Photovoltaic Industrial Policy And Corporate Debt Default ——A Case Study Of GCL New Energy Debt Default

Since 2010,photovoltaic industry in China has maintained a strong momentum of development and became a strategic emerging industry in 2018.The growth of the photovoltaic industry cannot be separated from policy supporting,and a frequent implementation of new policies will greatly influence business decisions and its performance.Since 2013,the National Energy Administration and the National Development and Reform Commission have continuously lowered the photovoltaic ongrid electricity price and price subsidies.The new electricity price policy on May 31,2018 once again greatly reduced electricity prices and subsidies.This policy is conducive to the sustainable development of the industry in the long run,but it can be seen that this policy is a repressive in the short term.In February 2021,GCL New Energy,one of photovoltaic giants in China,defaulted on its debt.According to their financial reporting,this default should be counted on changes in industrial policies.This paper answers the following questions through case studies:Have the changes in photovoltaic industrial policies made any impact on GCL New Energy’s decision-making?Does the reason for GCL New Energy’s debt default depend entirely on industrial policy changes in the photovoltaic,or are there any reasons from internal?Will GCL New Energy’s debt default this time bring the company to a total downfall?In application of theories,this paper uses the transmission mechanism of macroeconomic policy and corporate decision-making and the causes of financial distress to conduct discussion.Through trend and comparation analysis of financial data,and its matching with macro-data,the relationship between industrial policy changes and corporate decision impact,the internal and external causes of debt default were discussed.And the effectiveness was assessed in GCL New Energy’s obtaining sufficient cash flow by selling power stations early,negotiations on debt restructuring in advance,and issuing new shares.This paper has following innovations:using the above two theories,it explores the relationship between industrial policy,corporate investment and financing decisions and financial distress,comprehensively summarizes the reasons for GCL New Energy’s financial distress,and ranks the contribution of internal and external factors so as to provide practical reference for managers of strategic emerging industries such as photovoltaics;this research adopts event analysis and case analysis methods to observe the market’s expectations and actual financial effects of GCL New Energy’s investment and financing decisions,and compares the market responses and production capacity the after the introduction of "531 "new electricity price policy,evaluating the policy’s effects,reducing the subjective inference in the positioning of the policy.Regarding the relationship between industrial policy changes and corporate decisionmaking,this paper mainly analyzes the decisions of production capacity and output,investment and financing,and finds that GCL New Energy chose to increase its production capacity during the industrial policy boom from 2015 to 2017,and reduced its production capacity under the sluggish situation after 2018,but the production efficiency was improved.Under the industrial policy of considerable electricity prices and subsidies,GCL New Energy had an overly aggressive investment behavior from 2015 to 2017,and its financing cash flow was also increasing year by year;after the release of the new electricity price policy in 2018,with the gradual reduction of electricity prices and subsidies,GCL New Energy quickly reduced its investment and began to repay debts.Although the changes in industrial policies have a great impact on GCL New Energy’s investment and financing decisions,identical policy changes have caused different consequence for different companies within the same industry.Both internal and external reasons contribute to GCL New Energy’s debt default.Externally,due to high sensitivity,the decline in electricity prices caused by the "531"new electricity price policy in 2018 will greatly reduce the return rate of photovoltaic power generation projects.Given that GCL New Energy is highly dependent on electricity price subsidies for its annual revenue,the investment income it can obtain from new projects in the second half of 2018 and beyond will be greatly reduced,resulting in a decline in future solvency.However,the reason for the debt default of GCL New Energy is mainly internal.First of all,in order to seek development in the early stage,GCL New Energy still overfinancing in the case of insufficient hematopoietic capacity of its main business,the purpose of issuing this senior note is to repay the old debt with new bonds,which has not allowed the company’s stock price to be increased in the short term;second,its total asset yield is generally lower than that of other leading companies in the industry,reflecting the shortcomings of GCL New Energy in the cost control of investment projects;third,low investment income,unstable capital structure and short-term solvency are the internal reasons for its debt default;fourth,High financial risks will amplify the impact of the same industrial policy changes,causing GCL New Energy to seek a faster financial response to repay its liabilities,rather than resuming investment after 2019 like other companies.The debt default case of GCL New Energy provides an important practical reference for the industry:managers need to make timely responses to external policies,effectively control financial leverage and focus on cost management.This paper also has some shortcomings.For example,it only selects relevant industrial policies from subsidies and electricity prices for case study,and there is a way to go in improvements of the selecting comparing companies.