First green equity fund reflects China's goal to become carbon neutral

Chinese clean energy solutions provider GCL Energy Technology, a subsidiary of Golden Concord Holdings, will launch the country's first private equity fund centered on carbon neutrality on Wednesday in Beijing.

The fund, to be established in cooperation with CICC Capital, the fund management arm of China Capital Investment Group, will have a planned scale of up to 10 billion yuan ($1.53 billion). The fund will raise approximately 4 billion yuan in the first phase, according to a statement released by GCL Energy Technology.

During the 75th session of the United Nations General Assembly held in September last year, Chinese authorities announced the nation's goal to peak its carbon emissions in 2030 and reach carbon neutralization by 2060.

At the gatherings of the National People's Congress and the Chinese People's Political Consultative Conference earlier this month, carbon peaking and neutralization became an important part of the Government Work Report.

The capital market has responded quickly since China proposed the 2030 and 2060 carbon targets, with increasing investments channeled into clean energy, according to executives of GCL Energy Technology.

Zhu Yufeng, board chairman of GCL Energy Technology, said the CICC-GCL carbon neutrality fund will focus on clean energy for the automobile industry. It will also explore investment opportunities across the entire industrial chain, ranging from electric vehicle manufacturing, production of batteries, battery charging and swapping services and smart traffic management.

"The global automobile industry faces a revolution featuring an unprecedented growth in vehicles powered by electricity and other clean fuels like hydrogen," the executive said.

Global research institution BloombergNEF predicted that the number of electric vehicles on roads will reach 550 million units worldwide by 2040. The number in China is estimated to be 200 million units, which means a market value of 1.2 trillion yuan.

GCL Energy Technology recently released a new development plan featuring a transition of its operational model.

The plan said the company will shift its focus to providing comprehensive clean energy services, while consolidating its operations in clean-energy production.

Offering clean-energy solutions for mobility will be a core part of the plan, and a special emphasis will be placed on EV battery swapping system.

The company plans to sign strategic cooperation agreements with CICC Capital, using the resources of both sides to develop energy services for mobility throughout the country. These would include prioritized regions such as the Guangdong-Hong Kong-Macao Greater Bay Area, the Yangtze River Delta, Southwest China and Central China.

The joint establishment of the carbon neutrality fund is an important part of the strategic cooperation agreements, according to GCL Energy Technology.

As the fund management company solely owned by China Capital Investment Group, CICC Capital is the largest private equity fund platform in China, managing assets totaling 360 billion yuan.

According to the agreements signed, GCL Energy Technology and CICC Capital will establish long-term, comprehensive and multichannel collaborations in areas such as investing in and operating vehicle battery swapping stations, developing battery products and offering comprehensive solutions for battery swapping services.

The companies' joint statement for the carbon neutrality fund said the fund will direct equity investment into the entire industrial chain of vehicle battery swapping services. Their objective－to form an all-new mobility energy service ecosystem－will be made possible by developing a big data platform for battery charging and swapping.

The statement also shows that GCL Energy Technology's EV battery swapping business will be composed of three core operations: development, design and construction of battery swapping stations and other related facilities; operation of such stations and rapid battery charging and swapping services; and recycled utilization of batteries.

GCL Energy Technology is one of the leading thermal power producers and clean power service providers in China, with current assets totaling 25 billion yuan.

The company was listed on the small-and medium-sized enterprise board of the Shenzhen Stock Exchange in June 2019.

After a restructuring of its major assets in that month, the company began focusing its operations on clean-energy production and comprehensive energy services, emphasizing clean energy service for mobility.

Combined cooling, heating and power; wind power; and waste-to-energy are the major sectors of GCL Energy Technology's power production business. Their installed generation capacity accounts for more than 90 percent of the company's total.

The company's latest performance prediction statement said that its net profit attributable to shareholders in 2020 is estimated at 776 million yuan, an increase of more than 40 percent from the previous year.

A research report released by Founder Securities shows that GCL Energy Technology serves more than 4,000 corporate clients by supplying electricity, heat and other energy sources, as well as providing carbon neutrality-related services.