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Unit of Embattled CEFC Under Probe for False Disclosures

CEFC China headquarters in Shanghai. Photo: IC
CEFC China headquarters in Shanghai. Photo: IC

CEFC Anhui International Holding, a Shenzhen-listed unit of CEFC China Energy, is being investigated by the securities regulator for alleged falsification of information. The probe is the most recent development rattling the private conglomerate since founder Ye Jianming came under investigation in January.

CEFC Anhui received a notice from the China Securities Regulatory Commission regarding the investigation of allegations that the company made false statements in its 2017 annual report, CEFC Anhui said Wednesday in a filing.

The company, which is principally engaged in fertilizers, agricultural chemicals and energy businesses, is controlled by CEFC China’s main business subsidiary, CEFC Shanghai International Group. CEFC Shanghai contributed about 78.5% of CEFC China’s annual revenue in 2015.

CEFC China was once among China’s most aggressive dealmakers, amassing a large portfolio of energy and financial assets in Europe, the Middle East, Central Asia and Africa. It agreed in September to buy a $9 billion stake in Russia’s state-controlled oil major Rosneft, the world’s largest listed oil company.

Caixin reported earlier that CEFC China founder and Chairman Ye was placed under investigation in January by Chinese authorities over suspected economic crimes. The news sparked a series of downgrades of CEFC China’s units, leading to the abandonment of a bond sale, the freezing of assets by several courts and the collapse of the Rosneft deal.

The Shenzhen Stock Exchange in May questioned CEFC Anhui on its debts and transactions with affiliated companies after auditors issued a disclaimer on the company’s 2017 annual financial report.

According to the annual report, CEFC Anhui posted an 11.7% decline in 2017 revenue to 16.8 billion yuan ($2.44 billion). Net profit rose 21.6% to 447 million yuan, the company reported.

But the auditor, Shanghai Certified Public Accountants, issued a disclaimer of opinion against the annual report, citing outstanding issues and a “severe liquidity shortage.”

The auditor said it could not warrant that the annual report and the 2018 first-quarter report were factual, accurate and complete without any false record, misleading statement or important omissions.

In July, the Shenzhen bourse required CEFC Anhui to explain its financial positions. The company said in a statement July 24 that it had replied to the bourse’s inquiries but didn’t disclose any details.

CEFC Anhui in early July forecast a net loss of between 600 million yuan and 715 million yuan for the first half this year. The company has delayed its first-half earnings release.

Parent CEFC Shanghai is also mired in a debt crisis. Since May, CEFC Shanghai has defaulted on five bonds with total payment obligations of 8 billion yuan. Data from the Shanghai stock exchange showed that by the end of 2017, CEFC Shanghai had net assets of 63.6 billion yuan. As of the end of January, the company had liabilities totaling 114.5 billion yuan.

CEFC Shanghai said in an Aug. 20 filing that the investigation of controlling shareholder Ye has caused adverse impacts on the company’s business operation, adding it is making efforts to raise money for debt repayment.

CEFC Shanghai has repayment obligations on 13 bond issues totaling 29.6 billion yuan, including 10 billion yuan to be repaid this year, according to data from financial information provider Hithink Flush Information Network.

Contact reporter Han Wei (weihan@caixin.com)

 

Read more about scandal-ridden CEFC China Energy:

Investigation Casts Shadow on Rosneft’s China Investor CEFC

Founder of Troubled CEFC Hobnobbed With Europe’s Elite to Build Empire

CEFC Unit Suspends Bond Trading After Probe Report Sparks Sell-Off

CEFC China Chairman Steps Down, Czech Presidential Office Says

Troubled CEFC’s First Bond Default Deepens Debt Concerns

Troubled Energy Group’s Brokerage Arm Gets Near-Failing Grade


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