PetroChina corruption probe widens to include entrepreneur Hua Bangsong

PUBLISHED : Tuesday, 17 September, 2013, 2:36pm
UPDATED : Wednesday, 18 September, 2013, 7:14pm

A corruption investigation into PetroChina has put the spotlight on Chinese entrepreneur Hua Bangsong and the links that his company, Wison Engineering Services, has with the oil giant.

The founder and chairman of Wison was helping Chinese authorities with an unspecified investigation, Wison said on September 3 amid a widening probe into PetroChina and its parent China National Petroleum Corp (CNPC).

Shares in Shanghai-based Wison - which has gotten most of its revenue from PetroChina in recent years - have been suspended in Hong Kong since then. They had fallen 30 per cent after the Chinese government announced the investigation into several former top executives at PetroChina and CNPC in late August.

In a statement on Friday, Wison said Hua “is still assisting relevant authorities” but that it had not been informed about the nature of the investigation. It said Wison was considering appointing an acting chairman.

Wison was operating normally and would continue to service its existing contracts, it added.

“The company has relied excessively on one customer - PetroChina - so naturally the news about the chairman, the founder sparked fears about the company’s future,” said Wu Da, a portfolio manager at Beijing-based Changsheng Fund Management Co Ltd, which does not own shares in Wison but has shares in its larger rival Sinopec Engineering.

Hua, 47, could not be reached for comment. A Wison spokeswoman turned down a Reuters request for an interview with him, saying it was “inconvenient” for Hua.

According to Wison’s filings with the Hong Kong stock exchange, Hua founded the company in 1997 and built it into China’s largest private petrochemical contractor thanks largely to revenue from PetroChina, one of the world’s most valuable energy firms with a market capitalisation of about US$240 billion.

Since 2002, Wison has won numerous engineering, procurement and construction (EPC) contracts for PetroChina’s petrochemical and refining projects in a sector dominated by state-owned contractors, including units of PetroChina and Sinopec Group, parent of Sinopec Corp , Asia’s largest refiner.

Between 2009 and 2011 for example, Wison booked 8.1 billion yuan (US$1.32 billion) in revenue from PetroChina, according to filings, accounting for the majority of its revenue over that period.

Wison said it won the contracts because of its technical capabilities, experienced team and track record. Many of its senior staff are Chinese oil industry veterans, some of whom used to work for PetroChina, according to its website.

Wison ranked fifth in terms of EPC revenue from China’s oil refining and chemical industries in 2011 and 2010, according to the share offer prospectus of Sinopec Engineering.

It was the only privately controlled firm among China’s top 10 refining and chemical EPC contractors - a group that held 47.2 per cent of the market in 2011 with total combined revenue of 129.5 billion yuan (HK$163.3 billion).

Some industry insiders said Wison was regarded as a well-managed company with an experienced team.

Investors and specialists who have met Hua said he came across as a smart entrepreneur.

“He always strikes me as a very low-profile guy, a man of vision and guts,” said an official with an engineering firm that has worked with Wison on a natural gas project.

Hua began his career in the petrochemical industry in the sales department of a metal screen factory in Jiangsu province, next to Shanghai, according to Wison’s share prospectus and filings.

He listed Wison in December, raising more than US$200 million. Based on its last traded price of HK$1.98 - 29 per cent below its IPO price of HK$2.79 - Wison has a market value of US$1.04 billion.

After nearly a decade of relying of PetroChina for work, Wison appears to have diversified.

From last year, its revenue from PetroChina has been minimal, amounting to just 111.1 million yuan in the first half of this year, or 5.6 per cent of the total.

Wison has won contracts from new clients such as Germany’s BASF and entered into more coal-to-chemical projects in China. Those are projects that use coal as a substitute for oil in the production of chemicals.

The firm emphasised that strategy in a separate email to Reuters, saying “Wison Engineering has realised more balanced development under its existing diversification drive”.