and Tax holiday for the year ended December 31 2015 and 2016, respectively:
Year ended December 31,
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax holiday effect ((increase)/decrease)
|
|
|
(12,483
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Basic net loss per share effect ((increase)/decrease)
|
|
|
(0.07
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted net loss per share effect ((increase)/decrease)
|
|
|
(0.07
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
The income tax recoverable was RMB 8,270 and RMB 13,797
(US$ 1,987) as of December 31, 2015 and 2016, which were prepaid expenses and other current assets in the Consolidated Balance
Sheets, respectively.
The principal components of the deferred income tax
assets and deferred income tax liabilities are as follows:
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Gross deferred income tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable and prepayments to suppliers
|
|
|
196,843
|
|
|
|
279,131
|
|
|
|
40,203
|
|
Inventories
|
|
|
10,488
|
|
|
|
18,596
|
|
|
|
2,678
|
|
Employee benefits
|
|
|
21,071
|
|
|
|
26,943
|
|
|
|
3,881
|
|
Accrued warranty
|
|
|
118,532
|
|
|
|
126,144
|
|
|
|
18,169
|
|
Property, plant and equipment and fixed asset related subsidies
|
|
|
1,178,084
|
|
|
|
1,421,003
|
|
|
|
204,667
|
|
Net operating loss carryforwards
|
|
|
948,715
|
|
|
|
1,239,983
|
|
|
|
178,595
|
|
Investment loss
|
|
|
9,234
|
|
|
|
15,552
|
|
|
|
2,240
|
|
Provision for inventory purchase commitment
|
|
|
211,437
|
|
|
|
224,982
|
|
|
|
32,404
|
|
Total gross deferred income tax assets
|
|
|
2,694,404
|
|
|
|
3,352,334
|
|
|
|
482,837
|
|
Valuation allowance
|
|
|
(2,691,684
|
)
|
|
|
(3,352,131
|
)
|
|
|
(482,808
|
)
|
Net deferred income tax assets
|
|
|
2,720
|
|
|
|
203
|
|
|
|
29
|
|
Gross deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(8,804
|
)
|
|
|
(8,804
|
)
|
|
|
(1,268
|
)
|
Withholding income tax
|
|
|
(4,093
|
)
|
|
|
(4,215
|
)
|
|
|
(607
|
)
|
Total gross deferred income tax liabilities
|
|
|
(12,897
|
)
|
|
|
(13,019
|
)
|
|
|
(1,875
|
)
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred income tax assets
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Non-current deferred income tax assets
|
|
|
2,720
|
|
|
|
203
|
|
|
|
29
|
|
Current deferred income tax liabilities
|
|
|
(4,093
|
)
|
|
|
(4,215
|
)
|
|
|
(607
|
)
|
Non-current deferred income tax liabilities, included in other liabilities
|
|
|
(8,804
|
)
|
|
|
(8,804
|
)
|
|
|
(1,268
|
)
|
Net deferred income tax liabilities
|
|
|
(10,177
|
)
|
|
|
(12,816
|
)
|
|
|
(1,846
|
)
|
Tax loss carryforwards of the Company’s PRC subsidiaries
amounted to RMB 5,616,703 (US$ 808,974) as of December 31, 2016, of which RMB 1,547,167, RMB 1,206,489, RMB 637,990, RMB 1,248,889
and RMB 976,168 will expire if unused by December 31, 2017, 2018, 2019, 2020 and 2021, respectively.
The movements of the valuation allowance are as follows:
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
|
1,174,988
|
|
|
|
1,311,342
|
|
|
|
2,691,684
|
|
|
|
387,683
|
|
Additions of valuation allowance
|
|
|
159,355
|
|
|
|
1,409,078
|
|
|
|
690,704
|
|
|
|
99,483
|
|
Reduction of valuation allowance
|
|
|
(23,001
|
)
|
|
|
(28,736
|
)
|
|
|
(30,257
|
)
|
|
|
(4,358
|
)
|
Balance at the end of the year
|
|
|
1,311,342
|
|
|
|
2,691,684
|
|
|
|
3,352,131
|
|
|
|
482,808
|
|
In assessing the realization of deferred income tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax
liabilities (including the impact of available carryforward periods), projected future taxable income, and tax planning strategies
in making this assessment.
As of December 31, 2014, the Company recognized net
deferred income tax assets of RMB 665,644, primarily relate to the tax benefits of (i) RMB199,782 in provision for inventory purchase
commitment, which expire in varying amounts upon the settlement of the contingency on the long term purchase commitment provision
with the major polysilicon suppliers; (ii) RMB 428,790 in impairment of property, plant and equipment and gross tax loss carry
forwards, which expire in various amounts between 2015 and 2019. For the year ended December 31, 2015, with the successful disposal
of land use right of Fine Silicon as discussed in note (6), deferred tax assets of RMB 291,829 were realized. For the remaining
portion of deferred tax assets in relation to impairment of property, plant and equipment and gross tax loss carry forwards and
deferred tax assets in relation to long term purchase commitment provision with the major polysilicon suppliers, a full allowance
was provided due to that the Company believes it is more likely than not that the Company will be unable to generate sufficient
income in the foreseeable future to utilize the remaining portion of deferred income tax assets.
As of December 31, 2015 and 2016, the Company recognized
net deferred income tax assets of RMB 2,720 and RMB 203 (US$ 29), respectively, primarily relate to the tax benefits of depreciation
of property, plant and equipment. The realization of these tax benefits is dependent on the generation of sufficient taxable income.
Management believes it is more likely than not that the Company will realize the benefits of deferred income tax assets, net of
the existing valuation allowances as of December 31, 2015 and 2016. The amount of the deferred income tax assets considered realizable,
however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
The new EIT law and its relevant regulations impose
a withholding income tax at 10%, unless reduced by a tax treaty, for dividends distributed by a PRC-resident enterprise to its
immediate holding company outside the PRC for earnings accumulated beginning on January 1, 2008 and undistributed earnings
generated prior to January 1, 2008 are exempt from such withholding tax. As of December 31, 2016, the Company has
not recognized a deferred income tax liability of RMB 12,332 (US$ 1,776) for the undistributed earnings of RMB 123,323 (US$ 17,762)
generated by the PRC subsidiaries as of December 31, 2016 as the Company plans to indefinitely reinvest these earnings in
the PRC.
