Choosing a provincial state investor over a higher private valuation
In early 2022 Qianyue needed about RMB 2.5 billion of equity for its next seven stations. Our bank loans cost about 5.6 per cent, several backed personally by our founder. A consortium of growth funds offered RMB 2.6 billion for 26 per cent, valuing us at RMB 10 billion, with a right to make us buy back their shares at an 8 per cent annual return if we had not listed by the end of 2025. Mingquan Energy Investment Group, a provincial state-owned investor, offered the same sum for 34 per cent, three board seats and no buy-back right.
The RMB 2.35 billion valuation gap fell on our founder, our existing investors and the 180 employees in our shareholding platform. Fang Dezhi, our founder and chairman, preferred the private offer, as did the existing investors. A state shareholder, they argued, would slow decisions and make us look like a policy instrument to developers competing with Mingquan's own generators.
I recommended Mingquan. The buy-back clause decided it: our revenue rested on provincial rules that could change, and I did not want an obligation above RMB 3.3 billion falling due in those same years. I also expected banks to lend more cheaply against stations with a patient, solvent owner behind them. I gave up valuation, three seats and some speed.
Negotiation took four months. Mingquan gained approval rights over budgets, borrowing above a ceiling, disposals and related-party transactions; tenders, hiring, station design and pricing stayed with management. Any contract with a Mingquan company would be decided by the directors Mingquan had not nominated, on an independent price benchmark. The founder agreed once he gained a second board nominee.
Mingquan invested in September 2022. By 2024 new project loans cost 3.7 per cent and lenders no longer sought the founder's personal backing. We added 3.0 GWh of stations from 2023 to 2025, and when we withdrew our listing application in 2024 no investor could force a sale. Approvals are slower: in 2023 a Mingquan director's objection held up our purchase of a part-built station for three months, and a rival bought it.
I would have written the conflict rules for Mingquan's generators into the investment agreement itself rather than a later board policy, and I would have explained the valuation trade-off to our employee shareholders in person before the vote.