Excessive expansion and Big debt trouble for Altura's partner, Optimum Nano

https://www.reuters.com/article/chi...o-slashes-output-amid-debt-woes-idUSL3N1SI2ZI


* Company’s battery production operating at around 20 pct

* Parent posted 3.7 bln yuan loss in 2017 after forecasting profit

* Cutbacks will weigh on lithium carbonate prices - brokerage (Updates throughout)

By Tom Daly

BEIJING, May 11 (Reuters) - Optimum Nano, one of China’s biggest electric vehicle (EV) battery makers, has slashed production levels to around 20 percent of capacity as its parent company struggles to pay off debt, a spokesman told Reuters on Friday.

Wei Haiming, a securities representative for Shaanxi J&R Optimum Energy Co Ltd, which wholly owns Optimum Nano, told Reuters the Shenzhen-based battery manufacturing unit had cut production in April.

At the start of that month, Shaanxi J&R said in a statement to the Shenzhen Stock Exchange that it had 1.998 billion yuan ($314.90 million) of debt overdue. In 2017, Optimum Nano built enough lithium-iron-phosphate batteries to produce 5.6 gigawatt hours of electricity, making it the third-largest in China, said Wei.

The high cost of battery ingredients such as lithium and cobalt, and the intense competition in the sector are among the reasons for the company’s financial problems, he added.

“Electric batteries is a good business in the next three to five years” but not right now, Wei said, adding: “We all have the confidence to survive.”

Shaanxi J&R, which in January forecast a 17.5 percent rise in net profits for 2017, reported a 3.7 billion yuan annual loss on April 26. It also expects a 317-322 million yuan net loss in the first quarter of 2018. It blamed the “excessive expansion” of Optimum Nano, as well as slow collection of accounts receivables, a tighter funding chain and changes to China’s subsidy policy for the poor performance. China has said it will gradually phase out subsidies for the EV sector.

In March, Australian lithium producer Altura Mining said it was in talks with Shaanxi J&R about potentially being acquired by the Chinese firm, which already holds a 16.87 percent stake in Altura.

But on April 2, Shaanxi J&R said 13 of its and Optimum Nano’s bank accounts had been frozen by a Wuhan court and the company’s general manager Li Yao resigned this week.

Wei said Shaanxi J&R was talking to a syndicate of around 10 banks to extend the repayment deadline for its debt. Optimum Nano’s production struggles have resulted in “less demand for upstream lithium carbonate materials,” further weighing on the price of lithium carbonate, a battery-grade form of lithium, Argonaut Securities said in a note on Friday.

Lithium carbonate prices in China on Thursday fell to 139,500 yuan a tonne, according to data from Argus Media, the lowest since August.