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5. Hunan Corun New Energy Co., Ltd. Business Report FY ended Dec. 2017

Hunan Corun New Energy Co., Ltd. Business Report FY ended Dec. 2017

Order

-On December 26, 2017, Hunan Corun New Energy Co., Ltd. announced that the company signed an agreement with Haima Car Co., Ltd. on the development, production, and sales of Haima Car's M6 hybrid vehicles. According to the agreement, Hunan Corun New Energy is going to supply Haima Car with hybrid systems, each of which consists of mainly an engine, a hybrid transmission, a motor controller, a car body controller, a power battery pack and a regenerative brake system. Haima Car produces the car and Hunan Corun New Energy takes the lead in selling and expanding the use of the vehicles firstly in the public mobility market. Their goal is to make and sell more than 150,000 units of vehicles covered in the agreement by the end of 2021. In 2019 and 2020, Hunan Corun New Energy will be the sole distributor of the alliance models. In the future, Haima Car can also sell the alliance models in the market. (From a corporate announcement on December 26, 2017)

-Hunan Corun New Energy Co., Ltd. said on September 8, 2017, that a project on research and development and industrialization of high-performance drive controllers and high-power motors for electric vehicles by its subsidiary was designated as one of the 17 pilot business programs for China-Germany Platform for Cooperation in R&D and Innovation of Intelligent Manufacturing in 2017. This program was a solo program related to new energy vehicles out of the 17 certified programs. The subsidiary, Xiamen Fugong Engineering Technology Co., Ltd., has developed a high-performance drive controller in cooperation with Aradex AG of Germany and a high-performance motor with Elektromaschinenbau GmbH (E. M. B) of Germany, spending a total of Chinese yuan (CNY) 25 million between October 2015 and December 2017. The company has already advanced the level of automation at its production lines, and the products have already won some orders from automakers. By August 20, 2017, it supplied 2,000 sets of the system components to Zhongtong Bus & Holding. The number is expected to rise further in the fourth quarter of 2017. (From a press release on September 9, 2017)

-A new production line of Hunan Copower EV Battery Co., Ltd., a subsidiary of Hunan Corun New Energy Co., Ltd., has passed an inspection of Toyota Motor Corporation. The new production line is part of the project for the Chinese company to expand its production capacity. It will be dedicated to the production of nickel hydride battery cells developed proprietarily by Hunan Copower EV Battery. (From a press release on June 23, 2017)

Strategic cooperation

-Hunan Corun New Energy Co., Ltd. said on April 3, 2018, that the company had signed an alliance agreement with Geely Group. The two companies will ally the areas of hybrid vehicles and their core components. Hunan Corun New Energy is going to offer hybrid systems it developed with its overseas partners to Geely. Then the two companies will cooperate in the development, production, and sales of hybrid electric vehicles (HEVs). Their first alliance model will be the Geely model, which is to be developed under the development code FE-6. During the first two years after the mass production launch, Geely is to take responsibility in manufacturing vehicles while Hunan Corun New Energy is to take responsibility in the sales of the vehicles in the public mobility market. Starting in the third year, Hunan Corun New Energy will handle the sales to the public mobility operators and Geely will handle the sales in the consumer market. The two companies plan to sell 150,000 HEVs in the first three years, 20,000 units in the first year, 50,000 units in the second year and 80,000 units in the third year. Geely will lead the development, production and quality assurance of the alliance models and invest in the construction of the facilitates for producing HEVs and PHEVs, energy-saving vehicles and new energy cars, based on the strategic alliance plan of the two companies. Hunan Corun New Energy will be responsible for performance development and other technical support for hybrid power system and battery packs, including battery management system, of the alliance models. (From a corporate announcement on April 4, 2018)

-On January 30, 2018, Hunan Corun New Energy Co., Ltd. and FAW Car Co., Ltd. signed a partnership agreement. The two companies are going to form a technical and product alliance in the areas of crucial automotive components such as transmissions, engines, and batteries for hybrid power units. Also, Hunan Corun New Energy is going to supply hybrid systems and related critical parts for FAW Car vechile models. The products to be provided include integratedly-developed hybrid system, proprietary CHS system, transmissions and engines for hybrid power units, battery packs and their management system, energy recovery system, and air-conditioners for electric cars. The two companies will also work together in developing hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEV). To begin with, they are going to put hybrid system integratedly-developed by Hunan Corun New Energy on the Besturn series to create one customized HEV model and release it in 2019 as a model for public transportation. They plan to make and sell 150,000 cars in the three years from 2019 to 2021. When the annual output of the jointly-produced models reaches 50,000 units, they'll discuss again the scheme for their joint production, joint venture construction, and so forth, of the hybrid system integratedly-developed by Hunan Corun New Energy to deepen the alliance. When the production of the custom-made HEV models reaches a commercially acceptable level, FAW Car will include Hunan Corun New Energy in its supplier network and start purchasing hybrid systems and components from Human Corun New Energy. (From a corporate announcement on January 30, 2018)

New company

-On November 1, 2017, the Company announced that Corun Hybrid Power Technology Co., Ltd. (CHS), its holding subsidiary, signed the Technology License Agreement and Commissioned Development Contract with Wuxi Mingheng Hybrid Technology Co., Ltd. CHS will license all existing patent and non-patent technology that can be adapted to the diesel to the Wuxi Mingheng, the total technology licensing fee shall be RMB 314.6 million; at the same time, Wuxi Mingheng will commission CHS to complete the development of the A Prototype of HT3800 Longitudinal Hybrid Synthesis Box, the total commissioned development cost for the Phase I of this project shall be RMB 35.4 million. In June 2017, Corun and Yunnan Yunnei Power Group Co., Ltd. announced that they had intended to establish Wuxi Tongrun Hybrid Power Technology Co., Ltd. (tentatively); in July 2017, the name of the enterprise approved by the relative administration for industry and commerce was set as Wuxi Mingheng Hybrid Technology Co., Ltd. The registered capital of Wuxi Mingheng is 600 million Yuan, in which the Yunnei Power and Corun respectively invest 306 million Yuan and 294 million Yuan, that is, they respectively hold 51% and 49% of the whole shares. The Wuxi Mingheng is principally engaged in the research and development of automotive hybrid technology, the manufacture, processing, technical promotion and after-sales service of automotive parts and accessories. (From the Company Announcements on November 1, 2017)

