China’s CEFC chairman investigated for suspected economic crimes: source

By Benjamin Kang Lim

BEIJING (Reuters) – The chairman of China’s CEFC China Energy, the private firm that has agreed to buy a nearly $10 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 said 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.

News of the probe comes after the Chinese government last week took control of insurer Anbang Insurance Group Co Ltd 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.

CEFC China Energy, which is focused on energy and other investments abroad, has 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 percent stake in Rosneft for $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, including real estate, a brewing group, a football stadium and an airline, with the apparent backing of Chinese and Czech political leaders.

CEFC China Energy did not respond to requests for comment on the probe into Ye, reported earlier on Thursday by Chinese magazine Caixin.

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

A senior 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.

Company executives had initially said the deal to close early this year.

CONGLOMERATE CRACKDOWN

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 ($9.5 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.

Shares in CEFC China Energy’s listed subsidiary, CEFC Anhui International Holding (SZ:), slumped as much as 10 percent, the maximum allowed, on reports of the investigation.

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