(Yicai Global) March 31 -- JA Solar Technology’s stock sank after it said a unit will get a CNY2.7 billion (USD425 million) investment in the form of a debt-to-equity swap and a capital increase. Investors are worried about the financial position of the solar equipment giant, which has already unveiled several ambitious investment plans.

After opening nearly flat this morning, JA Solar’s stock price [SHE:002459] began to sink and closed 6.3 percent lower at CNY78.68 (USD12.40).

Wholly owned subsidiary JA Yangzhou Solar Technology will receive the funds, which will be used primarily to repay debt and support operations, its Hebei province-based parent company said in a statement released late yesterday.

Asset manager China Orient Asset Management will take on debt of CNY1.5 billion in return for a stake in the unit, and another CNY500 million (USD78.78 million) will be contributed to participate in the equity restructuring.

In addition, JA Solar and ABC Financial Asset Investment, an arm of Agricultural Bank of China, and an investment fund of which Central Huijin Investment owns an indirect stake, will take part in the equity restructuring with cash.

Upon completion of the transaction, JA Solar's indirect ownership of the unit will fall to about 69 percent from 100 percent, while Orient Asset Management will have around 23 percent, ABC Financial Asset Investment almost 5.8 percent, and the investment fund 2.3 percent.

Since January last year, JA Solar, one of China’s major solar module suppliers, has announced four solar industry chain investment plans worth a total of CNY10 billion, including the production of solar wafers and modules and solar power plants, resulting in a great need for capital.

But the price of silicon, the upstream raw material, has risen sharply since the beginning of last year, putting greater cost pressure on JA Solar, which is in the middle and lower reaches of the industrial chain.

Though revenue jumped 56 percent in the first three quarters of last year to CNY26.1 billion, net profit was only CNY1.3 billion, a mere 1.6 increase on a year earlier.

Despite having revenue of CNY2.06 billion in the first half of 2021, JA Yangzhou Solar, had a net loss of CNY71.27 million. The debt-to-net worth ratio as of the end of June last year was 95 percent, according to the data provided in the announcement.

Due to strong demand, China's domestic solar silicon prices surged 177 percent last year, and there have been another 10 straight weeks of gains this year, sending prices up a further 7 percent in the first three months, according to industry data.

Editor: Tom Litting