by GAO Jing

CATL has made its first move into hydropower, taking a minority stake in a large project in southwestern China as the world's largest battery maker expands upstream into clean power and energy services.

According to a filing by GD Power Development, CATL will take a 10% stake in a new hydropower project company led by a GD Power-controlled subsidiary, alongside a local Sichuan power developer.

The plant, located in Danba county in the Garze Tibetan Autonomous Prefecture, will have installed capacity of 1.15 gigawatts. It is the ninth cascade on the main stream of the Dadu River, one of China's major hydropower bases.

According to GD Power, the project carries a total investment of 15.27 billion yuan (about US$2.18 billion), with 30% funded by equity and the remainder by bank loans. Based on its stake, CATL's investment is estimated at 458 million yuan.

The project is expected to generate 4.72 billion kilowatt-hours of electricity annually. Based on current regulated tariffs, the project's equity internal rate of return is estimated at about 5.95%, in line with the long payback periods typical of hydropower projects.

This marks CATL's first equity investment in a hydropower asset. Analysts say the appeal lies less in short-term returns than in long-term positioning, as hydropower typically involves high upfront spending but stable, long-duration cash flows.

The investment follows April measures by China's energy regulator to encourage private-sector participation in major energy projects, including hydropower.

CATL dominates the global market for EV and energy storage batteries and in 2021 signed a strategic cooperation agreement with China Energy Investment Corporation, the parent of GD Power Development, covering wind, solar, hydropower and energy storage. The Danba project follows that agreement.

Beyond financial returns, the investment highlights CATL's shift toward integrated energy solutions. At its Hong Kong listing ceremony in May, chairman ZENG Yuqun said the company aims to become a zero-carbon technology company, not just a supplier of battery components.

The hydropower stake is significant as regulators tighten carbon-disclosure rules for batteries sold overseas. Under the EU's new Battery Regulation, from 2027 batteries sold into Europe must carry a compliant battery passport detailing supply chains and carbon footprints.

Approved by China's top economic planner, the Danba project has secured key regulatory clearances. Once operational, it is expected to save about 1.5 million tonnes of standard coal annually and cut more than 3 million tonnes of carbon dioxide emissions each year.