China Eximbank provides a loan to facilitate Zhuzhou CRRC Times Electric's acquisition of Specialist Machine Developments (SMD) Limited

Project narrative

In 2015, the Export-Import Bank of China issued a loan to Zhuzhou CRRC Times Electric Co., Ltd. (TEC) — a Chinese state-owned company specializing in mass transit electric drive converter and control systems and subsidiary of CSR Corporation Limited — to facilitate its acquisition of British deep-sea robot and subsea engineering machinery manufacturer Specialist Machine Developments (SMD) Limited. On February 5, 2015, Zhuzhou CSR Times Electric signed an acquisition agreement with private equity firm Inflexion for the purchase of 100% of the equity of SMD from Inflexion for approximately £108,300,000 GBP (RMB 1,011,879,000) with potential additional payments of £10,000,000 GBP and £7,000,000 GBP if SMD reached certain performance indicators in the first and second years after the acquisition. On April 9, 2015, CRRC Times Electric (Hong Kong) Co., Ltd. acquired the entire share capital of SMD Limited. SMD is based in Wallsend, Newcastle, England. SMD is regarded as the world's leading manufacturer of deep-sea robots and equipment for subsea trenches and cables. SMD manufactures underwater remote operated vehicles (ROVs) for deep-sea applications and was organized with business streams for work class ROVs, subsea trenching, submerged mining, and marine renewables. It is the second largest provider of deep-sea robots in the world, the world's first commercial seabed mining equipment manufacturer, and has half of the global market share for the seabed self-propelled trenching and cable laying engineering machinery. SMD also provides tidal power generation equipment and ROVs for working in nuclear power plants. Its products are sold in more than 30 countries. It sells defense ROV systems to the Royal Navy of the United Kingdom. SMD was to remain independent in its business operations and the day-to-day functions under its original management team, albeit with a new board of directors (with chairman from CRRC Times) to be set up to take charge of business strategy and a new executive and at least one financial staff member added. Zhuzhou CRRC Times Electric stated its intentions to establish a Chinese subsidiary of SMD and accomplishing manufacturing base that would become the leading supplier of ROVs in the Chinese market. For Zhuzhou CRRC Times Electric, the acquisition of SMD was born out of a years' long entry into the marine engineering equipment industry. The acquisition was expected to align with CRRC Times' offshore wind power business, its land engineering machinery business, and its oil drilling frequency conversion equipment industry. Zhuzhou CRRC Times also framed the acquisition of SMD as following the maritime development strategy proposed by the 18th National Congress of the Chinese Communist Party in 2012 and other plans produced by Chinese government ministries and commissions that set targets to improve China's maritime economy and industry, specifically its offshore engineering equipment manufacturing, offshore oil and gas development, and the deep-sea robot equipment industry. The acquisition was thus expected to serve as a foundation of China's deep-sea equipment industry, bringing more advanced technologies and more markets for marine engineering equipment. Some observers have noted that the Chinese government has great interest in deep-sea mining; some arguing that it plans to continue its dominance in the rare earth trade by turning to deep-sea mining for minerals and metals needed for more advanced technologies. In this light, SMD's technology would be beneficial. SMD later provided spare parts and maintenance services for an ROV that it designed for Chinese research vessel 'Ke Xue', a ship owned by Chinese Academy of Sciences’ Institute of Oceanology (IOCAS) that was used to conduct research by some People's Liberation Army-affiliated universities and conducted underwater surveying activities in the South China Sea and off of Taiwan and Okinawa, Japan.