Contemporary Amperex Technology Co Ltd (SZ:300750), a leading EV battery maker and key Tesla partner, is seeking a $1 billion credit facility to support a new battery cell production joint venture in Karawang, Indonesia. Here’s what investors need to know.

Significance of Indonesia for CATL

• Strategic Location: Its proximity to nickel and cobalt mines minimizes raw material costs.
• Capacity Expansion: The Karawang plant aims to bolster CATL’s output to meet rising global EV demand.
• Long-term Partnership: The requested loan term of five to seven years aligns with planned project timelines.

Funding and Market Reactions

CATL intends to raise the funds through a consortium of banks. This strategy allows the company to avoid equity dilution while maintaining operational flexibility. Following this announcement, CATL’s shares jumped by 1.4%.

Solid Financial Position

Even with this new borrowing, experts predict CATL will keep a strong balance sheet. Investors should follow metrics like leverage and coverage ratios as project capex increases:

• Debt Tracking: Investors can monitor CATL’s net debt-to-EBITDA and interest coverage ratios over the next few quarters.
• Issuer Ratings: The latest updates on CATL’s credit ratings will be crucial as the company takes on long-term debt.

Dual Financing Approach

Additionally, reports indicate CATL is considering a secondary listing in Hong Kong to raise at least $5 billion in equity. This combined approach of seeking debt for projects and fresh equity for balance sheet strength highlights CATL’s ambitions to secure its leading position in the battery market.