news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

catl once attempted to acquire a controlling stake in runyang shares with 4 billion yuan, but was later overtaken by tongwei shares with 5 billion yuan.

text丨li zinan

editor: cheng manqi

we have learned that catl is seeking to acquire photovoltaic module and photovoltaic cell companies and is currently negotiating an acquisition with photovoltaic module manufacturer yida new energy. yida new energy was established in 2018 and ranked 8th in global photovoltaic module shipments in the first half of this year.

several people familiar with the matter said that before the contact, catl had also tried to acquire 51% of the shares of runyang, another photovoltaic module manufacturer, for 4 billion yuan. runyang is the world's fifth largest photovoltaic cell manufacturer.

finally, the photovoltaic industry leader tongwei co., ltd. bid 5 billion yuan to acquire 51% of runyang's shares, setting a record for the amount of mergers and acquisitions in china's photovoltaic history. tongwei announced the transaction in mid-august.

the synergy between photovoltaic power generation and lithium battery energy storage lies in the fact that photovoltaic power generation fluctuates with the weather and the power supply stability is poor. equipping photovoltaic power stations with energy storage batteries that can artificially adjust the rhythm of storage and discharge of electricity is one of the important solutions.

in 2022, zeng yuqun, chairman of catl, revealed that catl is developing next-generation photovoltaic technologies such as perovskite (a new photovoltaic cell material that can improve the efficiency of photovoltaic power generation). in may last year, catl launched the "zero auxiliary source light storage fusion" system: that is, photovoltaic power stations first convert solar energy into electrical energy and store it in lithium batteries; then flexibly allocate the output power to supply the power grid or other large industrial and commercial facilities, such as factories and commercial areas. the entire system can operate without an external power supply.

in june this year, catl's subsidiary, times green energy, successively acquired liyang solar, which mainly builds small photovoltaic power stations, and photovoltaic production equipment manufacturer la liga energy, and held 100% of the two companies. liyang solar was originally a subsidiary of photovoltaic giant longi green energy.

now, catl's attempt to acquire a photovoltaic module company is an attempt to enter the core area of ​​the photovoltaic industry chain.

the main links in the photovoltaic industry chain.

the entire photovoltaic chain includes silicon materials, components, solar cells, photovoltaic glass and other links. components account for the highest cost in the entire photovoltaic system, about 50%.

being able to manufacture photovoltaic modules by itself will enhance catl's vertical integration in the new energy sector. it will become a company that can simultaneously produce its own power generation (photovoltaic modules), power storage (energy storage batteries) and power consumption (charging and battery swap stations) equipment.

now is also a window period for mergers and acquisitions of photovoltaic assets. at the beginning of 2023, the valuation of the photovoltaic industry plummeted due to overcapacity. the market value of tongwei co., ltd., the second largest photovoltaic cell manufacturer in the world, fell by more than 70% from its peak in 2022 and is currently slightly above 100 billion yuan; the current market value of ja solar technology, the world's second largest photovoltaic module manufacturer, is 33.5 billion yuan, which is only equivalent to the net profit of catl in three quarters.

the photovoltaic industry will enter a merger and acquisition clearance cycle again in 2024. new energy companies from another sub-industry, such as catl, have begun to seek to integrate the photovoltaic industry in an attempt to become a more comprehensive energy giant.

pv overcapacity: catl and pv leaders compete for assets

since the 2008 financial crisis led to a reduction in global photovoltaic production and the bankruptcy of overseas photovoltaic companies, chinese companies have been the main players in the global photovoltaic industry.

from 2009 to 2021, when china's photovoltaic industry rapidly expanded production, the cost of photovoltaic power generation fell by more than 90%. currently, chinese companies manufacture 90% of the world's silicon materials, 86% of solar cells, and 83% of photovoltaic modules.

in mid-2023, due to overcapacity in all links of the photovoltaic industry, the photovoltaic industry will enter a clearance cycle of price wars. catl has the willingness and ability to become a major buyer.

the growth of the power battery industry, where catl started, has slowed down in recent years. in the first half of this year, catl's capacity utilization rate continued to decline by 5 percentage points from last year to 65%, the lowest in the past five years. expanding capacity has not helped catl continue to expand its market share.

