Hanwha Group plans to split off Hanwha Solutions’ Advanced Materials division and sell a minority stake to outside investors to repay some of the affiliate’s debts and improve its financial structure, industry sources on Wednesday (October 28).

The group is currently in talks with a private equity firm which has been granted exclusive negotiation rights. Advanced Materials will be spun off into a newly-established corporation that will own 100% of Hanwha Solutions’ production plants in the U.S., China, the Czech Republic and Mexico and a factory in Ningbo, China.

A financial investor will be allowed to acquire a 49% stake in the newly-formed company by purchasing old and new shares in a deal that market insiders believe will be worth approximately 600 billion won ($530 million). Hanwha Group will retain control by securing 51% of common shares.

Hanwha Solutions was formed after Hanwha Chemical, Hanwha Q Cells and Hanwha Advanced Materials merged in January this year. The company operates in three business areas: chemicals, total energy solutions, and advanced materials.

The surprise decision to re-separate the business so soon after the merger has been attributed to the group’s desire to secure cash to repay Hanwha Solutions’ debt and bolster the company’s financial structure.

Market insiders see growth potential in Hanwha Group’s solar energy and advanced materials businesses. Advanced Materials  has developed environmentally-conscious products and technologies that meet the needs of customers around the world. It is expanding its global footprint by producing lightweight composite materials and thermoformable components, highly efficient advanced film for solar energy, and high-performance coating films for mobile phones and display.

However, Hanwha Solutions’ debt load has rise because of the merger and the group’s large-scale investment in chemicals and solar energy businesses has become a weight on its finances.

Hanwha Solutions’ debt grew from 4.42 trillion won in 2017 to 5.89 trillion won in 2018 and 6.62 trillion won in 2019 on a consolidated basis. Its total debt amounted to 7.46 trillion won at the end of June. Credit rating agencies have already downgraded the company’s rating outlook from “stable” to “negative”.

“The idea was once discussed internally, but no progress is currently being made relating to the split-off and the stake sale of the division,” said a Hanwha Solutions official. (Reporting by Hye-ran Kim)