Electric cars

Evergrande Health pays US$155 million for control of electric-car battery maker

  • China’s third biggest builder by sales will use its health subsidiary to pay 1.06 billion yuan for 58 per cent of Shanghai CENAT New Energy
  • Move marks latest foray into new-energy vehicles for Evergrande, which bought majority stake in an electric carmaker last week
PUBLISHED : Thursday, 24 January, 2019, 8:35pm
UPDATED : Thursday, 24 January, 2019, 10:56pm

Chinese property giant Evergrande Group bought control of a company that produces electric-car batteries on Thursday, nine days after it took a majority stake in an electric carmaker.

The developer, China’s third biggest by sales, will use its subsidiary Evergrande Health Industry Group to pay 1.06 billion yuan (US$155.88 million) for 58 per cent of Shanghai CENAT New Energy, according to a statement to the Hong Kong stock exchange, where it is listed.

Shanghai CENAT is a China-Japan joint venture that makes lithium-ion batteries, a key component that gives electric vehicles greater range than standard power supplies.

An car industry research outfit under the control of the Chinese cabinet and a Japanese maker of lithium-ion rechargeable batteries founded Shanghai CENAT New Energy in May 2010.

The company has production plants in Shanghai, Jiangxi, Guangxi and Jiangsu.

The purchase is “with the aim of completing the layout of [our] new-energy vehicle industry production chain as a whole,” Evergrande Health said.

The deal is the latest attempt by Evergrande to break into the next-generation automobiles sector after emerging from a prolonged dispute with California-based Faraday Future, an electric car start-up founded by Chinese entrepreneur Jia Yueting.

Evergrande, which had committed to an investment of US$2 billion over three years, had accused Faraday Future of manipulating it into paying US$700 million ahead of schedule, while the carmaker said Evergrande was deliberately delaying investment to starve it and obtain its intellectual property.

Evergrande Health has so far invested US$800 million and owns 32 per cent of Jia’s Faraday Future.

On January 15, the company bought a controlling stake in National Electric Vehicle Sweden (NEVS) for US$930 million. Two of NEVS’ models meet the standards of mass production in China.

Evergrande Health pays US$930 million to buy control of carmaker in its foray into mass production of electric vehicles in China

The spending spree comes at a time the already heavily indebted developer is borrowing more money. It issued US$3 billion in offshore bonds to refinance debt on Wednesday.

Evergrande said the bonds were in three tranches with maturities ranging from one to three years and yields ranging from 6.25 per cent to 8.25 per cent.

The company is currently highly leveraged, with debts standing at 671.1 billion yuan as of June 2018, according to Singaporean credit research firm CreditSights.

In October, Evergrande sold US$1.8 billion of bonds with yields as high as 13.75 per cent.

Evergrande’s shares rose 3.86 per cent in Hong Kong to HK$22.85 on Thursday, while Evergrande Health was up 2.52 per cent to HK$13.84 before the purchase was announced.