The German tax law and its relevant regulations impose
a withholding income tax at 26.375% for dividends distributed by a Germany-resident enterprise to its immediate holding company
outside Germany. As of December 31, 2016, deferred income tax liabilities of RMB 4,215 (US$ 607) was recognized for the undistributed
earnings generated by a German subsidiary.
For each of the years ended December 31, 2014,
2015 and 2016, the Company did not have any unrecognized tax benefits and thus no interest and penalties related to unrecognized
tax benefits were recorded. In addition, the Company does not expect that the amount of unrecognized tax benefits will change
significantly within the next 12 months. According to the PRC Tax Administration and Collection Law, the statute of limitations
is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The
statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB 100
(US$ 17). In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of
limitation in the case of tax evasion. The tax returns of the Company’s PRC subsidiaries for the tax years 2012 to 2016
are open to examination by the relevant tax authorities.
|
(22)
|
Share-Based Compensation
|
On December 28, 2006, the Company adopted the
2006 Stock Incentive Plan (the “Plan”). The Plan provides for both the granting of stock options and other stock-based
awards such as restricted shares to key employees, directors and consultants of the Company. The Plan was subsequently amended
by the Company’s board of directors and shareholders to increase the number of ordinary shares that the Company is authorized
to issue. The amendment did not change any other provisions of 2006 Stock Incentive Plan. As of December 31, 2016, the Company
was authorized to issue 12,745,438 shares under the 2006 Stock Incentive Plan. Among these shares, up to 2,715,243 shares may be
issued for the purposes of granting awards of unvested shares and up to 10,030,195 shares may be issued for the purpose of granting
stock option.
Stock options
A summary of stock options activity for the years
ended December 31, 2014, 2015 and 2016 is as follows:
|
|
Number of
Stock options
|
|
|
Weighted
Average
exercise price
|
|
|
Weighted
Average
remaining
contractual
term
|
|
Aggregate
intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2013
|
|
|
5,169,567
|
|
|
US$
|
4.58
|
|
|
|
|
|
|
|
Granted
|
|
|
1,792,820
|
|
|
US$
|
4.17
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Forfeited or cancelled
|
|
|
(51,575
|
)
|
|
US$
|
(3.80
|
)
|
|
|
|
|
|
|
Outstanding as of December 31, 2014
|
|
|
6,910,812
|
|
|
US$
|
4.48
|
|
|
|
|
|
|
|
Granted
|
|
|
86,000
|
|
|
US$
|
0.84
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
US$
|
—
|
|
|
|
|
|
|
|
Forfeited or cancelled
|
|
|
(453,818
|
)
|
|
US$
|
(7.43
|
)
|
|
|
|
|
|
|
Outstanding as of December 31, 2015
|
|
|
6,542,994
|
|
|
US$
|
4.23
|
|
|
4.49 years
|
|
|
—
|
|
Vested and expected to vest as of December 31, 2015
|
|
|
6,542,994
|
|
|
US$
|
4.23
|
|
|
4.49 years
|
|
|
—
|
|
Exercisable as of December 31, 2015
|
|
|
6,483,744
|
|
|
US$
|
4.04
|
|
|
4.44 years
|
|
|
—
|
|
Granted
|
|
|
817,881
|
|
|
US$
|
0.50
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
US$
|
—
|
|
|
|
|
|
|
|
Forfeited or cancelled
|
|
|
(32,300
|
)
|
|
US$
|
5.98
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2016
|
|
|
7,328,575
|
|
|
US$
|
3.81
|
|
|
4.12 years
|
|
|
|
|
Vested and expected to vest as of December 31, 2016
|
|
|
7,328,575
|
|
|
US$
|
3.81
|
|
|
4.12 years
|
|
|
|
|
Exercisable as of December 31, 2016
|
|
|
6,531,394
|
|
|
US$
|
4.01
|
|
|
3.44 years
|
|
|
|
|
The weighted average option fair value of US$2.93
per share or an aggregate of US$5,255 on the date of grant during the year ended December 31,2014, the weighted average option
fair value of US$0.57 per share or an aggregate of US$49 on the date of grant during the year ended December 31, 2015 and the weighted
average option fair value of US$ 0.34 per share or an aggregate of US$ 279 on the date of grant during the year ended December 31,
2016,was determined based on the Black-Scholes option pricing model, using the following weighted average assumptions.
|
|
Year ended December 31, 2014
|
|
Year ended December 31, 2015
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
86.96%~88.76%
|
|
76.23%~78.53%
|
|
79.77%~81.25%
|
|
Expected dividends yield
|
|
—
|
|
—
|
|
—
|
|
Expected term
|
|
5.5~6.25 years
|
|
6.25 years
|
|
5.75~6.25 years
|
|
Risk-free interest rate (per annum)
|
|
0.12%~1.44%
|
|
1.38%~1.40%
|
|
0.89%~1.30%
|
|
Estimated fair value of underlying ordinary shares (per share)
|
|
US$2.09~2.99
|
|
US$0.34~0.78
|
|
US$0.34~0.35
|
|
The Company’s calculation of expected volatility
was based on the historical volatility of the Company’s stock price.
The Company accounts for stock options in accordance
with ASC Topic 718, by recognizing compensation cost based on the grant-date fair value over the period during which an employee
is required to provide service in exchange for the award. No income tax benefit was recognized in the consolidated statements
of comprehensive loss for these share options as such compensation expenses are not deductible for PRC tax purposes. The amount
of compensation cost recognized for stock options for the years ended December 31, 2014, 2015 and 2016 is as follows:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
4,748
|
|
|
|
1,525
|
|
|
|
—
|
|
|
|
—
|
|
Selling expenses
|
|
|
7,558
|
|
|
|
2,721
|
|
|
|
659
|
|
|
|
95
|
|
General and administrative expenses
|
|
|
18,603
|
|
|
|
6,409
|
|
|
|
821
|
|
|
|
118
|
|
Research and development expenses
|
|
|
4,023
|
|
|
|
1,295
|
|
|
|
—
|
|
|
|
—
|
|
Total compensation cost recognized for stock options
|
|
|
34,932
|
|
|
|
11,950
|
|
|
|
1,480
|
|
|
|
213
|
|
As of December 31, 2016, US$ 246 (RMB 1,708)
of unrecognized compensation expense related to stock options is expected to be recognized over a weighted average period of approximately
1.75 years.