Technology Transfer

-In November 2017, Corun Hybrid Power Technology Co., Ltd. (CHS), its subsidiary, signed Technology License Agreement and Commissioned Development Contract with Wuxi Mingheng Hybrid Technology Co., Ltd. CHS will license all existing patent and non-patent technology that can be adapted to the diesel to the Wuxi Mingheng, the total technology licensing fee shall be RMB 314.6 million; at the same time, Wuxi Mingheng will commission CHS to complete the development of the A Prototype of HT3800 Longitudinal Hybrid Synthesis Box, the total commissioned development cost for the first phase of this project shall be RMB 35.4 million. (From the Company Announcements on November 1, 2017)

Technology lincese

-On November 1, 2017, Corun Hybrid Technology Co.,Ltd.(CHS)，a subsidiary of Hunan Corun New Energy Co., Ltd., and Wuxi Mingheng Hybrid Technology Co., Ltd. signed a technology licensing agreement and commissioned development contract. CHS will allow Wuxi Mingheng to use its all existing patents and non-proprietary know-how which can be adapted to diesel engines, with the total license fee of 314.600 million Yuan. At the same time, Wuxi Mingheng will delegate CHS to complete the development of HT3800 longitudinal hybrid system A prototype, and the first phase of the project entrusted development costs a total of 35.4 million yuan. (From an announcement by the company on November 1, 2017)

Qualification

-In February 2017, the subsidiary Shenzhen National Engineering Research Center of Advanced Energy Storage Materials Co.,Ltd obtained the UL Witnessed Test Laboratory qualification officially authorized by Underwriter Laboratories. Authorized testing scope covers primary and secondary lithium batteries, nickel batteries, battery packs and mobile power products. UL Underwriter Laboratories Inc. is the most authoritative in U.S., as well as one of independent non-profit professional organizations, which engaged in product safety certification and safety certification business in the world. (From an announcement by the company on February 10, 2017)

Start operating

-The Company announced on June 28, 2018, that its subsidiary, Corun Hybrid Technology Co., Ltd., had completed the construction of the first production line at its new plant that is going to have a capacity to make 1 million sets of energy-saving, new-energy-powered hybrid powertrain in total. The production line is to be launched very soon. This production line can produce 0.1 million units or sets of the powertrain. The first phase of the project requires the investment of Chinese yuan (CNY) 4.65 billion and establishes an annual production capacity of 0.3 million units or sets of the products. The company intends to start accepting bids for the construction work for the second production line with an annual production capacity of 0.2 million soon. (From a press release on June 28, 2018)

Acquisition

-The Company announced on July 2, 2018, a plan to acquire 9.90% of shares in Corun Hybrid Technology o., Ltd. (CNS) from Geely Group and 27.07% of the same from Shanghai Maple Automobile Co., Ltd. The acquisition cost and method are yet to be determined. Hunan Corun New Energy currently owns 51.02% shares in CHS. CHS develops, manufactures, and sells hybrid powertrain platforms and system solutions. (From a press release on July 2, 2018)

Investment

-Hunan Corun New Energy Co., Ltd. announced on March 30, 2018, a plan to make an additional investment of JPY 5.44 billion in its subsidiary, Corun PEVE Automotive Battery Co., Ltd., jointly with other shareholders. The subsidiary will use the fund to expand its production facilities of automotive nickel hydride battery cell modules and double its production capacity. Corun PEVE Automotive Battery completed the construction of its production lines and launched their operation in 2016. The company's design production capacity is 113,200 sets. Hunan Corun New Energy is going to invest JPY 2.18 billion, or around Chinese yuan (CNY) 129 million. The company's shareholding ratio remains unchanged at 40% after the capital increase. (From some releases on April 10, 2018)

-On December 6, 2017, Hunan Corun New Energy Co., Ltd. announced a plan to invest Chinese yuan (CNY) 462 million, 70 million and 200 million in Hunan Copower EV Battery Co., Ltd., Changde Liyuan New Material Co., Ltd., and Corun Hybrid System Technology Co., Ltd. (CHS), respectively. The three subsidiaries will allocate the money for capital investment. Hunan Copower EV Battery has a plan to spend CNY 2.1 billion on a project to set up power battery business worth 518 million Ah a year, in particular in the first phase facility construction. Changde Liyuan New Material is going to use CNY 806 million in building a new facility to produce foamed nickel of 6 million square meters a year for the new energy vehicle market. CHS is planning to spend CNY 290 million in research and development on hybrid power assemblies. (From a corporate announcement on December 6, 2017)

R&D Facility

-By the end of 2017, the company owns 599 R&D personels, accounting for 20.72% of the total number of employees.

-The Company is mainly engaged in the research and development of hybrid powertrain systems, nickel series batteries and its key raw material, the nickel foam.

-The Company has a center (National Engineering Center for Advanced Energy Storage Materials) and four research platforms (Shenzhen, Nagoya, Changsha, Shanghai).

Patent

-As of December 31, 2017, the company has 532 domestic patents and 6 international patents.