Hunan Corun New Energy, a Chinese publicly-listed energy storage solutions provider, is planning to invest 1.12 billion yuan ($167.2 million) in a loss-making domestic new materials company as it bets on a business transition to focus on new-generation batteries.
The 24-year-old company will pick up a 30% stake in Jiangxi Dingsheng New Material Technology, a lithium-ion battery materials developer located in southeastern China’s Jiangxi Province, through the planned deal that values the business at 700 million yuan ($105 million) pre-money, Corun disclosed in a filing with the Shanghai stock exchange on Tuesday.
Corun agreed to settle the transactions with a small sum of advance payment and the transfer of the proprietary hybrid power system and related technologies owned by its holding subsidiary CHS to Dingsheng, the collective value of which was estimated at 1.12 billion yuan, according to the filing.
Corun, which is backed by Chinese automaker Zhejiang Geely Holding Group, is building blocks for its strategic transition to focus on the development of rechargeable batteries, such as nickel-metal hydride batteries and lithium-ion batteries, as well as related battery materials.
Its move comes as China is poised to hit a carbon emission peak in 2030 and reach carbon neutral before 2060, leading to rising investor interest in businesses and sectors that can help reduce waste, promote renewables and unconventional energy solutions.
“The signing of this agreement will help speed up our strategic transition, optimise resource allocation, improve management, and expand the scale of our core battery business. It is also beneficial to ensure the continuous development of CHS’s hybrid power business,” said Corun in the filing.
The investor said that it will join hands with Dingsheng to “create synergies” in the utilisation of lithium mine resources, lithium-ion battery materials, and hybrid energy storage solutions.
The investment is also expected to revamp the CHS business, which primarily offers energy management solutions to vehicles. The subsidiary booked net losses of 240 million yuan, 180 million yuan, and 230 million yuan ($34.3 million) in the three years from 2019 to 2021, respectively.