Shanghai Firm Bets Big on Fuel Cells
SHANGHAI--FOSUN Pharmaceutical (Group) Corporation, a medicinal maker and retailer, is extending its business into the new energy sector through an equity investment deal.
FOSUN Pharma said one of its subsidiaries has acquired a 36.26 percent stake in Shanghai Shen-Li High Tech Co., Ltd. from the latter's substantial shareholders for up to CNY 50.452 million.
The private Shen-Li High Tech, located in Shanghai Fengpu Industrial Park, is a leader in developing and manufacturing proton exchange membrane (PEM) fuel cell products. The company wins the central government's support to research and develop PEM fuel cell.
Presently, China's 16 own-brand fuel cell vehicles are all powered by the company's engines.
Wang Qunbin, President of FOSUN Pharma, said the deal would extend the company's business to a new sector other than pharmaceuticals, real estate, steel, retail, mining and financial services in which it now principally invests.
Hydrogen fuel cell is a most important approach to the efficient usage of hydrogen and as well a solution to the global energy and environmental protection, which is significant to the sustainable growth of society, claimed Mr. Wang.
A fuel cell uses a simple chemical reaction to combine hydrogen and oxygen into water, producing electric current in the process. It is an emerging substitute for hydropower, fire power and nuclear power, and is believed to be an eventual solution to vehicle's power in future.
However, Shen-Li High Tech has been losing money since inception in 1998 due to the burgeoning domestic fuel cell sector and dire highly manufacturing cost.
The company has not received a commercial order for its product before 2005 except the 15 fuel cells that were sold nearly at a cost price.
Kinglong United Automotive Industry (Suzhou) Co. Ltd. late in 2005 ordered for a fuel cell engine. The automaker is lobbying Suzhou city government to fund the establishment of hydrogen refueling stations. It is destined to be a rough negotiation.
The Ministry of Science and Technology offered fiscal support to sustain Shen-Li High Tech's operation, which amounted to almost CNY 100 million in the past four years, said an official at Shen-Li High Tech.
The PEM fuel cell manufacturer had CNY 103.66 million worth of assets as at December 31, 2005, and net asset of CNY 17.969 million. Net profit was a minus CNY 1.547 million.
Upon the completion of the deal, the buyer Fosun Pharma would inject another CNY 202,326 to boost Shen-Li High Tech's capital base to CNY 521,134, translating to 38.808 percent of the enlarged capital.
Dr. Hu Liqing, the founder of Shen-Li High Tech, is optimistic that FOSUN Pharma will have the capability of putting fuel cell engines into commercial use. The company's manufacturing base will have an annual production capacity of about 1,000 units if it begins full running.
Shanghai will be installing 10 hydrogen refueling stations, running 100 fuel cell-powered buses and 1000 units of fuel cell cars ahead of 2010 when Shanghai will host the World Expo. The city government will also invest CNY 1.3 billion in fuel cell in the coming three years.
China's government would continue to support the growth of hydrogen fuel cell manufacturing to secure its strategic position in the national energy structure, market analysts said.
(USD 1 = CNY 8.0)
Source: Fuel Cell Works