China Courts Energy Trader Mercuria in Bid to Revamp State Firms

  • Head of China’s SASAC meets with Mercuria official in Beijing
  • Regulator hopes Mercuria will help raise SOEs’ profitability

China is roping in one of the world’s biggest independent energy traders to help revamp its sprawling and inefficient state-owned enterprises.

Xiao Yaqing, the head of China’s State-owned Assets Supervision and Administration Commission, met with Han Jin, the president of Mercuria Asia Group in Beijing on Jan. 24, according to a statement on SASAC’s website. The regulator said it hopes the trading company will help it reform government-controlled firms and raise their profitability.

Revamping state-owned enterprises is critical to President Xi Jinping’s policy of moving the $10 trillion economy away from an over-reliance on debt-fueled infrastructure investment and exports to one powered more by services and consumer spending. The so-called SOEs, spanning from power companies to train makers to banks, have traditionally been a source of political patronage and economic power for the Communist Party. China has embraced mergers for the overhaul, with deals worth billions announced since late 2014.

SASAC hopes that Mercuria will also help raise the SOEs’ risk-control capabilities, Xiao was cited as saying in the statement. The trader wants to deepen cooperation with the Chinese central government-owned firms in business worldwide, Han was cited as saying.

Stake Sale

Mercuria Energy Group Ltd. is one of the five largest independent energy traders, handling more than 2 million barrels of crude and petroleum products a day. Founded more than a decade ago, the privately owned firm’s founders include two former Goldman Sachs Group Inc. bankers. The company has major trading offices worldwide, including in Singapore, Houston and Geneva.

ChemChina, the nation’s largest chemical company, acquired a 12 percent stake in Mercuria last year. The deal gave the Swiss commodity trading house better access to the world’s largest market for raw materials. A key driver of that deal was Han, a Chinese national who has overseen Mercuria’s expansion in the Asian nation.

In 2015, the trading house agreed to sell a 51 percent interest in its Henry Bath & Sons metals-warehousing business to Beijing-based CMST Development Co. for about $60 million. Prior to that, Mercuria sold a 50 percent stake in Vesta Terminals, an oil-storage business, to a unit of state-owned China Petroleum & Chemical Corp.

— With assistance by Andy Hoffman

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