Mystery of China Energy Giant That Came From Nowhere Deepens

(Bloomberg) -- CEFC China Energy Co.'s rapid ascent was shrouded in mystery and the turmoil that's engulfed the company over the past week is no different.

Just six months ago, CEFC called itself China's largest private oil and gas company, with 50,000 employees and revenue of more than $40 billion. That's when it agreed to buy a $9 billion stake in Russian state energy giant Rosneft PJSC following a series of deals elsewhere -- a spree that spawned speculation over how the previously obscure firm managed to make its mark on the international stage so quickly.

Now, it's being hit by a slew of bad news. Chairman Ye Jianming is said to have been investigated by authorities, it's reported to have been taken over by an arm of the Shanghai government and the company's bonds have posted record declines. All that's raised questions about the status of the Rosneft deal, which is yet to close. CEFC is also said to have missed paying $63 million for an oil-trading joint venture.

“The rise of the company was astonishing and difficult to understand,” said Li Li, a research director with commodities researcher ICIS China. “Now, many people in the industry are questioning not only its capability to finalize the Rosneft deal but to sustain normal operations.”

While a CEFC spokesman said last week that the company is operating normally and reiterated that reports about Ye being investigated are unfounded, Chinese President Xi Jinping's crackdown on debt-fueled expansion and scrutiny of the nation's rising tycoons is fueling speculation that the firm is being reined in. CEFC had holdings that spanned the Middle East to Africa and Europe, including everything from oil ventures to a soccer team and even a brewery.

Trading JV

The board of a unit, CEFC Anhui International, hasn't received any notice about being taken over by Shanghai Guosheng Group, a portfolio and investment agency controlled by the municipal government, the company said on an investor communication platform backed by the Shenzhen Stock Exchange.

Wuchan Zhongda Group, controlled by the government of China's Zhejiang province, this month canceled a plan to set up an oil trading house with CEFC after the company failed to make a payment for registered capital, according to people with knowledge of the matter. The JV, in which CEFC was meant to get a 40 percent stake, had aimed to trade crude, fuel and petrochemicals.

To contact the reporter on this story: Alfred Cang in Singapore at acang@bloomberg.net.

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Alexander Kwiatkowski

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