By Stephen Nakrosis


Borqs Technologies Inc. said Monday it will voluntarily divest its investment interests and rights in Holu Hou Energy LLC after receiving a letter from the U.S. Treasury Department citing national security concerns tied to China's potential to gain access to "critical technology."

The letter asks Borqs to negotiate with the Committee on Foreign Investment in the U.S., or CFIUS, to divest "due to HHE solar energy storage system and EnergyShare technology for Multi-Dwelling Residential Units being deemed a critical technology and therefore a potential national security risk," the company said.

CFIUS is concerned that, through Borqs' software development and hardware sourcing capabilities in China, "the PRC could gain significant visibility and exert influence over HHE's business operations and get access to HHE critical technology," Borqs noted.

Borqs said it will comply with the CFIUS requirements by entering into a national security agreement with various parts of the U.S. government and voluntarily divesting its interests and rights in HHE.

The plan will include "engaging a nationally recognized investment bank with experience in administering competitive sales and auction processes," Borqs said.

Other aspects of the plan include assigning and hiring personnel to communicate with CFIUS, removing Borqs' administrative and technical influence over HHE, and reducing the company's ownership of HHE from a majority to a minority position with the target of divesting all, Borqs said.

"We believe this voluntary mitigation will enable the tremendous inherent value of HHE to be realized and that the divestment can be a profitable transaction for Borqs' shareholders," the company said.

According to Borqs, the Treasury Department letter noted that HHE is considered a top 10 solar energy storage supplier in Hawaii, has been increasing market share and expects to grow at an exponential rate. The company focuses on "multi-family dwelling units which are common in military housing," the letter said.


Write to Stephen Nakrosis at stephen.nakrosis@wsj.com


(END) Dow Jones Newswires

12-19-22 1804ET