Zhongke Electric plans to cooperate with Yiwei Lithium Energy to invest 2.5 billion to expand the production of lithium battery materials

Hunan Zhongke Electric Co., Ltd. held the seventh meeting of the fifth board of directors on October 27, 2021, and reviewed and approved the "Proposal on the Company's Proposed Joint Venture Agreement with Yiwei Lithium Energy and the Establishment of a Joint Venture Company", agreeing that the company and Huizhou Yiwei Lithium Energy Co., Ltd. will sign a "Joint Venture Agreement". The two parties intend to cooperate to establish a joint venture company with a registered capital of RMB 100 million, of which the company subscribed RMB 600 million and Yiwei Lithium Energy subscribed RMB 400 million. The joint venture will focus on the manufacture of negative electrode materials and give priority to supplying Yiwei Lithium Energy and its affiliates. The total planned investment in the joint venture's related projects is RMB 2.5 billion, with an annual production capacity of 100,000 tons of negative electrode materials. It will adopt a phased construction model, with a production capacity of 50,000 tons/year for the first and second phases.

Party A and Party B jointly invest to establish a joint venture company, which is a limited liability company with a registered capital of RMB 100 million, of which Zhongke Electric subscribes RMB 60 million and holds 60% of the equity of the joint venture, and Yiwei Lithium Energy subscribes RMB 40 million and holds 40% of the equity of the joint venture. The two parties will pay the capital and increase the registered capital according to the operating needs of the joint venture, and the specific contents will be negotiated separately. Party A and Party B shall each be liable for the joint venture within the limit of their subscribed capital contribution. The total planned investment of the project is RMB 2.5 billion.

Both parties agreed and confirmed that the overall project will be built in phases. The first phase will have a production capacity of 50,000 tons/year and a construction period of no more than 18 months. The second phase will have a production capacity of 50,000 tons/year and a construction period of no more than 18 months.

The two parties agree and confirm that when the negative electrode materials produced by the joint venture meet the needs of Yiwei Lithium Energy, Yiwei Lithium Energy should give priority to purchasing from the joint venture. If the joint venture has surplus production capacity, with the consent of Yiwei Lithium Energy, the joint venture's surplus production capacity will be used to process the products of other customers of Zhongke Electric in a processing fee collection model (the materials used for processing are provided by Zhongke Electric and the material costs are borne by Zhongke Electric) and then sold by Zhongke Electric. The price charged by the joint venture for the processing is determined according to the fair price of similar outsourcing processing in the market; the price of negative electrode materials sold by the joint venture to Yiwei Lithium Energy and its affiliates is determined at the market fair price, which in principle has a certain cost advantage (that is, Yiwei Lithium Energy can therefore obtain a cost advantage).