Basic and diluted loss per share
For the years ended December 31, 2014, 2015 and
2016, basic and diluted loss per ADS assuming the change of ADS ration as discussed in note (28) occurred at January 1, 2014, as
follows:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Yingli Green Energy
|
|
|
(1,299,809
|
)
|
|
|
(5,600,526
|
)
|
|
|
(2,097,654
|
)
|
|
|
(302,125
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares outstanding
|
|
|
173,613,085
|
|
|
|
181,763,770
|
|
|
|
181,763,770
|
|
|
|
181,763,770
|
|
Basic and diluted loss per share
|
|
|
(7.49
|
)
|
|
|
(30.81
|
)
|
|
|
(11.54
|
)
|
|
|
(1.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ADS outstanding
|
|
|
17,361,309
|
|
|
|
18,176,377
|
|
|
|
18,176,377
|
|
|
|
18,176,377
|
|
Basic and diluted loss per ADS
|
|
|
(74.87
|
)
|
|
|
(308.12
|
)
|
|
|
(115.41
|
)
|
|
|
(16.62
|
)
|
The following table summarizes
potential common shares outstanding excluded from the calculation of diluted loss per share for the years ended December 31,
2014, 2015 and 2016, because their effect is anti-dilutive:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issuable under stock options and restricted shares
|
|
|
6,910,812
|
|
|
|
6,542,994
|
|
|
|
7,328,575
|
|
|
(24)
|
Related-Party Transactions
|
For the years presented, in addition to the transactions
described in note (9), note (10) and note (15), the principal related party transactions and amounts due from and due to related
parties are summarized as follows:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products to related parties (note (a))
|
|
|
435,046
|
|
|
|
756,431
|
|
|
|
390,388
|
|
|
|
56,228
|
|
Purchase of raw materials and services from related parties (note (b))
|
|
|
833,813
|
|
|
|
656,091
|
|
|
|
441,461
|
|
|
|
63,584
|
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable from related parties (note (a))
|
|
|
447,093
|
|
|
|
538,222
|
|
|
|
77,520
|
|
Prepayments to related party suppliers (note (b))
|
|
|
230,376
|
|
|
|
173,631
|
|
|
|
25,008
|
|
Other amounts due from related parties (note (c))
|
|
|
433,277
|
|
|
|
619,705
|
|
|
|
89,256
|
|
Total due from related parties - current
|
|
|
1,110,746
|
|
|
|
1,331,558
|
|
|
|
191,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
portion of amounts due from related party
(note (d))
|
|
|
32,318
|
|
|
|
32,332
|
|
|
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments for construction of property, plant and equipment to related party suppliers (note (e))
|
|
|
433
|
|
|
|
130
|
|
|
|
19
|
|
Total other due from related parties
|
|
|
433
|
|
|
|
130
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due to related parties (note (b))
|
|
|
(536,409
|
)
|
|
|
(393,063
|
)
|
|
|
(56,613
|
)
|
Short-term sales lease back and financing lease payable due to related parties
|
|
|
(57,248
|
)
|
|
|
(51,808
|
)
|
|
|
(7,462
|
)
|
Total due to related parties - current
|
|
|
(593,657
|
)
|
|
|
(444,871
|
)
|
|
|
(64,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
sales lease back and financing lease payable due to related parties
(note (i))
|
|
|
(242,267
|
)
|
|
|
(267,367
|
)
|
|
|
(38,509
|
)
|
Notes:
|
(a)
|
The Company sold PV modules
of RMB 14,793, RMB 5,365 and nil to its affiliate, Tibetan Yingli, for the years ended December 31, 2014, 2015 and 2016. The
Company sold products of RMB 268,177, RMB 683,319 and RMB 377,496 (US$ 54,371) to the subsidiaries of Yingli Group for the years
ended December 31, 2014, 2015 and 2016, respectively. The Company sold PV modules of RMB 81,203, nil and nil to an affiliate
which the Company holds 26.53% of its equity interest for the years ended December 31, 2014, 2015and 2016. However, it was
no longer the company’s related party since 2016 due to that the Company disposed all of its share of equity, which was
disclosed in note(9).The amount of transaction mentioned above included value-added tax.
|
|
(b)
|
The balance as of December 31, 2015 and 2016 mainly represents the prepayments to subsidiaries of Yingli Group for the purchase of raw materials and receipt of services. The Company purchased raw materials of RMB 587,538, RMB 401,690 and RMB 204,436 (US$ 29,445) from the subsidiaries and an affiliate of Yingli Group for the years ended December 31, 2014, 2015 and 2016, respectively. The company purchased services of RMB 230,950, RMB 239,060 and RMB 235,448 (US$33,912) from the subsidiaries of Yingli Group and the Company’s affiliate for the years ended December 31, 2014, 2015 and 2016, respectively. The amount of transaction mentioned above included value-added tax.
|
|
(c)
|
Other amounts due from related parties consists of the
following:
|
|
|
Year ended December 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to Yingli Group and its subsidiaries (i)
|
|
|
51,800
|
|
|
|
399,677
|
|
|
|
57,565
|
|
Receivables for disposal of subsidiaries (ii)
|
|
|
146,606
|
|
|
|
146,606
|
|
|
|
21,116
|
|
Amount paid to Yingli Group and its subs to purchase raw materials on behalf of the Company for better credit term
|
|
|
140,891
|
|
|
|
—
|
|
|
|
—
|
|
Receivables for disposal of machinery
|
|
|
30,739
|
|
|
|
—
|
|
|
|
—
|
|
Others receivables from miscellaneous transactions
|
|
|
63,241
|
|
|
|
73,422
|
|
|
|
10,575
|
|
|
|
|
433,277
|
|
|
|
619,705
|
|
|
|
89,256
|
|
|
(i)
|
Hainan Yingli made one-year entrusted loans of RMB 50,000 ,RMB 25,000 and RMB 40,000 in 2012, 2013 and 2014, to a subsidiary of Yingli Group at an interest rate of 5.4%, 6.0% and 6.0% per annum, respectively, and collected RMB 65,000 and RMB 10,000 and nil in 2013, 2014 and 2015 for the above mentioned loans, respectively. In 2015, Yingli Group disposed the 100% equity interest in the aforementioned subsidiary to a third party and the balance of RMB 40,000 was reclassified to other receivable.
