On January 23, 2024, Xinjiang Daqo New Energy Co., Ltd. (Daqo,SH： 688303) a subsidiary of Daqo New Energy Corp. (NYSE: DQ), a leading manufacturer of high purity polysilicon for the global solar PV industry, announced that it is involved in litigation in the amount of 1,958,536,900 yuan (US$273,020,000), of which 29,086,500 yuan (US$4 million) is unpaid and 1,929,450,400 yuan (US$268,965,000) is contingent economic loss.
Daqo recently received a court summons and related litigation materials and was charged with defaulting on business cooperation agreements signed with Xian'an New Material Co. (Xian'an) and Dengbo New Energy Co., Ltd. (Dengbo), which are related companies providing silicon material processing services to Daqo since January 2022 and July 2022 respectively.
The two claimants consider that Daqo is in breach of the contract as Daqo has not renewed the contract since the expiry of the annual contract on April 30, 2023, or placed any orders with Dengbo since April 19, 2023. Dengbo is seeking to terminate the business cooperation agreement and to require Daqo to pay compensation for its economic losses in the amount of 387,646,100 yuan, which was increased to 1,958,536,900 yuan in September 2023.
Daqo claims in the announcement that it has always attached importance to compliance with the law and fulfilled its relevant obligations in accordance with the terms and requirements of the Business Cooperation Agreement and the Annual Contract, and there is no fundamental breach of the aforementioned agreements, therefore Daqo does not acknowledge the claim of the plaintiffs. However, Daqo will pay close attention to the lawsuit and take vigorous measures to actively respond to the lawsuit in order to clarify the truth and effectively safeguard the interests of Daqo and its shareholders.
In addition, the total amount involved in this litigation accounts for 10.24% of Daqo's latest audited net profit attributable to shareholders of a listed company, which is relatively small and will not have a significant impact on its daily production and operation, and it expects that this litigation will not have a direct negative impact on its profit and loss for the time being. In view of the fact that the litigation has not yet commenced and the final outcome of the judgement is still uncertain, it is not possible to predict the impact on Daqo's profit and loss for the current and subsequent periods, and the final actual impact will depend on the outcome of the court's judgement, and the specific accounting treatment and impact will depend on the results of the annual audit of the current period.
（Picture: Veer）
