China Resources Power Holdings Co. (836), which was accused last year of deliberately overpaying for coal mines, said President Wang Yujun is under investigation by prosecutors in Jiangsu province.
The company suspended Wang, with Chairman Zhou Junqing assuming his duties, according to a Hong Kong stock exchange filing yesterday. Wang remains an executive director, it said. China Resources Power didn’t provide investigation details.
“It’s certainly a big risk for China Resources Power, as the investigation could further” expose the extent to which it overpaid for the Shanxi coal mines and other related corruption, said Shi Yan, an analyst at UOB Kay Hian Ltd. in Shanghai. “It could lead to asset write-offs, which we estimate could be anywhere from 5 billion yuan to 9 billion yuan.”
Song Lin, former chairman of the company’s parent, state-owned China Resources Holdings Co., was removed from his post in April after coming under investigation by a Communist Party commission for “suspected discipline violations,” language that typically denotes allegations of corruption. The probe into Wang follows allegations that the company deliberately overpaid for three coal mines in Shanxi, hurting minority shareholders’ interests.
A woman answering China Resources Power’s general phone number said the company’s spokesman wasn’t immediately available for additional comment on Wang, or the possibility of asset write-offs.
Shares of China Resources Power dropped 3 percent to HK$23.00 as of 10:39 a.m. in Hong Kong; the city’s benchmark Hang Seng Index was little changed.
Overpaying for coal mines
In allegations posted on Xinhua’s website in July 2013, Song and China Resources Power were accused of overpaying for coal mines in Shanxi province purchased in 2010. The claims prompted a government audit of the parent, according to Xinhua. Song and the company denied any wrongdoing.
The Song Lin probe is part of a Communist Party campaign to root out the corruption that President Xi Jinping has said threatens its six-decade hold on power. Party leaders have promised to target both “tigers and flies,” or cadres up and down the power ladder, over graft.
Zhou Yongkang, a former Politburo Standing Committee member and security chief, was investigated by the party, the official Xinhua reported on July 29.
The former auditing head of China Resources Holdings Ltd., parent of China Resources Power, was taken away by police a week ago on suspicion of illegally obtaining state secrets, the Economic Information Daily reported on Aug. 25, without citing anyone.
Wu Ding, chief executive officer of unit China Resources Capital Holdings Co., is also being investigated by authorities, Caixin magazine reported on April 23, citing several unidentified people.
The Wang investigation won’t “materially and adversely affect” normal operations, the Hong Kong-based company said in yesterday’s filing.