Hebei Changrun Environmental Technology, the wholly-owned subsidiary of Sunpower Group, has signed a thermal business transfer agreement with Hebei Sanli Group and Hebei Sanli Wool Spinning Co (collectively referred to as Sanli) for a consideration of RMB100 million ($20.5 million).

Under the agreement, Sanli will use the steam produced by Hebei Changrun for the production and heating within its plants for 25 years.

Hebei Changrun will also take over Sanli’s four sets of boilers.

The Hebei Sanli Group is founded in 1986 and is located in Gaoyang County of Hebei Province.

Sanli is one of the largest towel and blanket enterprises with a renowned brand in China.

Its main business activities include the manufacturing of wool textiles, products, clothing and apparel, towel weaving, washing and dyeing, as well as printing and dyeing.

Sanli is equipped with four sets of steam boilers, which were installed more than 10 years ago.

SEE: Analysts positive on Sunpower Group's M&S divestment

According to the valuation report issued by Nanjing Changcheng Land & Real Estate Assets Evaluation Consulting Co, the value of the 25-year exclusive right to supply steam to Sanli is RMB105 million as at Aug 31, 2020.

Sunpower will pay RMB20 million as a deposit within five business days after the signing of the agreement, as well as the steam supply right contract.

The balance consideration of RMB80 million after the boiler assets have been transferred to Hebei Changrun, and Sanli has completed one month of normal usage of the steam supplied by the former.

In the agreement, Sanli shall not purchase steam from other third parties or product its own steam for 25 years, unless Hebei Changrun is unable to fulfil its required steam volume or quality.

Sanli also guarantees that all of its existing textile and printing and dyeing related assets and production businesses in Gaoyang County will remain at their original operating sites.

According to Sunpower, Sanli’s demand for steam has remained stable at a high level for the past few years, and that the transaction will enable Hebei Changrun to become the only professional coal-fired centralised provider of industrial steam in Gaoyang County.

Shares in Sunpower closed 10 cents higher or 11.7% up at 95.5 cents on Jan 12.