at the same time, catl has sufficient funds and investment needs. according to the financial report, by the end of 2023, catl will have 60 billion yuan in cash, and its net profit in the first half of this year reached 22.8 billion yuan, a year-on-year increase of 10.3%. catl is also one of the only two companies in the world's power battery companies with net profit this year (the other is china new energy, but its scale is much smaller than catl, with a net profit of 417 million yuan in the first half of this year, less than 1/50 of catl).

according to our understanding, in the second quarter of this year, catl began to contact a number of photovoltaic module companies. many investors believe that the top six companies in the photovoltaic module market (jinkosolar, longi green energy, trina solar, ja solar, canadian solar, and risen energy) will not choose to sell to catl. they are all listed companies with more financing channels and relatively sufficient cash reserves to survive until the next demand upswing cycle.

among the top ten photovoltaic module companies in the world in terms of shipments, only runyang shares and yida new energy have not yet been listed. they are the few suitable targets for catl.

according to people familiar with the matter, runyang, which is now controlled by tongwei, was once a priority target of catl. runyang is highly internationalized, with four wholly-owned overseas subsidiaries located in thailand, singapore, germany and the united states, and component manufacturing bases in thailand and the united states. in july this year, runyang disclosed that europe and the united states accounted for more than 80% of its component shipments.

if the acquisition of runyang is successful, catl will be able to enter the overseas photovoltaic market more quickly, especially the united states, which has high requirements for localized production of photovoltaic modules.

but runyang was eventually bought by tongwei, which offered a higher bid. according to tongwei's bid, the ratio of runyang's selling price to net assets, or pb (price-to-book ratio), was 0.9. even though tongwei's bid was 1 billion higher than catl's, it was still a deal that represented great value for money.

"from catl's bid, we can see the amount of money catl is willing to invest in this matter, and that catl also believes that the valuation of these photovoltaic companies is less than 1 times the pb," analyzed an insider.

according to our understanding, catl is still negotiating the acquisition price with yida new energy. however, catl does not have many options after missing out on runyang.

“yida also knows that catl does not have any good targets, so the reserve price it offered is higher than 1 times the pb. catl thinks it is too expensive, and the two sides are still arguing,” said a person familiar with the matter.

yida new energy has accumulated certain experience in topcon photovoltaic technology. according to calculations by the national photovoltaic industry metrology and testing center, the power generation efficiency of yida's topcon products is higher than that of products from industry leaders such as trina solar and ja solar.

however, for catl, which has its eyes on overseas markets, the internationalization of yida's new energy business is far less than that of runyang. in 2022 and 2023, the proportion of yida's overseas business revenue was less than 10%.

another person familiar with the matter said that the merger and acquisition negotiations between catl and yida may be completed within a month. in addition to catl, other photovoltaic companies are also in contact with yida.

a number of leading companies in the photovoltaic industry may be the main competitors of catl in acquiring photovoltaic companies. for example, although tongwei co., ltd. has suffered losses for three consecutive quarters, according to financial reports, as of the first half of this year, tongwei still had more than 26 billion yuan in cash. this year, it acquired a controlling stake in runyang co., ltd. for 5 billion yuan, which also shows its determination to continue to expand and strengthen its photovoltaic business. sungrow power supply, which mainly produces inverters (key equipment for photovoltaic power stations), is one of the few listed companies in china's photovoltaic industry that is still making money. its net profit in the first half of this year reached 4.96 billion yuan. as of the end of last year, sungrow power supply had 17 billion yuan in cash.

the above-mentioned person believes that whether catl will defeat its competitors and win this time depends on whether catl believes that it has reached the bottom of this round of photovoltaic cycle: "if catl believes that photovoltaic companies will continue to lose money and valuations will continue to decline, it may not be so anxious now."

after tesla and byd, there will be another giant engaged in both lithium batteries and photovoltaics

the new energy solution of photovoltaic and energy storage has become a consensus in the industry. the electricity generated by traditional photovoltaic systems was once described as "junk electricity". the efficiency of photovoltaic power generation is greatly affected by day and night and climate. equipping photovoltaic power stations with energy storage batteries can to some extent bridge this fluctuation and make photovoltaic power generation truly valuable.

according to a forecast by third-party analysis agency infolink, by 2030, at least 50% of the world's energy storage power stations will be equipped with photovoltaics.

