Summary: In late Oct., Huaheng Biotech proposed to issue stock to raise funds for the construction of the 50,000 t/a malic acid project.

On 28 Oct., Anhui Huaheng Biotechnology Co., Ltd. (Huaheng Biotech) publicised the 2022 Plan for Issuing A-Shares to Specific Objects to raise funds for the bio-based malic acid, bio-based succinic acid and raw materials for bio-based products projects, and for supplementing working capital.

Outline of the stock issuance

• Offerees and subscriptions: up to 35 accredited objects by China Securities Regulatory Commission including securities investment fund management companies, securities companies, trust companies, finance companies, asset management companies, insurance institutional investors, qualified overseas institutional investors, other domestic legal investors, natural persons or other qualified investors; all the offerees will pay in RMB cash at the same price per share.
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• Number of issuing shares: determined by dividing the total amount of raising funds by the issue price, in a maximum of 32,520,000 shares not exceeding 30% of the capital stock before the issuance.
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• Proposed total amount of raising funds: not exceeding USD248.59 million (RMB1.73 billion), all in cash

Overview of the funding 50,000 t/a malic acid project

• Total investment: USD98.50 million (RMB684.35 million)—USD96.37 million (RMB669.53 million) are from the raising funds and the rest are self-funded.
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• Executive unit: Qinhuangdao Huaheng Bioengineering Co., Ltd., wholly-owned by Huaheng Biotech
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• Location: Shanhaiguan District, Qinhuangdao City, Hebei Province
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• Construction period (estimated): 30 months

Necessity and feasibility of the funding project

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• At present, citric acid is the mainstream acidity regulator in China, while the mixed use of malic acid and citric acid in foods and beverages featuring a natural, rich fruit-like taste is favoured by many domestic consumers. Such mixture can be used to substitute the single use of citric acid in certain cases, hinting a great increase in future demand for malic acid to match up with the scale market of citric acid in the country.
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• Regarding production, although most of malic acid is produced via chemical synthesis at the moment, the production by such method may face headwinds due to China's stricter environmental regulations and the growth of global environmental awareness. While this funding project is to produce malic acid from fermentation, a safer and more environmentally-friendly production process, in line with the current low-carbon consumption trend of great prospect in the malic acid industry development. Meanwhile, Huaheng Biotech has developed R&D platforms, advanced bio-manufacturing technology and capacity to convert raw materials at higher rates and reduce production costs, catering for the green consumption amongst the masses with high-performing, reasonably priced products.
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• This project helps expand Huaheng Biotech's product portfolio,  facilitate the company's strategic development, and foster its lead in the field of synthetic biology in all.