China Sunergy Co., Ltd. has signed a share transfer agreement with its affiliated company, China Electric Equipment Group Co., Ltd. (CEEG), under which the Company agreed to sell and CEEG agreed to purchase, 100% of the equity interest in China Sunergy (Shanghai) Co., Ltd., a subsidiary of the Company, for a total consideration of approximately RMB 231.2 million (US$37.7 million).
As a result, China Sunergy expects to receive the cash proceeds of approximately RMB 79.6 million (US$13.0 million) from the transaction in the second quarter of 2014. The remaining consideration will be settled through forgiveness of the amount due from China Sunergy by Sunergy Shanghai. As part of this transaction, CEEG expressly undertakes that it will not utilize Sunergy Shanghai or its assets to engage in any business competitive with the China Sunergy. The transaction, which was approved by China Sunergy's board of directors, is subject to customary closing conditions.
Sunergy Shanghai was established by the Company in November 2007, with an original plan for solar cell production, solar power research, and other developmental activities. However, due to market conditions and the company's strategic planning, Sunergy Shanghai has not yet developed substantive operations, and as such the disposal of Sunergy Shanghai will not impact China Sunergy's overall production capacity.
Mr. Stephen Cai, CEO of China Sunergy, commented, "The sale of Sunergy Shanghai follows an extensive and thoughtful evaluation of potential options relating to sale of Sunergy Shanghai, and we fully expect the cash proceeds from the sale will further strengthen our working capital and enhance our operations. We believe these resulting improvements will contribute meaningful long-term rewards to the company."