Former Environmental Giant Mired in Litigation Quagmire, Net Assets Turn Negative!

Once a giant in the environmental sector, Enlight Environment (000826) (SZ000826, stock price 2.38 yuan, market value 3.392 billion yuan) is facing its darkest hour.

On the evening of March 12, Enlight Environment released an announcement showing that, as of now, the company and its controlling subsidiaries have a total of 4.088 billion yuan in ongoing litigation and arbitration cases, accounting for 170.20% of the company’s latest audited net assets. Meanwhile, the amount of previously adjudicated or settled but unpaid claims has reached 7.737 billion yuan.

Even more severe, according to the earnings forecast, Enlight Environment expects a net loss of 2.2 to 2.7 billion yuan after non-recurring gains and losses in 2025. The company’s end-of-year net assets attributable to the parent could fall below zero, with a negative value of -2.075 to -2.775 billion yuan. If the final audit confirms negative net assets, the company’s stock will be officially flagged with delisting risk (*ST) after the 2025 annual report is disclosed.

The “Daily Economic News” reporter noted that, faced with multiple “minefields” such as auctioned controlling shares, frozen bank deposits, and overdue debts, Enlight Environment is attempting to resolve liquidity issues through vigorous collection of accounts receivable and asset disposals.

In this battle of restructuring amid mounting litigation and debt pressure, whether Enlight Environment can successfully turn the tide has become a focus of the capital market.

Deepening Litigation Quagmire: Over 4 Billion Yuan in Unresolved Cases

The litigation storm facing Enlight Environment is intensifying.

The company’s March 12 announcement titled “Progress of Litigation (Arbitration) Cases” shows that, to date, the company and its controlling subsidiaries have a total of 543 million yuan in unresolved cases related to administrative lawsuits, construction disputes, and other operational matters; and a total of 3.545 billion yuan in unresolved cases involving construction contract disputes and debt litigation as defendants.

Combined, the total amount involved in litigation and arbitration cases exceeds 4.088 billion yuan, representing 170.20% of the company’s latest audited net assets.

Additionally, the announcement indicates that some previously litigated or settled cases involving the company and related subsidiaries have reached judgments or settlements, with outstanding amounts totaling approximately 7.737 billion yuan.

The “Daily Economic News” reporter observed that these massive litigation cases are not just on paper; many have entered enforcement stages, directly impacting the company’s liquidity.

For example, in a case handled by the Beijing First Intermediate People’s Court, plaintiff Enlight Technology Service Co., Ltd. vs. defendant Enlight Environment over a loan contract dispute, the court ordered Enlight Environment to repay approximately 230 million yuan in principal and interest by December 15, 2025, along with high additional interest and court costs.

Earlier in February, the company announced that due to the application for enforcement by Hunan Jinsha Road and Bridge Construction Co., Ltd., the Intermediate People’s Court of Xianyang, Shaanxi Province, froze and allocated bank deposits of Xingping Hongyuan Development Construction Co., Ltd. and Enlight Environment totaling 520 million yuan, or may seize, withhold, or auction their income or assets. This involved about 495 million yuan, accounting for 10.54% of the company’s net assets at the end of the previous year.

Furthermore, the core subsidiary’s equity has been frozen and appraised. On February 10, the Jinan Intermediate Court in Shandong announced that, in a dispute over a construction contract with Zhibian Group Co., Ltd., it froze 6.95 million yuan worth of equity in Hunan Sander Kaitian Renewable Resources Technology Co., Ltd., in which Enlight Environment holds a 65% stake, and further requested valuation and auction of this equity.

Meanwhile, multiple cases involving Enlight Environment are being escalated or reinstated for enforcement: a loan dispute with Chang’an Bank Xi’an Yanliang Branch involving over 767 million yuan (16.32% of last year’s net assets) has been resumed by the Xi’an Intermediate Court; and a construction dispute involving Shaanxi Wanyue Industrial Co., Ltd. has been transferred to the Xi’an Intermediate Court for enforcement.

These frequent litigation and enforcement actions highlight the severe external debt collection pressures facing Enlight Environment.

Projected Losses Up to 3.5 Billion Yuan, Net Assets Turn Negative Trigger Delisting Warning

The heavy litigation burden has directly undermined Enlight Environment’s financial fundamentals.

According to the company’s January-end forecast for 2025, preliminary estimates suggest a net loss of 2.8 to 3.5 billion yuan attributable to shareholders; after excluding non-recurring gains and losses, the net loss is expected to be between 2.2 and 2.7 billion yuan.

This massive loss could cause the company’s net assets attributable to the parent at year-end 2025 to be negative, estimated between -2.075 and -2.775 billion yuan. The company issued a risk warning, stating that if the audited net assets at the end of 2025 are negative, the stock trading could be suspended with a delisting risk (*ST) label after the annual report disclosure.

The reasons for such a large projected loss include: judicial auction of some controlling subsidiaries’ equity, confirming significant investment losses; continued growth of receivables leading to substantial impairment losses; incomplete settlement of transferred assets and underperforming projects resulting in asset impairments; and overall debt pressure, with some debts overdue, leading to heavy financial costs and penalty interest.

In response, Enlight Environment’s management stated in the March 12 announcement that, given the large overall litigation amount and the fact that some cases are entering enforcement stages, the company is actively working to resolve litigation and enforcement risks, communicating with relevant parties to reach solutions.

However, with nearly 77 billion yuan in pending enforcement judgments and 4 billion yuan in unresolved litigation, whether routine collection efforts and partial asset disposals can reverse the situation, fill the funding gap, and prevent delisting remains highly uncertain.

Cover image source: Daily Economic News

(Edited by Zhao Yanping HF094)

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