|
|
|
|
|
|
In 2014, Hainan Yingli made another one-year entrusted loan of RMB 18,000 at an interest rate of 6% per annum to a subsidiary of Yingli Group, which was collected in full by Hainan Yingli in December 2015.
|
|
|
|
|
|
In 2015, Yingli Tianjin made a one-year entrusted loan of RMB 2,000 at an interest rate of 5.35% per annum to Tianjin Yingli PV Power Plant technology development Co., Ltd., a subsidiary of Yingli Group. As of December 31, 2016, the Company did not withdraw the entrusted loans.
|
|
|
|
|
|
In 2015, Yingli Tianjin made several one-year entrusted loans of RMB 49,800 at an interest rate of 5.6% per annum to Yingli (Tianjin) International Trading Ltd. (“TJ International Trading”), a subsidiary of Yingli Group. As of December 31, 2016, the Company did not withdraw the entrusted loans.
|
|
|
|
|
|
In 2016, the Company also made interest free loans of RMB 347,877 to Yingli Group and its subsidiaries, which are expected to be collected in 2017. The main purpose of these loans is to allow Yingli Group and its subsidiaries have enough capital to complete their long-lived assets under construction, such as project assets, and then dispose these assets to settle the Company’s historically cumulated receivables due from Yingli Group and its subsidiaries.
|
|
|
|
|
(ii)
|
In 2014, the Company disposed all its equity interest in its subsidiary Yingli (Tianjin) International Trading Ltd. (“TJ International Trading”) to Tianjin Yingli Bubalus Logistics Co., Ltd., which is a subsidiary of Yingli Group. The total consideration was of RMB 134,167 and gains of RMB 22,271 was recorded in other income. As of December 31, 2015 and 2016, the related proceeds for the disposal have not been collected.
|
|
|
|
|
|
In December 2014, Yingli Shuntong (Beijing).International Freight Agency Co., Ltd. was sold to Tianjin Yingli Bubalus Logistics Co., Ltd., which is a subsidiary of Yingli Group for the consideration of RMB 12,439, and gains of RMB 1,672 was recorded in other income.
|
|
|
|
|
|
In 2016, the Company disposed all its interest in its subsidiary Datong Lichuang New Energy Resources Co. Ltd. to Yingli PV Group for the consideration of RMB 1,000, and gains of RMB 29,682 was recorded in other income. All the consideration proceeds have been received by the Company in 2016.
|
|
|
|
|
|
In 2016, the Company disposed all its interest in its subsidiary Chengdu Yaoneng New Energy Resources Co., Ltd. to Beijing Yaoying New Energy Resources Co., Ltd. for the consideration of RMB 826, and gains of RMB 291 was recorded in other income. All the consideration proceeds have been received by the Company in 2016.
|
|
(d)
|
In 2012, Yingli Lixian entered into a financial lease with a subsidiary of Yingli Group, and paid RMB 4,490 and RMB 7,510 deposits during the years ended December 31, 2012 and 2013, respectively, for guarantee of the transaction. In 2012, Fine Silicon entered into a financial lease with a subsidiary of Yingli Group, and paid RMB 10,000 deposits for guarantee of the transaction. In August 2013, Yingli China entered into a sales-lease back transaction with a subsidiary of Yingli Group and paid RMB 10,000 deposits for guarantee of the lease. These deposits will be returned when the transactions were completed, and are recorded in due from related parties as of December 31, 2012, and are reclassified to long-term portion of amounts due from a related party as of December 31, 2015 and 2016.
|
|
(e)
|
The balance as of December 31, 2015 and 2016 mainly represents the prepayments to subsidiaries of Yingli Group for the construction of plants, which is included in property, plant and equipment in the Consolidated Balance Sheets.
|
|
(f)
|
The Company entered into entrusted construction contract with Yingli PV Group. Under the general term of the contract, Yingli PV Group built 23 project assets of 222.4MW in total for the Company with total amount of RMB 825,748 in 2014. In September 2015, the Company entered into an agreement with Yingli PV Group to terminate the above-mentioned construction contract and deconsolidated all the project assets under the VIE structure. The loss of RMB 6,852, which was the difference between the consideration of RMB 554,452 and the net book value of the VIEs of RMB561,304, (comprised of total assets of RMB 1,886,045 net of related liabilities of RMB 1,324,741), of was recognized in the Consolidated Statements of Comprehensive Loss upon the disposal of VIE in 2015. Upon disposal, accounts receivables from these VIEs due to sales of PV modules were reclassified from accounts receivables from subsidiaries, which was eliminated when preparing the consolidation, to accounts receivables from related parties; meanwhile, RMB 554,452 of receivables in relation to consideration of disposal of VIE from related parties were net-off by payables to the related parties for the initial capital injection into the VIEs when VIE were incorporated.
|
|
(g)
|
The Company pledged its assets of total amount of RMB 147,600 and provided guarantee to back up the RMB781,830 (US$120,694) and RMB 433,264 (US$ 62,403) bank borrowing of Yingli Group as of December 31, 2015 and 2016, respectively.
|
|
(h)
|
The Company received guarantee from the Yingli Group of total amount of RMB 2,386,307 and RMB 2,263,334 (US$ 325,988) as of December 31, 2015 and 2016, respectively.
|
|
(i)
|
The Company entered into several financing lease agreement with related party controlled by Yingli Group. As of December 31, 2015 and 2016, the total outstanding payable within one year was RMB 57,248 and RMB 51,808 (US$ 7,462) over one year was RMB 242,267and RMB 267,367 (US$38,509), respectively.
|
|
(25)
|
Commitments and Contingencies
|
As of December 31, 2016, commitments outstanding
for the purchase of property, plant and equipment approximated RMB 1,510.8 million (US$ 217.6 million).
In order to secure adequate and timely supply of polysilicon,
the Company entered into a number of multi-year supply agreements from 2006 through 2011.
