GSR invests $236m in China environmental technology player

Shenwu Energy Saving (SES) and Shenwu Environmental Technology (SET), both of which are Shenzhen-listed units of Shenwu Technology Group, said in separate filings that GSR would subscribe to RMB350 million worth of newly issued shares in their parent company. The remaining RMB1.15 billion has been earmarked for technology development and supporting Shenwu's subsidiaries.

Shenwu wants to raise RMB5-7 billion from strategic investors in order to ease its liquidity crunch and meet the capital requirements for projects under construction. The company is said to have outstanding debt of more than RMB13 billion, including RMB7 billion in bonds secured against equity pledges.

Founded in 1996, Shenwu employs nearly 4,000 people across 11 subsidiaries, including the two listed entities. It specializes in energy-saving and emission-reduction technology, with operations covering research and development, transformation and engineering, the manufacture of energy-saving equipment, project financing, and facilities management. 

The company's industrial client base spans metals, chemicals, petrochemicals, thermal power, biomass energy, and organic and metal solid waste treatment. It claims to save 31 million tons of standard coal equivalent with corresponding carbon dioxide emission reduction of 72 million tons.

SES and SET have issued several liquidity warnings this year as stock price volatility required Shenwu Group to increase the collateral for the share pledges.

The two subsidiaries have also struggled financially. SES posted increases in revenue and net profit for 2017, but there was a huge decline in net cash flow from continuing operations. In the first quarter of 2018, revenue dropped 98.7% on the previous year to RMB2.02 million and a net profit of RMB74.2 million became a loss of RMB67.1 million.

SET, which failed in March to redeem RMB450 million in bonds due to liquidity restraints, has delayed releasing its latest annual and quarterly results.

GSR Capital is affiliated to early-stage venture firm GSR Ventures, renminbi investment platform GSR United Capital, and overseas acquisition platform Go Scale Capital. The firm raised $1 billion for a vehicle that invests in LED companies and launched a cross-border M&A fund with Go Scale. Prior to establishing that fund, GSR Capital missed out on the acquisition of Lumileds, Philip' LED components and automotive lighting unit, due to regulatory concerns in the US.

The fund involved in the Shenwu deal also acquired Nissan Motor's electric battery operations and production facilities in 2017.

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• Topics
• Greater China
• Cleantech
• Restructuring
• Technology
• China
• GSR Ventures