24 billion yuan in overseas assets face losses and idleness; Ronbai Technology initiates subsidiary equity restructuring

Chinatimes.net.cn Reporter Hu Yawen Beijing Report

An increasing number of new energy companies are facing the impact of the U.S. “Big and Beautiful Act.” Should they give up the North American market or rebuild their overseas structure? Rongbai Technology (Rights Protection) (688005.SH) has chosen the latter.

On March 17, Rongbai Technology announced plans to transfer equity and carry out a series of operations to reduce the Chinese shareholding in its wholly owned Korean subsidiary to below 25%, thereby obtaining Non-PFE (Non-Prohibited Foreign Entity) status. This move aims to revitalize the capacity of Korea Sanyuan Cathode and other production lines, which have a total investment of 2.472 billion yuan. As of March 17, a Huaxia Times reporter had sent a letter to Rongbai Technology regarding related issues, but no response had been received by press time.

This transaction involves Rongbai Technology and its actual controller Bai Houshan jointly establishing a joint venture, addressing how to settle the 1.088 billion yuan debt of the Korean subsidiary, and safeguarding future interests in the North American market. Liu Zhigeng, a renowned tax and finance expert and senior CPA, told Huaxia Times, “On the surface, this is a premium sale, but overall, it resembles a strategic divestment of loss assets and risk avoidance. The core goal is to adjust equity to make Singapore AKB a Non-PFE entity, thereby restoring supply qualification in North America.”

Seeking to Stop Loss

In 2013, Jash Energy Co., Ltd. (hereafter “Korea JS”) was established as a wholly owned subsidiary of Rongbai Technology, serving as the overseas cathode material production base built with an investment of 2.472 billion yuan. Korea JS has successively built annual capacities of 27,000 tons and 40,000 tons of high-nickel ternary cathodes, specifically targeting the North American market. It also has supporting ternary precursor capacity and investments aimed at the European market.

However, the “Big and Beautiful Act” stipulates that Chinese entities holding more than 25% of shares are deemed “Prohibited Foreign Entities” (PFE). Once classified as such, North American customers purchasing PFE products cannot apply for tax subsidies. This directly weakens Chinese companies’ competitiveness in the North American market. Rongbai Technology stated, “The ternary capacity built in Korea cannot effectively supply China or Europe due to economic reasons and EU localization requirements, and can only serve the North American market. However, the company will lose all North American customers due to PFE status, ultimately leading to idle capacity, continued losses for Korea JS, and asset impairments, damaging company interests.”

Singapore AKB will replace Korea JS as the new entity, taking over the actual assets. Bai Houshan and Rongbai Technology have established two companies—Singapore AKB and Korea AKB (a wholly owned subsidiary of Singapore AKB)—by the end of 2025. The announcement shows Rongbai Technology plans to split Korea JS into two entities: Korea JS Old and Korea JS New. Korea JS Old will hold a capacity of 7,000 tons/year of ternary cathodes and plans to transfer 31% and 69% of its equity respectively to Singapore AKB and Korea AKB.

The transaction price has not yet been finalized, but the announcement clearly states that the price will be based on the net asset valuation of Korea JS Old, with a certain premium, and not less than the initial investment in fixed assets. The valuation is expected to exceed $90 million (about 620 million yuan). By the end of 2025, related assets have a total investment of $68 million, with $8 million of depreciation since commissioning in 2024.

It is noteworthy that before asset delivery, Korea JS Old must settle a total payable of 1.088 billion yuan to Rongbai Technology. Liu Zhigeng explained in detail that this payable mainly consists of two parts: 91 million yuan in accounts payable for daily procurement (materials, equipment), and 997 million yuan as loans, management support, and R&D advances provided by the parent company, which are non-trade-related.

Regarding the source of repayment funds, Liu Zhigeng said, “The repayment does not rely on Korea JS Old’s own operating cash flow (which is limited due to PFE restrictions causing idle capacity), but directly comes from the transfer payments made by Singapore AKB and Korea AKB. These funds will be fully returned to the listed company before the asset transfer, ensuring the completion of debt repayment.”

After the transaction with Korea JS Old is completed, Korea AKB will gradually purchase the remaining ternary capacity owned by Korea JS New according to financing progress. Ultimately, Singapore AKB will serve as a Non-PFE entity holding the current 67,000 tons/year capacity of Korea JS and will develop North American business. Rongbai Technology will hold a 24.9% stake in Singapore AKB, with subsequent profit sharing based on the equity method.

How to Safeguard Voice?

Behind Singapore AKB is Rongbai Technology’s actual controller Bai Houshan. Over the past year, Rongbai Technology and Bai Houshan jointly established Amkobay Holding Pte. Ltd. (the “Singapore company”) and set up the joint venture Singapore AKB. Rongbai Technology invested 124,500 SGD (about 680,000 yuan) into Korea JS to hold 24.9% of the equity; the Singapore company invested 375,500 SGD (about 2.01 million yuan) into Singapore AKB for a 75.1% stake.

This means that after the transaction, the core North American business will be under the control of the Singapore AKB system, in which Bai Houshan holds 75.1%. Subsequently, Singapore AKB will also introduce third-party overseas investors and battery funds, with the planned battery fund becoming the main shareholder of Singapore AKB. For Rongbai Technology, after the transaction, it will only hold a 24.9% minority stake in Singapore AKB. Under the control of the actual controller and with potential new investors, how will Rongbai Technology safeguard its influence?

Liu Zhigeng stated that Rongbai Technology’s minority stake in Singapore AKB does not depend on shareholding percentage but is secured through contractual rights in the Shareholders’ Agreement (SHA). The core protections include board seats, veto rights on major decisions, information rights, audit rights, tag-along rights, and anti-dilution protections. “These clauses are standard governance practices for SPVs internationally, especially in the new energy sector. When Chinese companies establish non-PFE entities overseas, they commonly adopt such structures. Although the specific agreement texts are not publicly disclosed, the statement of ‘full protection of minority shareholders’ interests’ implies the existence of such contractual arrangements.”

From a revenue perspective, after the Korea asset restructuring, Rongbai Technology’s future income will include a one-time transfer payment and ongoing operating income from the equity method. However, the sustainability of income depends on the profitability of Singapore AKB, and whether Singapore AKB can successfully expand into the North American market and respond to ongoing U.S. policy changes remains uncertain.

Over the past two years, Korea JS has continued to incur losses. In 2024 and 2025, Korea JS’s revenue was 684 million yuan and 1.277 billion yuan, respectively; net profit (excluding non-recurring gains/losses) was -206 million yuan and -163 million yuan. Rongbai Technology stated, “Last year, Korea JS’s revenue accounted for 10.41% of the company’s total revenue, with a net loss of 164 million yuan. This adjustment to Korea’s business will not significantly impact the company. Post-adjustment, Singapore AKB and its subsidiaries will strictly limit their cathode material business to North America, while Rongbai Technology will focus on other non-North American markets. The business boundaries are clear, and customer structures are independent.”

Strategically, this equity adjustment is Rongbai Technology’s proactive response to uncertainties. However, the transaction still faces multiple risks. The announcement warns that if policies related to the “Big and Beautiful Act” change or other North American policies are adjusted, the effect of the equity restructuring may fall short of expectations.

Editor: Li Weilai Chief Editor: Zhang Yuning