CEFC chairman revealed to be under investigation

CEFC chairman revealed to be under investigation
CEFC chairman Ye Jianming was appointed an adviser to Czech President Milos Zeman and was seen as a middleman between Prague Castle (pictured) and the Chinese regime.
By bne IntelliNews March 19, 2018

The top men of Czech President Milos Zeman — Chancellor Vratislav Mynar, key advisor Martin Nejedly and Jaroslav Tvrdik, a representative of China Energy Company Limited (CEFC) in Czechia — have revealed that the chairman of CEFC is being investigated and will step down as head of the company.

CEFC was already reported to have financial problems, leading to speculation that deals recently announced in countries including Czechia, Russia and Romania could collapse. 

CEFC has been particularly active in the Czech Republic, where its chairman Ye Jianming was appointed an adviser to Zeman — a position he has retained despite the current problems. Jianming has been an economic adviser to Zeman since 2015, and CEFC bought a series of medium-sized Czech and Slovak assets in something of a frenzy the same year, though it has since largely slipped back behind the scenes.

Following reports that Jianming had been detained, Mynar, Nejedly and Tvrdik were dispatched to China on a fact-finding mission to look into the situation. 

“The Chinese side provided information that Ye Jianming is being investigated. The investigation is not against a corporate body of CEFC China and all the concerned sides declared their support for the Czech-Chinese co-operation project and for a project of CEFC Europe under One Belt One Road,” the president’s spokesman Jiri Ovcacek said.

Ovcacek also sought to play down Jianming’s role as an advisor to Zeman. Jianming has been seen as a middleman between Czechia and the Chinese regime, even though, formally, CEFC is a private company.

In an interview with Radiozurnal programme, Ovcacek stated: “In the case of this advisor [Ye Jianming], the post is really symbolic. Mr President is meeting his advisors once a quarter a year at Prague Castle without this one. It is really an honorary post, which should symbolise a new stage of Czech-Chinese relations”.

Asked why the Castle is so eager to keep Jianming, Ovcacek responded that, “We [the Castle] are waiting for an investigation of the issue.”

In addition to the news that Jianming is being investigated, Zeman’s top men also reported back that a company owned by the Chinese state is entering CEFC as a minority shareholder. The company has not been named, but according to Czech weekly Tyden.cz, it is believed to be CITIC Group, the 156th biggest company in the world, owned by the Chinese regime.

“The company still has one of its major priorities the projects in Czechia. The proof is that a very strong Chinese company with vast assets in China and abroad is entering CEFC as a minority shareholder,” Ovcacek said.

CITIC’s expected investment is likely to be related to the financial problems as reported by Reuters on March 12. CEFC was reportedly prepared to pay astronomical annual rates for short-term funding from non-traditional lenders. In January, CEFC borrowed CNY1bn (€130mn) from the Shanghai-based Bida Holding Group, also known as U.Trust Holding Group, for a 15-day loan with a daily interest rate of 0.1%, equivalent to an annual interest rate of 36%, said the newswire, citing a person with direct knowledge of the matter.

CEFC has also announced that the latest deal with Slovak-founded financial group J&T Finance Group (JTFG) is not happening, at least for now. Previously, CEFC and J&T had agreed that the Chinese group would raise its stake in J&T from 10% to 50%. But, given the current change in the shareholders' structure, CEFC is withdrawing a request to the Czech National Bank (CNB) to grant a permission to this deal.

Although the deal got a green light from the Czech anti-monopoly office (UOHS) in May 2017, the CNB refused to give its permission for the deal, which includes J&T Bank, until it was given more information about the source of the group's funds.

Despite CEFC backing away from the J&T transaction, “The mother company CEFC China still regards the projects in Czechia as a priority,” stated a spokesman for CEFC Europe, Pavel Bednar. 

“The development of our projects will continue, and we are looking forward to cooperating with our new shareholder. We see a synergy between its activities and activities of CEFC Europe not only in China but over the word,” added executive vice-president of CEFC Europe Marcela Hrda.

Even with the reports about a possible investment by CITIC, the fate of the Chinese company’s money in Czechia is at best uncertain, and the debacle is also problematic politically, as Prague Castle has already been criticised for its relationship with a dubious Chinese company.

Little is known about CEFC, despite its high-profile activity in the Czech Republic and elsewhere in the region. Jianming was, according to the Czech media, introduced to Zeman by Tvrdik. Tvrdik was Zeman's former minister of defence when the latter was premier, and since 2014 he has been a pro-Chinese lobbyist.

Tvrdik is also a co-president of the Czech-Chinese chamber, which is supported by the PPF group owned by Peter Kellner, the wealthiest Czech. Other people from Zeman’s inner circle — specifically Mynar and Nejedly — have been also connected to the Chinese company.

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