A portion of the Company’s multi-year supply
agreements are structured as “take or pay” arrangements which allow the supplier to invoice the Company for the full
purchase price of polysilicon the Company is obliged to purchase each year at predetermined prices, whether or not the Company
actually ordered the required volume, purchase obligations under “take or pay” arrangements are as follows:
Year ended December 31,
|
|
RMB
|
|
|
US$
|
|
2017
|
|
|
349,625
|
|
|
|
50,356
|
|
2018
|
|
|
1,539,797
|
|
|
|
221,777
|
|
2019
|
|
|
2,078,637
|
|
|
|
299,386
|
|
2010
|
|
|
2,078,637
|
|
|
|
299,386
|
|
2021
|
|
|
2,078,637
|
|
|
|
299,386
|
|
Thereafter
|
|
|
7,517,867
|
|
|
|
1,082,798
|
|
Total
|
|
|
15,643,200
|
|
|
|
2,253,089
|
|
The purchase prices under the multi-year supply agreements
are subject to adjustments, taking into consideration the spot market price, the cost to produce the polysilicon, among other things. The
Company purchased polysilicon from Supplier B in the amount of RMB 561,487, RMB 461,515 and RMB 238,182 (US$ 34,305) under the
“take or pay” arrangements during 2014, 2015 and 2016, respectively.
Besides the “take or pay” arrangements,
future minimum obligations under other polysilicon supply agreements with Supplier C amounted to RMB 2,977,423(US$ 428,838)
as of December 31, 2016. The Company purchased polysilicon in the amount of RMB 701,784, RMB 248,496 and RMB 219,991(US$
31,685) under the multi-year supply agreements during 2014, 2015 and 2016, respectively. Provision of RMB 522,050 and RMB 10,672
(US$ 1,537) was provided against prepayments to Supplier C for year ended December 31, 2015 and 2016, please refer to note (19).
In terms of the supply agreement with Supplier A,
it is impractical for the Company to execute the agreement because of the events such as anti-dumping and anti-subsidy investigations
into solar-grade polysilicon imported from the U.S. and South Korea launched by the Ministry of Commerce of the PRC in July 2012
that have occurred are beyond the management’s control. Therefore, based on assessment of management, no material losses
or costs should be incurred for not executing the agreement. Reserve for inventory purchase commitments was provided against Supplier
A for year ended December 31, 2016, please refer to note (19).
In the past years, the Company signed several agreements
and amendments with a supplier to provide certain service for the Company. Due to certain quality control issues related to the
supplier and substantial changes in the market, the Company and this supplier had disputes over the performance of the contracts
and the Company's payments of accounts receivable to the supplier. In May 2013, the supplier informed the Company that it would
like to cease the recovery service and claimed compensation. In July 2014, the Company filed litigation against this supplier for
breach of contract and claimed damages against this supplier. In September 2015, the supplier also filed litigation against the
Company for the default in performance of contract and claimed compensation. The Provincial High People’s Court consolidated
these two disputes in January 2016, in accordance with the Company’s request. At the end of December 2016, the court issued
judgments as to these two disputes and the Company was informed of the judgments in January 2017, in which the court ruled that
the agreements and amendments with the supplier shall be rescinded, and the Company shall pay compensation to the supplier. All
other claims of the Company and the supplier were rejected. At this time, both the Company and the supplier have appealed to the
Supreme People’s Court, so no judgments of the Provincial High People’s Court have yet taken effect. The Supreme People’s
Court has not held any hearing yet. The Company believes that the supplier’s claims lack merit. As such, the Company is hopeful that the judgment from the Provincial High People’s Court will
be overturned in the Company’s favor. However, considering the uncertainties involved in the appeals process, the Company
made a provision of RMB59 million, representing the entire amount awarded to the supplier by the initial judgment from the Provincial
High People’s Court. Nevertheless, such provision does not constitute, and should not be interpreted or viewed in any manner
as, any recognition by the Company of the merit of any aspect of the judgment from the Provincial High People’s Court. Accordingly,
the Company recorded an accrual for the amount of compensation to the supplier in the year ended December 31, 2016.
In October 2013, the Company received notice
of an antitrust filed by Energy Conversion Devices Liquidation Trust (“ECD”), through its liquidating trustee, against
the Company and two other China-based photovoltaic panel manufacturers. in the U.S. District Court of the Eastern District of Michigan. ECD
alleges a wide-ranging conspiracy among the Company and other two Chinese photovoltaic panel manufacturers, their suppliers, banks
and the Chinese government to destroy ECD and the U.S. solar industry by flooding the market with cheap photovoltaic panels. On
October 31, 2014, the Court granted the Company’s joint motion to dismiss the case. In November 2014, the plaintiff
filed a motion for reconsideration and a second motion to amend or alter the judgement and for leave to file an amended complaint,
both of which were denied by the Court in September 2015. ECD appealed to the U.S. Court of Appeals for the Sixth Circuit, which
unanimously affirmed the trial court’s dismissal of ECD’s claims in August 2016. ECD filed a petition for a writ of
certiorari to the U.S. Supreme Court, which was denied on April 17, 2017, ending the litigation.
In May and June 2015, two individual plaintiffs respectively
filed purported class action securities fraud lawsuits against the Company, the Company’s chairperson and chief executive
officer, Mr. Liansheng Miao, and our director and chief executive officer, Mr. Yiyu Wang, in the U.S. District Court for the Central
District of California, both alleging, among other things, that the Company made false and misleading statements and failed to
disclose certain material financial information. In October 2015, the cases were consolidated, and the court appointed lead plaintiffs
and lead counsel. In November 2015, lead plaintiffs filed a consolidated amended complaint. The amended complaint contended that
the Company and certain of the Company’s officers and directors made false or misleading statements between December 2, 2010
and May 15, 2015 regarding (i) the Chinese government’s Golden Sun program, which provided subsidies for solar projects in
China; and (ii) the Company’s accounts receivable attributable to Chinese customers. The sole claim in that complaint was
for violation of Section 10(b) of the Securities Exchange Act of 1934. In December 2015, the Company filed a motion to dismiss
the consolidated suit, and, on May 10, 2016, the Court granted that motion with leave to amend. On June 24, 2016, lead plaintiffs
filed a new complaint, again alleging that, between December 2, 2010 and May 15, 2015, Yingli’s officers made false or misleading
statements regarding Golden Sun and accounts receivables. This complaint added an additional claim against Mr. Miao and Mr. Wang
for violation of Section 20(a) of the Exchange Act. On August 8, 2016, the Company again filed a motion to dismiss the suit, and,
on March 15, 2017, the Court again dismissed the plaintiffs’ claims with leave to amend. The plaintiffs filed a second amended
complaint on April 24, 2017. The Court set a briefing schedule requiring the filing of the Company’s motion to dismiss by
May 30, 2017, plaintiffs’ opposition by July 5, 2017, and the Company’s reply by July 19, 2017. A hearing on the motion
is set for August 14, 2017. It is premature at this stage of the litigation to evaluate the likelihood of favorable or unfavorable
outcomes. The Company intend to defend vigorously against those allegations.
