Beijing launches audit of China Resources
Beijing has launched an audit of China Resources (Holdings) after top managers of the conglomerate's electricity unit were accused of causing a major loss of state assets by overvaluing some mining assets it acquired.
Xinhua yesterday quoted an unnamed official at the State-owned Assets Supervision and Administration Commission (Sasac) as saying that it had noticed media reports about the case, adding that "relevant authorities" were conducting an audit of China Resources. "Sasac will take measures according to the audit results," the report said. "If there are legal and disciplinary irregularities, they will be dealt with in a firm manner."
This comes a day after the Communist Party's anti-graft watchdog, the Central Commission for Discipline Inspection, said it was processing a whistle-blower's complaint about alleged negligence in the acquisition of three coal mines and related assets by China Resources' subsidiary China Resources Power Holdings (CRP) in early 2010.
A joint venture 49 per cent-controlled by CRP bought an 80 per cent stake in the assets from Shanxi tycoon Zhang Xinming's Jinye Group for 7.9 billion yuan (HK$9.9 billion), according to Economic Information Daily reporter Wang Wenzhi . That valued the entire assets at 9.9 billion yuan, almost double the 5.2 billion yuan value assessed by state-owned coal miner Datong Coal Mine Group which tried to buy the same assets just three months earlier, Wang alleged.
A Datong spokesman would not comment yesterday, saying he needed time to find the relevant facts. Asked to comment on news of the audit, Wang sent a text message saying "thank you," without elaborating.
On Wednesday, Wang accused China Resources chairman Song Lin of ordering the deal in 2010. Song was CRP's chairman at the time.
The Hong Kong-registered conglomerate, with major operations in retail, energy and property, reports directly to Beijing, making Song's rank equal to that of a vice-minister. It ranked 187th on Fortune magazine's Global 500 list this year.
Wang said an assessment for CRP by Shanxi Borui Mining Rights Valuation & Appraisal had valued the 80 per cent stake at 8.35 billion yuan. The valuer had projected that Yuanxiang mine - one of the three purchased mines - would book pre-tax profits of between 192 million yuan to 1.2 billion between 2010 and last year, but Wang said it made losses in each of those years.
He also said an internal audit by China Resources found the valuation to be massively above the actual worth of the assets. China Resources said on Wednesday that libellous media reports had damaged its and its management's reputation, and it reserved the right to seek redress for legal and economic losses.
On July 5, six minority shareholders filed a lawsuit in Hong Kong against 20 past and present CRP directors containing similar accusations. Mounting scrutiny of CRP's acquisition has seen its share price fall 15.6 per cent in the past three days. It fell 4.5 per cent yesterday to HK$16.86.