FUNENG CO.,LTD(SH:600483) Zheng Quan Zhi Xing·2025-07-10 16:21Core Viewpoint - The company, Fujian Funiu Co., Ltd., is responding to the Shanghai Stock Exchange regarding the issuance of convertible bonds, emphasizing the rationale behind maintaining large deposits while also borrowing significantly from its financial group, which aligns with its operational needs and industry characteristics [1][21]. Financial Position - As of the end of 2024, the company's cash balance was 564,520.69 million, with significant amounts held in current accounts and financial company deposits [2][5]. - The company’s cash balance at the financial group was primarily in current deposits, accounting for 99.42%, 99.55%, and 97.93% of the total deposits over the reporting periods [3][4]. Operational Needs - The company has a high demand for working capital due to its operations in the energy sector, which requires substantial cash for raw material procurement and employee salaries [6][19]. - The company’s operational cash outflows for 2024 amounted to 1,107,869.55 million, with a cash balance to cash outflow ratio of 34.52% [5][6]. Investment Projects - The company has multiple ongoing and planned investment projects, necessitating a high reserve of cash for project expenditures. As of the end of 2024, the total required capital for these projects was 64.40 billion, with 16.71 billion already invested [9][10]. - The company is involved in significant projects, including hydropower and thermal power generation, which require long-term financing due to their large scale and extended construction periods [16][20]. Debt Structure - The company’s interest-bearing debt was 1,768,649.01 million at the end of 2024, with long-term loans making up a significant portion of this debt [12][20]. - Loans from the financial group accounted for 19.21% of total interest-bearing debt, indicating a relatively low reliance on this source compared to other financing options [12][20]. Rationale for Financial Strategy - The company maintains large deposits in its financial group while borrowing extensively, which is justified by the need for liquidity in a capital-intensive industry and the advantages of higher deposit rates and convenience offered by the financial group [17][21]. - The interest rates on loans from the financial group are slightly lower than those from commercial banks, making this strategy financially sound [11][20].