The agreement includes a technology transfer fee of US$1.5 million, which is payable upon achievement of certain milestones, and a royalty of US$2.25 per litre of diesel particulate filters (DPF), which could generate US$2.25 million in royalty revenue in 2018 and US$4.5 million in 2019 if the joint venture company achieves Kailong’s projections.
LiqTech will own 30% of the company and invest US$4 million in the joint venture over a 2-year period. Kailong will invest a minimum of US$2.5 million in LiqTech, conditional on Chinese government approval.
Zang Zhicheng, chairman of Kailong, said: “In the past 15 years, Kailong has established a strong business platform in China for selective catalytic reduction (SCR) systems for the diesel vehicle industry. We have been planning to enter into Silicon Carbide (SiC) production and have had serious discussions with companies in Italy, Japan and South Korea. We have ultimately chosen LiqTech as our partner because of its leadership in SiC technology and its extensive knowledge in working with SiC.”
LiqTech chairman Aldo Petersen said: “We believe that the DPF market in China will develop rapidly over the next several years, but to be successful, LiqTech believes the right partner is necessary. We believe we have found that partner in Kailong and are very optimistic about the long-term future of the new company. It will take 12–18 months to establish the new facility, but with our current capacity, LiqTech can service Kailong until the new company can service the DPF market in China.”