In October 2012, the Company received notice of an
antitrust and unfair competition lawsuit filed by Solyndra, LLC (“Solyndra”, a U.S.-based solar company) against the
Company and two other China-based photovoltaic panel manufacturers in the U.S. District Court of the Northern District of California.
The Company filed its joint motion to dismiss all of Solyndra’s claims with the co-defendants in March 2013. On April 9,
2014, the Company received an order denying defendants’ joint motion to dismiss Solyndra’s claims. In February 2016,
the Company entered into an agreement to settle these claims (“the Settlement Agreement”). According to the Settlement
Agreement, i) the Company together with Yingli Green Energy Americas, Inc. (“Yingli Americas”, one subsidiaries of
the Company), shall pay US$7.5 million to settle Solyndra’s claims; ii) the Company shall be obligated to pay to Solyndra
additional cash of US$10 million, if the annual total sales of PV modules from the Company and its subsidiaries to the United States
and Canada equals or exceeds 800 megawatts in any single calendar year from 2016 to 2018. The aforementioned lawsuit against the
Company will be dismissed with prejudice, and under the Settlement Agreement, Solyndra has released the Company and all of its
affiliates from any further claims based on the same or any related facts or allegations. This settlement is subject to approval
by the bankruptcy court handling Solyndra’s bankruptcy case. Therefore, provision of settlement fee of US$ 7.5 million (RMB
48.7 million) has been provided as of December 31, 2015 and was recorded in “Payables due to settlement of claims”
and “General and administrative expenses” to the “Consolidated Statements of Comprehensive Loss”, no provision
was made against the additional of US$10 million (RMB 64.8 million) since it is not probable that a liability has been incurred.
The payment US$7.5 million was made in 2016.
As of December 31, 2015 and 2016, the Company’s
intangible assets consisted of the followings:
|
|
December 31, 2015
|
|
|
|
Weighted
average
amortization
period
|
|
|
Gross carrying
Amount
|
|
|
Accumulated
amortization
|
|
|
Impairment
|
|
|
Intangibles, net
|
|
|
|
Years
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
Indefinite
|
|
|
|
57,672
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,672
|
|
|
|
8,903
|
|
Technical know-how
|
|
|
5.7
|
|
|
|
209,084
|
|
|
|
(208,396
|
)
|
|
|
—
|
|
|
|
688
|
|
|
|
106
|
|
Customer relationship
|
|
|
5.8
|
|
|
|
66,671
|
|
|
|
(66,671
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Order backlog
|
|
|
1.3
|
|
|
|
23,274
|
|
|
|
(23,274
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Short-term supplier agreements
|
|
|
0.5
|
|
|
|
4,303
|
|
|
|
(4,303
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Long-term supplier agreements
|
|
|
9
|
|
|
|
137,820
|
|
|
|
(6,643
|
)
|
|
|
(131,177
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
498,824
|
|
|
|
(309,287
|
)
|
|
|
(131,177
|
)
|
|
|
58,360
|
|
|
|
9,009
|
|
|
|
December 31, 2016
|
|
|
|
Weighted
average
amortization
period
|
|
|
Gross carrying
Amount
|
|
|
Accumulated
amortization
|
|
|
Impairment
|
|
|
Intangibles, net
|
|
|
|
Years
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
Indefinite
|
|
|
|
57,672
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,672
|
|
|
|
8,307
|
|
Technical know-how
|
|
|
5.7
|
|
|
|
209,084
|
|
|
|
(208,646
|
)
|
|
|
—
|
|
|
|
438
|
|
|
|
63
|
|
Customer relationship
|
|
|
5.8
|
|
|
|
66,671
|
|
|
|
(66,671
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Order backlog
|
|
|
1.3
|
|
|
|
23,274
|
|
|
|
(23,274
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Short-term supplier agreements
|
|
|
0.5
|
|
|
|
4,303
|
|
|
|
(4,303
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Long-term supplier agreements
|
|
|
9
|
|
|
|
137,820
|
|
|
|
(6,643
|
)
|
|
|
(131,177
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
498,824
|
|
|
|
(309,537
|
)
|
|
|
(131,177
|
)
|
|
|
58,110
|
|
|
|
8,370
|
|
Technical know-how represents self-developed technologies,
which were feasible at the acquisition date and technologies contributed by a non-controlling interest holder of a subsidiary of
the Company. These technologies included the design and configuration of the Company’s PV manufacturing line, manufacturing
technologies and process for high efficiency silicon solar cells and provision of innovations for continuous improvement of cell
efficiencies and manufacturing cost reduction.
Management estimated that the economic useful life
of technical know-how by taking into consideration of the remaining life cycle of the current manufacturing technologies.
Management estimated the useful life of the customer
relationships based primarily on the historical experience of the Company’s customer attrition rate and estimated sales to
these customers in future years. The straight-line method of amortization has been adopted as the pattern in which the economic
benefit of the customer relationship are used, cannot be reliably determined.
The estimated fair values of short-term and long-term
supply agreements were determined based on the present values of the after-tax cost savings of the Company’s short-term and
long-term supply agreements. The after-tax cost savings of the Company’s short-term and long-term supply agreements were
based on the difference of price of polysilicon between the agreed purchase price per the supply contracts and the forecasted spot
market price at time of the forecasted inventory acquisition. The after-tax costs savings also considered the interest impact of
making the pre-payments in accordance with the supply agreements payment terms. Management estimated the useful life of the short-term
and long-term supply agreements based upon the contractual delivery periods specified in each agreement. The long-term supply agreements
relate to four long-term polysilicon supply agreements with delivery period commencing in 2009.
