Chinese oil baron Ye Jianming investigated for suspected economic crimes: Source

Shares and bonds related to CEFC China Energy plunged on the news that chairman  Ye Jianming has been investigated for suspected economic crime.
Shares and bonds related to CEFC China Energy plunged on the news that chairman Ye Jianming has been investigated for suspected economic crime.PHOTO: REUTERS

BEIJING (REUTERS) - The chairman of China's CEFC China Energy, the private firm that has agreed to buy a nearly US$10 billion (S$13 billion) stake in Russian oil major Rosneft, has been investigated for suspected economic crimes, a person with direct knowledge of the matter said.

Ye Jianming was taken in for questioning this year, the person disclosed, without saying which authorities were involved or whether the probe was continuing. The person declined to be identified because of the sensitivity of the matter.

Shares and bonds related to CEFC China Energy plunged on the news, first reported earlier on Thursday (Mar 1) by Chinese magazine Caixin.

Detail on the probe comes after the Chinese government last week took control of insurer Anbang Insurance Group and said its chairman was being prosecuted for economic crimes, underscoring Beijing's willingness to curtail big-spending conglomerates as it cracks down on financial risk.

Given problems in China's financial system, it was "distinctly possible" the government will assume control of more firms, said Professor Christopher Balding at the Peking University HSBC School of Business in Shenzhen."They are trying to essentially... build firewalls around each of these things so that people that are dealing with them say 'OK the government stepped in, I'm going to get my money back'," Balding said.

In just a few years, CEFC China Energy transformed from a niche fuel trader into a rapidly growing oil and finance conglomerate, with assets across the world and an ambition to become one of China's energy giants. It agreed in September to buy a 14.16 per cent stake in Rosneft for US$9.1 billion.

Aside from its energy assets stretching from Chad to the United Arab Emirates to Kazakhstan, it has also invested in a series of Czech companies.

It has made investments there including real estate, a brewing group, a football stadium and an airline, with the apparent backing of Chinese and Czech political leaders.

ROSNEFT DEAL CONCERNS

The investigation casts further doubt on the timing of the completion of the Rosneft deal.

A source with direct knowledge of the transaction told Reuters earlier this week he expected the deal to close in the first half of this year, suggesting a delay from previous expectations.

CEFC China Energy executives had initially said the deal would close early this year.

A spokesman for Rosneft said the company did not know anything about the Chinese investigation.

"It (the investigation) is not related to us," spokesman Mikhail Leontyev said.

CEFC China Energy's debt and lack of transparency over its ownership and financing have drawn scrutiny among international bankers and some regulators.

Last month, the Czech National Bank rejected CEFC's push to increase its stake in the country's privately held J&T Finance Group (JTFG) because of a lack of information about the origin of the funding for the deal.

In an interview with Caixin last year and published in the article on Thursday, Ye said CEFC's total outstanding loans amounted to over 60 billion yuan (S$12.5 billion).

More than half of that was owed to China Development Bank, he said, which sources told Reuters is the company's single largest source of financing.

The company planned to repay debts by selling assets, including those in the aviation and trading sectors, to focus on core assets in oil and gas production and the finance sector, Ye told the magazine.

CEFC related bonds slumped on the news.

The 2020 exchange-traded bond sold by unit CEFC Shanghai International Group slid 31 yuan to a record low of 60 yuan before trading was suspended, according to the Shanghai exchange.

Trade in the company's 6 billion yuan 2021 4.08 percent bond was also suspended for most of the day after plunging 34.1 per cent to 60.00 yuan.

Shares in CEFC China Energy's listed subsidiary, CEFC Anhui International Holding, also slumped as much as 10 per cent, the maximum allowed.