China's Planned $9 Billion Stake in Russian Oil Partner Delayed

Updated on
  • CEFC China Energy in spotlight amid reports of investigation
  • Purchase of Rosneft stake has been delayed, Chengxin says

A Rosneft pavilion and logo. .

Photographer: Andrey Rudakov/Bloomberg

CEFC China Energy Co.’s planned $9 billion purchase of a stake in Russian oil giant Rosneft PJSC has been delayed, according to a Chinese rating agency, citing discussions with the Chinese company that’s recently come under scrutiny.

A unit of the little-understood conglomerate informed China Chengxin International Credit Rating that there had been some delays in the transaction, the agency said in a March 8 note posted to a website affiliated with the country’s central bank. CEFC’s remaining payment due for the 14 percent share of Rosneft is highly dependent on external borrowing after making a “huge” initial payment, Chengxin said. The rating firm added that it sees “uncertainties” for the acquisition. CEFC declined to comment.

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"If the transaction goes smoothly, CEFC Shanghai will face a substantial increase in its debt burden,” Chengxin said in the statement, referring to unit CEFC Shanghai International Group. “If it doesn’t, the company will take a huge investment loss."

The status of the Russian oil deal, sealed as presidents Xi Jinping and Vladimir Putin use energy cooperation to draw their countries closer together, has come into question amid reports Chairman Ye Jianming is said to have been investigated by authorities and that the company is being taken over by an arm of the Shanghai government. The company has denied the reports. Glencore Plc, which is selling the Rosneft stake along with Qatar Investment Authority, said last month the deal is expected to close during the first half of the year.

Rising Star

The Rosneft agreement capped a series of deals that propelled CEFC onto the global stage. Since its founding in 2002, the private company has picked up assets in oil and fuel storage and distribution, upstream production, financial firms and even a soccer team. The speed of its rise has spawned questions about its financial backing and origins, and sparked speculation that it has links to government officials.

Separately, details emerged last week about how a subsidiary of state-owned China Huarong Asset Management accumulated a 36 percent stake in the unit through which CEFC purchased its share of Rosneft. Huarong built up the stake in CEFC Hainan International Holdings Co. over two transactions during December and February, according to Administration for Industry & Commerce filings. The deal was a debt-to-equity swap, Caixin reported Friday, citing a person at the asset manager who it didn’t identify. CEFC declined to comment on the Huarong stake as well.

CEFC has also been approaching non-traditional lenders for costly short-term loans from at least the second half of last year, Reuters reported Monday, citing six sources it didn’t identify.

— With assistance by Judy Chen, Alfred Cang, and Venus Feng

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