The aggregated amortization expense for intangible
assets for the years ended December 31, 2014, 2015 and 2016 is as follows:
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical know-how
|
|
|
326
|
|
|
|
250
|
|
|
|
250
|
|
|
|
36
|
|
As of December 31, 2016, the estimated amortization
expense for the next five years is as follows:
|
|
December 31,
2016
|
|
|
|
RMB
|
|
2017
|
|
|
250
|
|
2018
|
|
|
188
|
|
2019
|
|
|
—
|
|
2020
|
|
|
—
|
|
2021
|
|
|
—
|
|
|
(27)
|
Geographic Revenue Information
|
The following summarizes the Company’s revenue
from the following geographic areas (based on the location of the customer):
|
|
Year ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Germany
|
|
|
671,534
|
|
|
|
170,518
|
|
|
|
3,089
|
|
|
|
445
|
|
- Spain
|
|
|
186,341
|
|
|
|
136,964
|
|
|
|
15,575
|
|
|
|
2,243
|
|
- France
|
|
|
191,071
|
|
|
|
363,635
|
|
|
|
1,477
|
|
|
|
213
|
|
- Italy
|
|
|
32,607
|
|
|
|
21,680
|
|
|
|
229
|
|
|
|
33
|
|
- Belgium
|
|
|
5,247
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
- Holland
|
|
|
116,725
|
|
|
|
39,715
|
|
|
|
39,209
|
|
|
|
5,647
|
|
- Czech
|
|
|
—
|
|
|
|
126
|
|
|
|
—
|
|
|
|
—
|
|
- Greece
|
|
|
2,225
|
|
|
|
239
|
|
|
|
—
|
|
|
|
—
|
|
- England
|
|
|
998,203
|
|
|
|
80,255
|
|
|
|
88,129
|
|
|
|
12,693
|
|
- Turkey
|
|
|
118,305
|
|
|
|
550,799
|
|
|
|
69,956
|
|
|
|
10,076
|
|
- Others
|
|
|
133,698
|
|
|
|
74,004
|
|
|
|
4,112
|
|
|
|
592
|
|
Subtotal- Europe
|
|
|
2,455,956
|
|
|
|
1,437,946
|
|
|
|
221,776
|
|
|
|
31,942
|
|
PRC (excluding HK SAR, Macau and Taiwan)
|
|
|
4,550,915
|
|
|
|
4,078,476
|
|
|
|
4,932,284
|
|
|
|
710,397
|
|
HK SAR
|
|
|
39,582
|
|
|
|
4,125
|
|
|
|
7,085
|
|
|
|
1,020
|
|
United States of America
|
|
|
2,301,496
|
|
|
|
1,248,536
|
|
|
|
513,690
|
|
|
|
73,987
|
|
Japan
|
|
|
2,487,949
|
|
|
|
2,723,800
|
|
|
|
2,363,239
|
|
|
|
340,377
|
|
South Korea
|
|
|
2,201
|
|
|
|
2,440
|
|
|
|
2,074
|
|
|
|
299
|
|
Other countries
|
|
|
1,089,278
|
|
|
|
470,463
|
|
|
|
335,951
|
|
|
|
48,387
|
|
Total net revenues
|
|
|
12,927,377
|
|
|
|
9,965,786
|
|
|
|
8,376,099
|
|
|
|
1,206,409
|
|
On August 13, 2015, the Company received a notice from the New
York Stock Exchange (the "NYSE") stating that the Company was not in compliance with the NYSE's price criteria for continued
listing standard because, as of August 12, 2015, the average closing price of the Company's American Depositary Shares, or ADSs,
was less than $1.00 per ADS over a consecutive 30 trading-day period.
In accordance with Section 802.01C of the NYSE's Listed Company
Manual, the Company was provided with a period of six months ("the Cure Period") following receipt of the notice to regain
compliance with the minimum share price requirement. The Company can regain compliance during the Cure Period if the Company's
ADSs have a closing share price of at least $1.00 per ADS on the last trading day of any calendar month during the period and also
have an average closing price of at least $1.00 per ADS over the 30 trading-day period ending on the last trading day of that month.
The Company can also regain compliance if at the expiration of the six-month Cure Period, both a $1.00 or above closing price per
ADS on the last trading day of the Cure Period and a $1.00 or above average closing price per ADS over the 30 trading-day period
ending on the last trading day of the Cure Period are attained.
Effective on December 28, 2015, the Company changed the ratio
of its American Depositary Shares (“ADSs”) to ordinary shares from one (1) ADS representing one (1) ordinary share
to one (1) ADS representing ten (10) ordinary shares. Pursuant to the ratio change, each shareholder of record at the close of
business on December 28, 2015 was required to exchange every ten ADSs then held for one new ADS. The ratio change brought the Company
back into compliance with all NYSE listing standards. The historical and present loss per share for the periods presented herein
has been retrospectively adjusted to reflect such effect.
On May 3, 2017, the Company repaid its medium-term
note originally due on May 3, 2017 in the amount of RMB300 million.
|
(30)
|
Restricted Net Asset Parent
Only Financial Information
|
Relevant PRC laws and regulations permit PRC companies
to pay dividends only out of their retained earnings. if any, as determined in accordance with PRC accounting standards and regulations.
In addition, PRC companies can only distribute dividends upon approval of the shareholders after they have met the PRC requirements
for appropriation to statutory reserves. Relevant rules require annual appropriations of 10% of net after-tax income to be set
aside prior to payment of any dividends. As a result of these and other restrictions under PRC laws and regulations, the PRC subsidiaries
are restricted in their ability to transfer a portion of their net assets to the Company either in the form of dividends, loans
or advances, which restricted portion was greater than 25% threshold of the Group’s total consolidated net deficits as of
December 31, 2016. Even though the Company currently does not require any such dividends, loans or advances from the PRC subsidiaries
for working capital and other funding purposes, the Company may in the future require additional cash resources from the PRC subsidiaries
due to changes in business conditions, to fund future acquisitions and developments, or merely declare and pay dividends to or
distributions to the Company’s shareholders.
The separate condensed financial statements of Yingli
Green Energy Holding Company Limited as presented below have been prepared in accordance with Securities and Exchange Commission
Regulation S-X Rule 5-04 and Rule 12-04 and present the Company’s investments in its subsidiaries under the equity
method of accounting as prescribed in ASC 323. Such investment is presented on the separate condensed balance sheets of the Company
as “Investments in subsidiaries.” The condensed financial information of Yingli Green Energy Holding Company Limited
has been presented for the period from January 1, 2013 to December 31, 2016.
