Shandong Forever New Energy, a Chinese firm that develops lithium-ion batteries for new energy vehicles, has entered into a reorganisation agreement with the country’s energy technology firm Jiangsu Tiankai to raise almost $20.41 million.
Upon completion of the transaction, Jiangsu Tiankai will own a 50 per cent stake in Shandong Forever New Energy, and the registered capital of the investee will be increased from nearly $20.41 million to about $40.82 million, Honbridge Holdings Limited revealed in a recent filing with the Hong Kong stock exchange.
Triumphant Glory, an affiliate of Honbridge Holdings Limited, holds 49 per cent equity interest in Shandong Forever New Energy, while Chinese automaker Geely Auto owns the remaining 51 per cent prior to the deal. Their shares will be diluted to 24.5 per cent and 25.5 per cent, respectively.
Established in 2010 and based in eastern China’s Shandong province, Shandong Forever New Energy is principally engaged in the research, production and sales of lithium-ion batteries in the country. The company claims an annual production capacity of 150,000 kWh of lithium iron phosphate battery, or 225,000 kWh of ternary lithium battery.
The firm recorded a revenue of about HK$18.2 million ($2.34 million) in 2018, which was slightly higher compared to the 2017 revenue of approximately HK$18.8 million ($2.42 million).
However, the overall gross profit margin deteriorated from -0.7 per cent in 2017 to -27.9 per cent in 2018, due to the over-supply of similar products in the market and increased raw material costs.
The investment is expected to “save” the company and to “increase the overall competitiveness” of the lithium-ion battery plant through Jiangsu Tiankai’s strengths in developing lithium batteries, per the filing.
The proceeds from the deal will be mainly used to increase the company’s annual production capacity, improve its research and development capability, and conduct research on new products.