Green Cycle plans to raise 937 million yuan to invest in projects such as the annual recycling of 100,000 tons of modified plastics

On July 1, 2012, the State Council promulgated the "Administrative Measures for the Collection and Use of Waste Electrical and Electronic Products Disposal Funds", which are represented by "four machines and one brain" such as "TVs, washing machines, refrigerators, air conditioners, and computers".
Extended producer responsibility system
.

The tax bureau and the customs collect funds from the producers of "four machines and one brain" products and the consignees of imported products or their agents, and then use the collected funds to subsidize the recycling and disposal costs of waste electrical and electronic products.
Audited by the Ministry of Environment and paid by the Ministry of Finance
.

This part of the levied fund will eventually be reflected in consumer spending as part of the cost
.
To put it simply, part of the money that ordinary consumers spend on purchasing the above-mentioned "four machines and one brain" becomes a subsidy for their disposal
.

At present, a total of 109 waste electrical and electronic dismantling enterprises in five batches have entered the fund subsidy list.
Since 2016, no new enterprises have entered the list, and the industry structure has been basically stable
.

But for these 109 companies, the annual subsidy often takes two or three years to arrive
.
Taking Green Cycle as an example, as of March 2021, the company’s most recent fund subsidy payment actually corresponds to the second quarter of 2017
.

The long time for fund subsidies to arrive has also led to a large proportion of accounts receivable in Green’s circulating current assets.
In the first quarter of 2021, of the 1.
51 billion yuan of current assets, 1.
225 billion yuan belonged to accounts receivable – of which 1.
221 billion yuan For the fund subsidy receivable, the fund subsidy receivable accounts for 80.
86% of the current assets
.

This is also the norm in the waste electrical and electronic industry
.

The 2020 annual report of the industry leader China Re Capital (600217.
SH) shows that the company's current assets totaled 5.
349 billion yuan, of which fund subsidies receivable were 4.
377 billion yuan, accounting for 81.
83%
.

Another company in the industry, Huaxin Luyuan Environmental Protection Co.
, Ltd.
(hereinafter referred to as "Huaxin Environmental Protection"), according to its annual report and reply letter, the company's current assets in 2020 are 685 million yuan, and fund subsidies receivable are 439 million yuan, accounting for 64.
09% %
.

Is there a risk that the fund subsidy will not be credited? On July 26, an industry insider who did not want to be named told Times Finance and Economics that he was not worried, "Although I don't know why the fund subsidy is so slow, I believe it will be paid later
.
"

Huaxin Environmental Protection, which is also hitting the GEM, explained in its reply letter to the Shenzhen Stock Exchange on March 30 that although the review and disbursement process of fund subsidies is long, the time for enterprises to obtain fund subsidies is longer, and the payment is slow, but It is expected that there is no risk that the company will not be able to recover the fund subsidy in the future
.

Maximize the benefits of a spin-off

For listed companies, the fundamental purpose of spin-off and listing is whether the parent company's value can be improved and the magnitude of the increase in value to maximize benefits
.

The above-mentioned GEM related persons admitted that due to the slow receipt of subsidies from the disposal fund for waste electrical and electronic products, the spin-off and listing of related businesses will help to improve the financial performance of the parent company GEM, and the spin-off Green Cycle can obtain new funds through external financing.
hematopoietic" ability
.

According to GEM’s annual report, its accounts receivable at the end of 2020 was 2.
546 billion yuan, while the GEM’s IPO prospectus disclosed that the amount of fund subsidies receivable at the end of 2020 was 1.
140 billion yuan
.

In other words, in 2020 before the split and listing, the unreceived waste electrical and electronic product disposal fund subsidies have accounted for 44.
79% of the parent company GEM's receivables, while the revenue of the comprehensive utilization of electronic waste business only accounted for GEM 9.
02% of total revenue for the same period
.

How to solve the common problem of over-reliance on policy subsidies is also reflected in Green Cycle's proposed investment projects to raise funds.
One of the fund-raising projects is to dismantle 150,000 tons of scrapped "non-subsidy" electronic and electrical projects per year
.

The above-mentioned GEM related person told Times Finance that it is expected that after the completion of the fund-raising project, GEM’s “subsidy” electrical and electronic business revenue will be compressed to less than 30% of the main business revenue, further reducing the reliance on fund subsidies
.

Times Finance noticed that the "Disposal Catalog of Waste Electrical and Electronic Products (2014 Edition)" released in February 2015 added 9 categories to the original "four machines and one brain", namely range hoods, electric water heaters, gas water heaters, Printers, copiers, fax machines, monitors, mobile phones, and telephones, but the relevant departments have not yet issued subsidy standards for the new 9 categories
.

For Green Cycle, which wants to hit the GEM alone, it must be proved that it can still continue to make profits without leaving the parent company
.
In an environment where industry fund subsidies are always "long overdue", strengthening "non-subsidy" businesses may be an option
.