The subsidiaries did not pay dividend to
the Company for the period presented.
Except as disclosed in the consolidated financial
statements as presented above, the Company did not have any significant contingency, commitment, long term obligation, or guarantee
as of December 31, 2016.
Condensed Balance Sheets
(Amounts in thousands)
|
|
December 31,
2015
|
|
|
December 31,
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
1,145
|
|
|
|
453
|
|
|
|
65
|
|
Amounts due from related parties
|
|
|
2,658,849
|
|
|
|
2,775,520
|
|
|
|
399,758
|
|
Prepaid expenses and other current assets
|
|
|
174,559
|
|
|
|
178,438
|
|
|
|
25,701
|
|
Total current assets
|
|
|
2,834,553
|
|
|
|
2,954,411
|
|
|
|
425,524
|
|
Investments and loans to subsidiaries
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
|
|
2,834,553
|
|
|
|
2,954,411
|
|
|
|
425,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due to related parties
|
|
|
2,952,404
|
|
|
|
3,214,114
|
|
|
|
462,929
|
|
Other current liabilities and accrued expenses
|
|
|
95,127
|
|
|
|
32,596
|
|
|
|
4,694
|
|
Total current liabilities
|
|
|
3,047,531
|
|
|
|
3,246,710
|
|
|
|
467,623
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit subsidiaries
|
|
|
5,726,706
|
|
|
|
8,056,078
|
|
|
|
1,160,317
|
|
Total liabilities
|
|
|
8,774,237
|
|
|
|
11,302,788
|
|
|
|
1,627,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares —
|
|
|
|
|
|
|
|
|
|
|
|
|
Par value: US$0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized shares: 1,000,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares: 187,490,478 and 187,490,478 as of December 31, 2015 and 2016, respectively
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding shares: 181,763,770 and 181,763,770 as of December 31, 2015 and 2016, respectively
|
|
|
13,791
|
|
|
|
13,791
|
|
|
|
1,986
|
|
Additional paid-in capital
|
|
|
7,246,760
|
|
|
|
7,248,240
|
|
|
|
1,043,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock: 5,726,708 and 5,726,708 as of December 31, 2015 and 2016, respectively, at cost
|
|
|
(127,331
|
)
|
|
|
(127,331
|
)
|
|
|
(18,339
|
)
|
Accumulated other comprehensive income
|
|
|
180,025
|
|
|
|
(54,651
|
)
|
|
|
(7,871
|
)
|
Accumulated deficit
|
|
|
(13,252,929
|
)
|
|
|
(15,428,426
|
)
|
|
|
(2,222,156
|
)
|
Total shareholders’ deficit
|
|
|
(5,939,684
|
)
|
|
|
(8,348,377
|
)
|
|
|
(1,202,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity/deficit
|
|
|
2,834,553
|
|
|
|
2,954,411
|
|
|
|
425,524
|
|
Condensed Statements of Comprehensive
Loss
(Amounts in thousands)
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Selling expenses
|
|
|
282,636
|
|
|
|
76,890
|
|
|
|
29,261
|
|
|
|
4,214
|
|
General and administrative expenses
|
|
|
37,543
|
|
|
|
54,101
|
|
|
|
13,087
|
|
|
|
1,885
|
|
Research and development expenses
|
|
|
4,091
|
|
|
|
1,295
|
|
|
|
—
|
|
|
|
—
|
|
Total operating expenses
|
|
|
324,270
|
|
|
|
132,286
|
|
|
|
42,348
|
|
|
|
6,099
|
|
Interest expense
|
|
|
(4,328
|
)
|
|
|
(2,810
|
)
|
|
|
(47
|
)
|
|
|
(7
|
)
|
Interest income
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Foreign currency exchange gain (losses)
|
|
|
8,771
|
|
|
|
12,895
|
|
|
|
4,792
|
|
|
|
690
|
|
Other income
|
|
|
284
|
|
|
|
406
|
|
|
|
421
|
|
|
|
61
|
|
Loss before income taxes
|
|
|
(319,542
|
)
|
|
|
(121,795
|
)
|
|
|
(37,182
|
)
|
|
|
(5,355
|
)
|
Equity in losses of subsidiaries
|
|
|
(980,267
|
)
|
|
|
(5,478,731
|
)
|
|
|
(2,060,472
|
)
|
|
|
(296,770
|
)
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
(1,299,809
|
)
|
|
|
(5,600,526
|
)
|
|
|
(2,097,654
|
)
|
|
|
(302,125
|
)
|
Foreign currency exchange translation adjustment, net of nil tax
|
|
|
22,494
|
|
|
|
(131,336
|
)
|
|
|
(234,675
|
)
|
|
|
(33,802
|
)
|
Cash flow hedging derivatives, net of nil tax
|
|
|
(273
|
)
|
|
|
(749
|
)
|
|
|
—
|
|
|
|
—
|
|
Comprehensive loss
|
|
|
(1,277,588
|
)
|
|
|
(5,732,611
|
)
|
|
|
(2,332,329
|
)
|
|
|
(335,927
|
)
|
Condensed Statements of Cash Flows
(Amounts in thousands)
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(128,256
|
)
|
|
|
(32,709
|
)
|
|
|
(32,459
|
)
|
|
|
(4,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
(599,332
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Repayment of amounts due from subsidiaries, net
|
|
|
207,712
|
|
|
|
253,063
|
|
|
|
31,767
|
|
|
|
4,575
|
|
Net cash provided by (used in) investing activities
|
|
|
(391,620
|
)
|
|
|
253,063
|
|
|
|
31,767
|
|
|
|
4,575
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of short-term borrowings
|
|
|
—
|
|
|
|
(221,109
|
)
|
|
|
—
|
|
|
|
—
|
|
Proceeds from issuance of ordinary shares
|
|
|
517,272
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
|
517,272
|
|
|
|
(221,109
|
)
|
|
|
—
|
|
|
|
—
|
|
Net decrease in cash
|
|
|
(2,604
|
)
|
|
|
(755
|
)
|
|
|
(692
|
)
|
|
|
(100
|
)
|
Cash at beginning of year
|
|
|
4,504
|
|
|
|
1,900
|
|
|
|
1,145
|
|
|
|
165
|
|
Cash at end of year
|
|
|
1,900
|
|
|
|
1,145
|
|
|
|
453
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|