(Yicai Global) Feb. 21 -- Hunan Zhongke Electric’s shares surged after the Chinese firm said Contemporary Amperex Technology has become a shareholder of a project company of its that is building a plant capable of producing 100,000 tons of lithium battery anode materials a year.

After earlier gaining as much as 8.4 percent, Zhongke Electric [SHE: 300035] finished today 5.2 percent higher at CNY31.91 (USD5.04).

Power battery giant CATL will invest CNY280 million (USD44 million) for a 35 percent stake in Gui’an New Area Zhongke Xingcheng Graphite, Yueyang-based Zhongke Electric said in a statement late yesterday. The unit will prioritize supplies to CATL in exchange for a capital increase.

Zhongke Xingcheng Graphite and CATL will jointly invest CNY700 million to promote the project, according to the agreement the pair signed. After the transaction is completed, Zhongke Xingcheng Graphite's registered capital will rise to CNY800 million.

Zhongke Electric began construction of the CNY2.5 billion (USD395 million) lithium battery anode materials plant last December. Zhongke Xingcheng Graphite will operate the plant, whose first 65,000-ton phase is expected to be completed and put into production within 24 months.

Zhongke Electric is one of the main suppliers of anode materials for lithium batteries in China, and it counts CATL, BYD, China Aviation Lithium Battery Technology, Amperex Technology, and SK Innovation among its clients.

Due to the soaring production capacity of electric vehicles both in China and overseas, CATL has not only expanded its annual output of power batteries, but also invested in upstream companies and projects, including suppliers of battery cathode and anode materials, to ensure the supply of raw materials for its new factories.

Welcoming CATL as a strategic investor can not only relieve the financial pressure of project construction by upstream companies, but also provide a guarantee for future sales.

Editor: Futura Costaglione