March 1, 2018 / 4:00 AM / 4 months ago

UPDATE 4-China's CEFC chairman investigated for suspected economic crimes - source

* CEFC had 60 bln yuan in debt - Ye said in interview last year

* CEFC has amassed assets in Czech Republic, Chad and UAE

* Shares and bonds related to CEFC plunge

* News of probe comes after Beijing seizes control of Anbang (Adds background on Ye in para 24-27)

By Benjamin Kang Lim

BEIJING, March 1 (Reuters) - The chairman of China's CEFC China Energy, the private firm that has agreed to buy a nearly $9.1 billion stake in Russian oil major Rosneft, has been investigated for suspected economic crimes, a person with direct knowledge of the matter said.

Ye Jianming, who founded the company in 2002, was taken in for questioning this year, the person said without saying which authorities were involved or whether the probe was continuing. The person declined to be identified because of the sensitivity of the matter.

Shares and bonds related to CEFC China Energy plunged on the news, first reported earlier on Thursday by Chinese magazine Caixin.

Detail on the probe comes after the Chinese government last week took control of insurer Anbang Insurance Group Co Ltd and said its chairman was being prosecuted for economic crimes, underscoring Beijing's willingness to curtail big-spending conglomerates as it cracks down on financial risk.

It also comes ahead of an annual meeting of parliament, which opens on Monday, when President Xi Jinping is likely to cement his hold on power with a proposal to remove term limits for the office.

Given problems in China's financial system, it was "distinctly possible" the government would assume control of more firms, said Professor Christopher Balding at the Peking University HSBC School of Business in Shenzhen.

"They are trying to essentially ... build firewalls around each of these things so that people that are dealing with them say 'OK the government stepped in, I’m going to get my money back'," Balding said.

In just a few years, CEFC China Energy transformed from a niche fuel trader into a rapidly growing oil and finance conglomerate, with assets across the world and an ambition to become one of China's energy giants. It agreed in September to buy a 14.16 percent stake in Rosneft for $9.1 billion.

Aside from its energy assets stretching from Chad to the United Arab Emirates to Kazakhstan, it has also invested in a series of Czech companies. It has made investments there including real estate, a brewing group, a football stadium and an airline, with the apparent backing of Chinese and Czech political leaders.

CEFC China Energy did not respond to requests for comment on the probe into Ye.

ROSNEFT DEAL CONCERNS

The investigation casts further doubt on the timing of the completion of the Rosneft deal.

A source with direct knowledge of the transaction told Reuters earlier this week he expected the deal to close in the first half of this year, suggesting a delay from previous expectations.

CEFC China Energy executives had initially said the deal would close early this year.

A spokesman for Rosneft said the company did not know anything about the Chinese investigation.

"It (the investigation) is not related to us," spokesman Mikhail Leontyev said.

CEFC China Energy's debt and lack of transparency over its ownership and financing have drawn scrutiny among international bankers and some regulators.

Last month, the Czech National Bank rejected CEFC's push to increase its stake in the country's privately held J&T Finance Group (JTFG) because of a lack of information about the origin of the funding for the deal.

In an interview with Caixin last year and published in the article on Thursday, Ye said CEFC's total outstanding loans amounted to over 60 billion yuan ($9.5 billion).

More than half of that was owed to China Development Bank, he said, which sources told Reuters is the company's single largest source of financing.

The company planned to repay debts by selling assets, including those in the aviation and trading sectors, to focus on core assets in oil and gas production and the finance sector, Ye told the magazine.

CEFC related bonds slumped on the news. Traders said CEFC Shanghai International Group's exchange-traded 3 billion yuan 2020 4.98 percent bond plunged 33 percent on Thursday morning, prompting the Shanghai Stock Exchange to suspend trading for most of the day, citing unusual fluctuations.

Trade in the company's 6 billion yuan 2021 4.08 percent bond was also suspended for most of the day after plunging 34.1 percent to 60.00 yuan.

Shares in CEFC China Energy's listed subsidiary, CEFC Anhui International Holding, also slumped as much as 10 percent, the maximum allowed.

AMBITIOUS

Ye, born in 1977, set up the Shanghai-based company in his home town in Fujian province with big ambitions. In 2016, he said he wanted to create a second Sinopec, China's second-largest energy giant and Asia's top oil refiner.

The businessman ranked second - and two spots ahead of French President Emmanuel Macron - in Fortune magazine's '40 Under 40' list of the world's most influential young people in 2016.

His influence goes well beyond China. Czech President Milos Zeman appointed him as an adviser on economic policies in 2015.

A spokesman for Zeman did not respond for request for comment on Thursday.

($1 = 6.3390 yuan)

Reporting by Benjamin Kang Lim Additional reporting by Aizhu Chen and Elias Glenn in BEIJING, Andrew Galbraith in SHANGHAI, Julie Zhu in HONG KONG, Olesya Astakhova and Katya Golubkova in MOSCOW and Robert Muller in PRAGUE; Writing by Josephine Mason; Editing by Lincoln Feast and Nick Macfie

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