Battery maker CATL cuts fundraising target after questions from Shenzhen Stock Exchange

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The Chinese battery giant Contemporary Amperex Technology Co. Ltd. (CATL) (300750.SZ) cut the amount of capital it intends to raise through a private placement of shares by billions of yuan after the Shenzhen Stock Exchange suggested the plan was excessive.

According to a exchange deposit (link in Chinese) published on Monday, CATL will now seek to raise 45 billion yuan ($ 7.05 billion) – instead of the 58.2 billion yuan announced on August 12 – from 35 institutional investors by selling a stake of 10% in the company, as part of a plan to roughly double its battery capacity.

The proceeds will be used to develop four lithium-ion battery projects and a new energy research project, with a planned capacity expansion of 135 gigawatt hours, up from 167 gigawatt hours in the previous plan. From January to September, the company produced 106.4 gigawatt hours of batteries.

The reduction in the fundraising target means the company will scuttle a planned injection of $ 9.3 billion to supplement working capital, cut a 3.1 billion yuan plan to increase the capacity of a lithium-ion battery factory in its home province of Fujian, and cut 800 million yuan from another battery project there.

The more measured approach to the expansion comes as CATL seeks to capitalize on what it sees as huge demand for batteries that power electric cars and store energy from sources such as solar power. and wind turbine so that they can be used when these generators are not working. It is also due to the fact that the rising costs of raw materials such as lithium are likely to affect the company’s astronomical profits.

As a major battery manufacturer in the largest automotive market in the world with the ambition to develop new energy vehicles, CATL has just posted gains of around 130% in sales and profits for the third trimester. In the first nine months, the combined capacity of electric vehicle batteries sold by CATL accounted for more than half of the total market share.

The fundraising review comes after Shenzhen-listed supplier Tesla received a request from the exchange authorities in late September, asking if the company was raising capital “excessively” given its previous fundraising efforts. exceptional funds.

“The company’s current assets are not sufficient for all the planned expansion,” CATL said in its reply (link in Chinese) on the Shenzhen Stock Exchange. To meet the “booming” market demand, the company must increase its production capacity, increase its research and development funds and increase its operating budget.

The response also revealed that the company had spent all the capital raised during its 2018 IPO and used nearly 80% of the funds raised through a private placement in 2020. Meanwhile, its debt-to-asset ratio has fallen. of 52.36% in December. 2018 to 63.67% in June 2021.

At the end of September, the company’s liabilities stood at 169 billion yuan while it held more than 70 billion yuan in cash and cash equivalents.

The battery giant recently put money into new investments. Zhejiang Yongtai Technology Co. Ltd. (002326.SZ) announced on Sunday that CATL had paid 500 million yuan to take a 25% stake in its lithium-ion battery materials main unit. Yongtai saw later its shares fall by more than 13% (link in Chinese) on Monday because CATL’s payment for the stake was considered too low compared to Yongtai’s current market value of 50 billion yuan.

In September, a subsidiary of CATL paid $ 240 million for a 24% stake in the Manono project in the Democratic Republic of the Congo. A few days later, the battery maker announced that it would acquire the Canadian company Millennial Lithium Corp. for C $ 376.8 million ($ 297.3 million) in cash, giving it access to lithium mining sites in Argentina. On November 1, however, a U.S. lithium company made a $ 400 million stock and cash offer to Millennial, in an attempt to outbid CATL, which has yet to update its offer.

Prices for battery grade lithium carbonate have also more than quadrupled this year in China. As of Nov. 9, the price was up 368 percent from the previous year, hitting a record high of 194,500 yuan per ton, according to data from researcher Shanghai Metals Market.

The company plans to deliver 455 gigawatt hours of lithium-ion batteries by 2025.

Contact reporter Manyun Zou ([email protected]) and editor Flynn Murphy ([email protected])

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