Another Central State-Owned Enterprise "Crosses Over" into the ESS Sector

China Battery News has learned that Complant International Ltd., a subsidiary of SDIC Group, recently announced a plan to acquire 100% equity in CNTEC Jiangsu Clean Energy Co., Ltd. (hereinafter referred to as "CNTEC Jiangsu") held by China National Technical Import & Export Corporation (hereinafter referred to as "CNTEC") through the issuance of shares, indicating that this traditional complete equipment export enterprise will "cross over" into the ESS sector.

It is understood that Complant International is a holding company of China National Complete Plant Import & Export Corporation, with the actual controller being the SASAC of the State Council. Its main businesses include complete equipment export and engineering contracting, environmental technology, and composite material production. Relevant analysts believe that Complant International's cross-border acquisition of ESS assets is directly related to the continuous pressure on its performance in recent years. Data shows that from 2019 to 2024, Complant International has suffered substantial losses in its net profit attributable to shareholders after deducting non-recurring gains and losses for six consecutive years, with a total loss exceeding 900 million yuan from 2022 to 2024.

The target company, CNTEC Jiangsu, is a wholly-owned subsidiary of CNTEC, with the actual controller also being the SASAC of the State Council after upward tracing. It is worth noting that CNTEC is a subsidiary of China General Technology (Group) Holding Co., Ltd., the indirect controlling shareholder of Complant International, so this transaction constitutes a related-party transaction.

According to reports, CNTEC Jiangsu is mainly engaged in the investment, development, and operation of ESS projects on the user side for industrial and commercial users. It provides ESS solutions to users through the energy performance contracting model, generating revenue through peak-valley electricity price arbitrage, which is shared between CNTEC Jiangsu and industrial and commercial users in a certain proportion, helping enterprises reduce electricity costs and enhance power grid stability. CNTEC Jiangsu has currently undertaken and operated ESS projects on the user side for industrial and commercial users such as CATL Jiangsu (Phase I), SAIC Times, CATL Jiangsu (Phase II), GAC Times, and Dongguan Base Station. The ESS power stations in operation are mainly located in Liyang City, Jiangsu Province; Dongguan, Zhaoqing, and Guangzhou Cities, Guangdong Province; and Jiyuan City, Henan Province.

Some analysts believe that as a publicly listed firm controlled by a central state-owned enterprise, Complant International's acquisition aligns with the group's strategic direction of expanding into new energy, ESS, and other fields as outlined in the "14th Five-Year Plan." If Complant International successfully merges CNTEC Jiangsu into the listed company, it will form positive synergies and complementary relationships in ESS project construction and operation, customer resources, and going global platforms, promoting the extension of its main business towards green energy businesses such as ESS and creating a second growth curve.

However, it is worth noting that the current new-type energy storage industry is highly competitive, and its business model is facing policy risks, with multiple uncertainties in its profitability prospects. Although China Technology Jiangsu has undertaken and operated several large enterprise projects, it is not well-known in the ESS industry. Moreover, the overall profitability of the current ESS industry is not optimistic. Therefore, this transaction by China Chengtong is not widely favored by the outside world.

From the perspective of the profit model, China Technology Jiangsu mainly relies on the peak-valley electricity price spread to generate profits. Experts have analyzed that this model is facing threefold challenges: Firstly, regions such as Jiangsu have explicitly narrowed the peak-valley electricity price spread, which is expected to directly reduce the profit margin by 20%-30%, and the narrowing of the peak-valley price spread has become a major policy trend nationwide; Secondly, with the comprehensive market entry of new energy for trading, the uncertainty of power plant revenues is gradually increasing; Thirdly, this business model has a relatively low technical threshold and is easily replicable, making it difficult to form a "moat".

China Chengtong also stated that the user-side ESS industry for industrial and commercial users is influenced by the time-of-use electricity price spread, and its risks mainly lie in the uncertainty of price fluctuations in the electricity market. The electricity price spread may be affected by multiple factors, such as the electricity consumption time of downstream industrial and commercial users, changes in electricity supply and demand, and adjustments to time-of-use electricity price policies. If the electricity price spread narrows or there are adverse changes in electricity price policies, the economic viability of ESS projects may be weakened, thereby affecting China Technology Jiangsu's revenue and return on investment.

Market analysts have pointed out that although asset injection is a common means for publicly listed firms to improve their performance, the overall ESS industry is currently in a profit trough, adding uncertainty to China Chengtong's transformation and recovery. In addition, a head of the new energy department of a central state-owned enterprise stated that the current new-type power system is rapidly raising the technical requirements for ESS enterprises, and enterprises urgently need to enhance their intelligent trading capabilities, which poses a significant challenge to their technological reserves and financial preparations.