China Resources Power shares tumble on graft claims
Shares in China Resources Power Holdings tumbled 10 per cent on Wednesday in what brokers said was a response to comments in Chinese media alleging corruption in the state-run electricity producer.
In Hong Kong, six minority shareholders of the company filed a lawsuit against former and existing executives of China Resources Power for what they said was faulty approval of its acquisition of coal mining assets in 2010.
Shares of the company plunged to a day low of HK$17.62 in Hong Kong trading before recovering to close at HK$17.98. Nearly 46 million shares changed hands, five times its 30-day average, making it the third most active counter on the exchange on Wednesday.
The company, an independent electricity producer that relies on coal for over 92 per cent of its power generating capacity, told the Hong Kong exchange that it was unaware of any reason for the fall in the share price.
The lawsuit filed with the Hong Kong High Court on July 5 alleged that China Resources Power “suffered serious loss and damage” from its acquisition of coal mining assets in the northern province of Shanxi in 2010, according to a copy of the suit obtained by Reuters.
The exploration licences of some of the mines had expired when China Resources Power made the acquisition, which resulted in losses, the suit says, adding that executives breached their duties. The shareholders demanded an unspecified amount of damages.
Several Hong Kong traders linked the fall in China Resources Power’s shares on Wednesday to widespread Chinese media reports citing a Chinese journalist affiliated with the official Xinhua news agency who made similar allegations.
The journalist and China Resources Power could not be immediately reached for comment. The company is yet to respond to the lawsuit.
“It is because of the Xinhua report,” said Peter Yao, an analyst with BOCI Research, of the fall in the share price.
“It is having a big impact on its share price today,” he said, adding that the report could have a negative impact on China Resources Power’s planned merger with sister company China Resources Gas Group.
China Resources Gas shares fell 3.6 per cent on Wednesday.
In May, China Resources Power announced that it planned to merge with the natural gas distributor to create what analysts say will lead to a more integrated energy group. The combined entity would have a total market value of US$17 billion based on Wednesday’s closing prices.
The report posted on Xinhua’s website and on Chinese twitter-like Weibo feed had the journalist, identified as Wang Zhiwen, accusing the executives of “intentionally causing a loss of billions of yuan of state-owned assets” through the acquisitions in the northern province of Shanxi.
The report - which was picked up by numerous Chinese media and news portals - along with the full submission the journalist made to the Chinese Communist Party’s disciplinary authority, was later removed from Xinhua but is still visible on Weibo.
China Resources Power has been regarded a relatively well-run domestic power producer, a key reason why its shares have outperformed its peers in the past few years, analysts say. Its net profit soared 68 per cent to HK$7.48 billion last year.
Its merger with China Resources Gas has yet to win shareholder approval.
Earlier this month, Citi Group said in a research report that it was highly likely that minority shareholders of China Resources Power would oppose the merger proposal due to valuation concerns and uncertainties over China Resources Gas’ business prospects.