A unit of GCL-Poly Energy Holdings Ltd. defaulted on a $500 million bond after ending an exchange offer with existing bondholders. GCL New Energy Holdings Ltd. announced the default in an exchange filing. The firm, which operates solar power plants, is majority owned by GCL-Poly, one of the world’s leading makers of solar-grade polysilicon, and whose shares have soared 700 per cent since China announced plans to be carbon neutral by 2060.

The default on the three-year, 7.1 per cent note due January 30 will trigger a cross default after the offer was terminated, GCL New Energy said in a statement to the Hong Kong stock exchange. The cross default will have “a material negative impact” on the company’s business and financial position, it said.

GCL New Energy announced the exchange offer for the notes in December 2020, saying its cash position and liquidity was deteriorating due to a delay of subsidy payments. As of June 30, the company had net current liabilities of 6.5 billion yuan ($1 billion), which cast doubt about its ability to continue as a going concern, according to a statement on December 23.

GCL New Energy is among renewable energy developers that have been hurt by China’s government delaying subsidy payments, with total debt ballooning to more than $42 billion last year. The firm’s accounts and notes receivable had risen to more than 4.5 billion yuan as of June 30, up from 1.9 billion four years earlier. The company has been selling renewable plants to help pay down debt, but the effort has not been fruitful enough, said Dan Wang, a Bloomberg Intelligence credit analyst.

The unit’s struggles have not been enough to weigh down enthusiasm for its parent company, which owns two of the world’s four largest polysilicon factories, one in Jiangsu province and the other in Xinjiang. The ultra-refined material is highly conductive, allowing electrons excited by photons of light to travel through and produce electricity. Last month the parent was able to raise $543 million in a share placement.

Polysilicon prices have surged in the past six months, first on the back of production outages, including one at GCL’s Xinjiang factory, and more recently on potential demand increases after Xi Jinping’s September announcement that China would be carbon-neutral by 2060.