zeng yuqun wrote "replacing fossil energy with electrochemical energy storage + renewable energy generation" as one of catl's three major strategic development directions in 2020. the other two are to promote the replacement of fuel vehicles with electric vehicles and the electrification of other fields such as aircraft and ships. this means that zeng yuqun may want to build catl into a new energy giant that spans fields (not only lithium batteries) and terminals (not only cars).

other entrepreneurs with similar ideas include byd's wang chuanfu and tesla's musk.

wang chuanfu proposed a new energy solution of photovoltaic + energy storage in 2016; he said at the time that if 1% of china's deserts were covered with photovoltaic panels, the entire country would be able to supply electricity. when musk announced tesla's master plan 3 in 2023, he said that if an area of ​​land equivalent to the size of france was covered with photovoltaic panels, the entire earth would be able to complete the new energy transformation.

these fanciful ideas would require cheaper manufacturing and deployment of more photovoltaic and energy storage power plants.

the price of photovoltaic panels is already low enough: chinese photovoltaic companies have reduced the price of photovoltaic panels to less than 200 yuan per square meter, which is no more expensive than ceramic tiles; american farmers even use photovoltaic panels as fences because they are cheaper than ordinary fences.

in 2023, the price of lithium batteries also began to fall: according to our understanding, the price of lithium iron phosphate batteries, which are currently used in energy storage power stations, has fallen by more than 60% compared to the end of 2022, reaching a historical low of about 0.3 yuan/wh. this may be one of the reasons why catl chose to invest more aggressively in "photovoltaic + energy storage" at this moment.

if catl can enter the photovoltaic module manufacturing segment through mergers and acquisitions this year, it will become the third new energy giant spanning the lithium battery and photovoltaic industries after tesla and byd.

the advantage of catl's layout of the "photovoltaic + energy storage" system is that it controls the core value of the entire system - lithium batteries. in a photovoltaic power station with a supporting energy storage system, the cost of lithium batteries accounts for about 50%.

moreover, catl's position in the field of energy storage batteries is far more stable than that of photovoltaic leaders such as tongwei and jinkosolar in the photovoltaic field. since 2020, catl has been the world's number one in energy storage battery shipments, with a market share of about 35%. the world's number one in photovoltaic module shipments changed hands last year, from tongwei changke co., ltd. to jinkosolar, and the gap between the top three in the world is not large. last year, jinkosolar, which ranked first, had a market share of about 15%. the photovoltaic market is more fragmented than energy storage batteries. the fundamental reason behind this is that energy storage batteries have stronger technical barriers, while the main barrier for photovoltaic modules before technological upgrading is production scale.

compared with tesla, catl's layout in the photovoltaic industry is characterized by entering the upstream link with a higher cost share. tesla's photovoltaic sector solar city mainly engages in the downstream photovoltaic assembly link, and its photovoltaic cells and modules are purchased from companies such as almaden and foster. if catl enters the photovoltaic module manufacturing link, it will have the ability to manufacture both the core components of the energy storage system (lithium batteries) and the core components of the photovoltaic system.

byd had the ability to produce major photovoltaic components as early as 2017, and it has photovoltaic module factories in thailand and brazil, but its shipment scale is small and it is not ranked among the top ten in the world.

after acquiring the loss-making photovoltaic company, catl has to solve a new problem: how to find demand and market in the overcapacity cycle? a possible way is to go overseas.

catl had already obtained photovoltaic and energy storage fusion projects in north america and europe in 2022, and it could only produce the energy storage batteries in them at that time. after having photovoltaic production capacity, catl may use these projects and subsequent construction plans as sales channels, while selling its own lithium batteries and photovoltaic modules.

overseas large-scale energy storage systems are also a lucrative market. catl, tesla, and sungrow currently have the highest gross profit margins in the sales of energy storage systems in europe and the united states. tesla makes more money selling energy storage than selling cars, and sungrow's gross profit margin for overseas energy storage systems is as high as 40%.

mergers and acquisitions within or across industries are a common path for large manufacturing companies to develop. under the global energy transformation trend, catl is exploring more new energy forms and industrial chain links based on its advantages in the lithium battery field. the transformation and evolution of this 800 billion energy giant continues.

title image source: visual china