| 6. | Deconsolidation
of Sinsin |
Pursuant to a share sale
and purchase agreement dated September 6, 2014 (“Sinsin SPA”), the Group, through its wholly owned subsidiary SPI
China, acquired the 100% equity interest of Sinsin from its former shareholders, Sinsin Europe Solar Asset Limited Partnership
and Sinsin Solar Capital Limited Partnership (collectively, the “Sinsin Group”). Sinsin owns and operates four solar
photovoltaic projects in Greece with an aggregate capacity of 26.57 MW. According to the Sinsin SPA, 70% of the acquisition price
would be paid in cash in four installments, while the remaining 30% has been settled by the transfer of Group’s shares to
Sinsin Group. In addition, the shares of the Greek project companies which own the 26.57 MW projects were pledged in favor of
Sinsin Group to secure the repayment of the full purchase price to Sinsin Group. Finally, pursuant to the Sinsin SPA, Sinsin Group
undertook the obligation vis-à-vis the Group, to appoint the Group as its EPC Contractor for solar photovoltaic projects
of 360MW, which would be developed by Sinsin Group internationally over a period of three years (the “360MW EPC assignment
obligation”).
However, Sinsin Group failed
to fulfil its 360MW EPC assignment obligation and, as a result thereof, the Group ceased payment of the last two installments
of the purchase price of $43,595 (EUR 38,054). In March, 2016, the Group entered into a supplementary agreement with Sinsin Group
(“Supplementary Agreement”) in order to extend the Group’s payment obligations of the outstanding consideration
up to November 30, 2017.
Moreover, pursuant to the Supplementary
Agreement: (a) Sinsin Group would be entitled to supervise and manage the bank accounts of Sinsin to ensure that all the electricity
income would be applied towards repayment of any outstanding purchase consideration and (b) Sinsin Group would support the Group
in securing project finance for the above projects.
However, and despite the above
obligation by Sinsin Group, the Group was not able to secure project finance and, as a result therefrom, the last two installments
of the purchase consideration were not paid to Sinsin Group.
After the acquisition in 2014,
Sinsin was managed by a board of directors which consisted of three members from the Group. Effective on July 1, 2015, Mr. Ye
Dejun, who worked for Sinsin Group before the acquisition, joined the Company as CEO and was assigned to replace an original director
in Sinsin in December of 2015. In March of 2016, Mr. Ye resigned from his role as CEO and was appointed to the Company’s
Board as a director and executive vice president. However, on October 9, 2017, Mr. Ye resigned from his position as a director
of the Company. Due to his demission, on December 19, 2017, in an Extraordinary General Meeting of the shareholders of Sinsin,
a resolution was passed to remove Mr. Ye from the board of directors of Sinsin, and appoint a new director who represented the
Group, which caused the Sinsin Group filed a petition before the Athens One-Member First Instance Court to suspend the force of
the Extraordinary General Meeting resolution.
In November 2017, Sinsin Group
claimed that the Group was in default of the Sinsin SPA and the Supplementary Agreement and attempted to exercise the pledge agreements
and take control of the Greek project companies. The Group denied such allegations and responded that it is Sinsin Group the party
who defaulted in its contractual obligations. Litigation and arbitration proceedings ensued in Greece and Malta. SPI Group filed
a claim against Sinsin group before the arbitration court in Malta requesting the award of circa $65,000 (EUR 54,000) in damages
(arising out of the breach of the 360MW EPC assignment obligation) and Sinsin Group filed a counterclaim against the Group requesting
payment of the outstanding purchase price.
Moreover, Sinsin Group’s
petition to take control over the Greek project companies (and the funds that such project companies had in their bank accounts
from the electricity income generated) was rejected by the Athens One-Member First Instance Court. More particularly, the court
issued a provisional measures decision on June 25, 2018, by virtue of which an interim management was appointed of the Greek project
companies, which consists of two members elected by Sinsin Group and one member elected by the Group. As the date of this report,
the legal dispute is still ongoing (See Note 26(b) Contingencies).
In view of above situations,
the Group considered that it would not be able to manage any funds or operations of Sinsin even if it had taken actions on an
earlier time in 2017, and it could not benefit from any net income of Sinsin in 2017. In addition, the Group could not access
to or obtain sufficient financial information or operational documents for 2017 to direct Sinsin’s financial and operational
decisions.
The above facts directly affected
the Group’s ability to effectively control Sinsin and make any direct management decisions or have any direct impact on
Sinsin’s polices, operations or assets without the agreement of Sinsin Group. Therefore, the Group deconsolidated Sinsin
as of January 1, 2017. The financial position of Sinsin as of the date of deconsolidation was as below:
| |
January
1,
2017 | |
ASSETS | |
| |
Restricted cash | |
$ | 2,679 | |
Accounts receivable | |
| 3,594 | |
Prepaid expenses and other current assets | |
| 4,000 | |
Amount due from inter-group entities | |
| 7,817 | |
Property, plant and equipment, net | |
| 55,458 | |
Deferred tax assets | |
| 179 | |
Total assets | |
$ | 73,727 | |
LIABILITIES | |
| | |
Accounts payable | |
$ | 809 | |
Income tax payable | |
| 243 | |
Deferred tax liabilities | |
| 2,958 | |
Other current liabilities | |
| 111 | |
Total liabilities | |
$ | 4,121 | |
As of December 31, 2018 and
2017 the Group’s carrying amount of the investment in Sinsin was $69,606 and $69,606 on the consolidated balance sheet.
As of the issuance of the financial statements, the lawsuit with Sinsin is still on the proceeding, and it is uncertain how the
court will rule (see Note 26 (b) Contingencies).
|