Smarter Energy Invests USD 240 Million on the Establishment of Detroit Electric Co., Ltd.
Far East Smarter Energy Co., Ltd. (hereinafter referred to as “Far East Smarter Energy”, stoke code: 600869), subsidiary of Far East Holding Group Co., Ltd., has taken various measures to achieve its transformation in recent years, and puts automobile industry as the short-term target of the company.
On the evening of February 17, 2017, announcement released by Far East Smarter Energy revealed that it would invest USD 240 million in the form of equal RMB cash to establish Detroit Electric Co., Ltd. (pre-approved name, hereinafter referred to as “joint venture”, name as approved by the registration authority will be final and valid) with Detroit Electric Holdings Limited (hereinafter referred to as “Detroit Electric”) and China Yixing Environmental Protection and Sci-tech Industrial Park Development Corporation (hereinafter referred to as “Yixing Environmental Protection and Sci-tech Industrial Park”). On February 18, 2017, the three parties officially signed the agreement to establish the joint venture in Yixing, Jiangsu that is specialized in R&D, manufacturing and sales of vehicle, accessories and relevant technologies of electric automobiles.
The announcement shows that the total investment of joint venture is USD 1.8 billion, including USD 600 million invested by stockholders through registered capital. Among which USD 300 million is invested by Detroit Electric, accounting for 50% of total shares, USD 240 million is contributed by Far East Smarter Energy, accounting for 40% of total shares and USD 60 million is invested by Yixing Environmental Protection and Sci-tech Industrial Park, accounting for 10% of total shares. The remaining USD 1.2 billion will be raised by the joint venture after its foundation through ways such as debt financing and bank loan. According to the plan, the joint venture is expected to be constructed in Yixing Environmental Protection and Sci-tech Industrial Park in 2017, obtain the electric automobile production qualification and sell products produced by original equipment manufacturer in 2018, and launch the first electric automobile independently produced by the joint venture in 2019.
Far East Holding Group Co., Ltd. (hereinafter referred to as Far East), founded in 1990, is a private joint-stock enterprise covering three major businesses, i.e. smart energy, real estate and investment. Adhering to the strategy of “main business + investment”, Far East Smarter Energy and Wuxi Far East Real Estate Co., Ltd., subsidiaries of Far East, have achieved the development of “one body and two wings”. It is learned that cable industry, main business of Far East, has been leading the industry of China in terms of sales revenue for 19 successive years, making Far East the supplier with most complete smart cable products and biggest sales volume of China. Now Far East obtains the annual operation revenue of nearly RMB 30 billion as well as assets of over RMB 20 billion.
As the important support of power industry, wire and cable industry has accounted for a quarter of market returns of the whole power industry. Besides, wire and cable products are applied to such industries as data communication, rail transportation, automobile manufacturing and shipbuilding. However, affected by factors such as price declining of raw materials, economic slowdown of downstream markets and overcapacity, the growth of China’s wire and cable industry has decreased rapidly since 2011.
2017-2021 Investment Analysis and Outlook Report on China Wire and Cable Industry issued by CIConsulting points out that since 2004, China’s wire and cable industry has showed a tendency of rapid growth, reaching the compound annual growth rate as high as 28.7% from 2004 to 2010. According to the calculation, however, compound annual growth rate of China’s wire and cable industry had decreased to 7.4% from 2011 to 2014.
Moreover, although China has become the biggest manufacturer of wire and cable in the world, its industrial concentration is relatively low. “The total capacity of China’s Top 10 cable manufacturing enterprises only accounts for 10% of the country. As for the scale of enterprise, more than 95% of cable manufacturing enterprises are small and medium-sized manufacturers, and most of them are engaged in the production of middle and low level products. There are 200 cable manufacturing enterprises in Yixing and thousands of the similar ones throughout the country, but they are basically involved in the low level competition.” An employee told the journalist of China Business News that “in recent years, Far East Smarter Energy increases added value of products by improving the technology.”
Based on the development of wire and cable industry in recent years, transformation has become the only way for enterprises to develop. By studying the acquisition cases of Far East in recent years, it is not difficult to find that in addition to the stability of main business, Far East is also seeking for transformation and has been involved in new energy automobile field for a long time, as well as the strategic layout in fields of battery and electronic control. In order to build resources and advantages in new energy automobile industrial chain, Far East Smarter Energy had disclosed the plan of producing 3 GWh high-performance lithium battery through non-public stock and 6 GWh high-performance lithium battery through investment.
In 2013, Far East Smarter Energy made the transformation strategy of “smart energy”, and had frequently taken internal and external measures based on the direction of strategy since 2014, such as the establishment of a network with double platforms through its subsidiary “MMB”. Far East Smarter Energy also improves its layout of energy internet by a series of acquisitions, including distributed generator and power selling of Shanghai Intelligence Power Electric Engineering Corporation as the Class A electric power design institute, improvement of power distribution terminal layout of Beijing Semeureka Electric Co., Ltd., and power and energy-storage battery industry of Far East First New Energy Co., Ltd. (hereinafter referred to as Far East First). Benefitting from the realization of the above-mentioned layout, numerous excellent enterprises acquired previously have contributed greatly to the performance of Far East Smarter Energy.
It is learned from the financial reports of Far East Smarter Energy that in 2015, Smarter Energy achieved operation revenue of RMB 11.712 billion, seeing a year-on-year growth of 3.16%, net profit of RMB 451 million, witnessing a year-on-year increase of 126.39% and net profit attributable to shareholders of listed companies of RMB 420 million, with year-on-year growth of 131.11%. Among which Far East First achieved impressive revenue of RMB 1.076 billion and net profit of RMB 114 million in 2015, seeing a year-on-year growth of 31.4% and 1.54 times respectively.
“Far East First is a leading production enterprise of 18650 cylindrical lithium battery, and ranks No. 1 in China and No. 3 in the world in terms of annual production and sales volume.” Jiang Chengzhi, President of Smarter Energy, told journalists of different newspapers including China Business News that the cooperation with Detroit Electric is the further extension of the original strategy, and it will further perfect the smart energy industrial chain and make Smarter Energy the competitive energy supplier of new energy automobile by virtue of the technological advantages of joint venture in new energy automobiles.
Detroit Electric, founded in 1907, is an electric vehicle company owned by Albert Lam, former CEO of Lotus Engineering Group and Executive Director of Lotus Cars of England, and relevant investors.
“With a series of mature core technologies and experiences of development and manufacturing of electric automobiles, Detroit Electric has applied pure electric vehicle system and integration technology to various vehicles and has been certified by the European Union. In the future, the joint venture will have all-round cooperation in the explore capacity and technology of new energy automobile battery and electric vehicles.” Albert Lam introduced that “we plan to produce international electric automobiles as the same quality as products of top brands in 5 years, and sell 30% of them to China and 70% of them to Europe and North America through our quality channels.”
Jiang Xipei, founder, Chairman of the Board and Secretary of the CPC Committee of Far East, indicated that “Far East is full of confidence in the development of new energy automobiles and will create international new energy automobile products through the joint venture. The project is expected to achieve automobile production capacity of 50,000 by 2020, sales volume of 100,000 by 2021 and production and sales volume of 1 million by 2030.”