A subsidiary of publicly-listed Chinese energy technology group Guangzhou Zhiguang Electric has raised 700 million yuan ($98.5 million) in strategic financing at a post-money valuation of 2.5 billion yuan ($351.7 million).
Guangzhou Zhiguang Energy Storage Technology, which initiated its fundraising efforts in December 2023, raised the strategic funding from a group of largely state-owned investors in China to boost its financial strength and consolidate industry resources, the parent group announced in a stock exchange filing.
Zhiguang said that it remains the controlling shareholder of the energy storage business, but its stake was reduced to 66.8% upon the completion of the deal.
The country’s 50.1-billion-yuan ($7 billion) Guokai Manufacturing Transformation and Upgrading Fund, which is tasked to promote the manufacturing industry development, contributed 300 million yuan ($42.2 million) as one of the two lead investors, according to the filing.
The other lead investor Yuecai Holdings, a financial holding company backed by the local government in Guangdong Province in southern China, also poured 300 million yuan into the deal through two investment vehicles.
State-owned China Southern Power Grid invested 100 million yuan ($14.1 million) out of its 4.95-billion-yuan ($5.5 billion) equity investment fund, while the remaining capital came from companies like Guangzhou Industrial Investment Holdings Group, which has links to government capital in Guangzhou.
Exit arrangement in place
Notably, the investment agreements have specified exit arrangements, which include a right for these investors to convert their shares in the subsidiary into those of the listed parent if required. This is a sign of how a challenging exit environment is affecting how deals are structured, even in one of the more resilient industries of energy storage, where Beijing’s favourable initiatives and massive capital support have made it an investment bright spot despite a macro market slowdown.
Headquartered in Guangzhou, Zhiguang Energy Storage was founded in early 2018 to dedicate to the parent group’s strategic development of digital energy technology and integrated energy services.
Leveraging Zhiguang’s over two decades of research and application of power electronics technology, the subsidiary offers services like energy storage system integration, as well as core technologies and equipment including battery management system (BMS), power conversion system (PCS), and energy management system (EMS) products.
The subsidiary posted 731 million yuan (102.8 million) in revenue and almost 44.9 million yuan ($6.3 million) in profit for the first three quarters of 2023. Its total asset value as of the end of Q3 2023 was close to 1.8 billion yuan ($253.2 million).