This was expected: the founder of the company E Jianming, who demanded to call himself "chairman of E", is under investigation in China at least since early March. "Kommersant" managed to find an article deleted immediately after publication about E Jianmin, the youngest and most mysterious billionaire of China. The information collected by Chinese journalists Caixin information partly sheds light on who Russian officials were going to sell a stake in one of the largest companies in the country and the world. Much of his business biography, Mr. E was on the verge of bankruptcy, and the bulk of the state was made on feigned trade deals with state enterprises.
The article about E Jianming's fate is as complicated as the businessman himself, who almost managed to buy a stake in Rosneft shortly before his arrest. The material was published on the Caixin Online website on March 1, and it turned out that the CEFC chief appears to have been detained and an investigation is under way. A few hours later, the article was deleted, but it was stored in Google's cache, which allowed Andrew Chubb, a researcher at Princeton University, to translate it into English. Officially, that the businessman is under investigation, was confirmed on March 19, who visited the Czech delegation in Beijing (the country's president Milosh Zeman appointed E Jianming an economic adviser).
But even before the arrest of the businessman almost nothing was known, although many searched for information - including in Russia, trying to understand who was entrusted with 14.16% of the shares of the largest public oil company in the world. Journalists of the Chinese edition studied E Jianmin for several years and managed to write the best portrait of him today in broad strokes. The material does not provide answers to many questions, but it provides enough information to understand the businessman's way of doing things and thinking.
Without family and name
There were a lot of rumors about E Jianming, the most popular of which was that he was the grandson of the Marshal of the PRC and the ally of Mao Zedong E Jianying, who died in 1983. This was indicated by the surname (E), and the beginning of the career of a businessman at home for a Chinese military leader in the southeast of the country. This would explain his rapid career rise, and the initial capital, and connections with the military. The website of the CEFC E Jianmin group published a refutation of this rumor (now removed), and the text indicates that it was allegedly dated 2002. But the refutation itself raises more questions than answers. The rumor appeared much later, and in 2002, Mr. E was 25 years old, he was a small, no-known businessman in Fujian province, and hardly anyone was very interested in his pedigree.
Born in Fujian in mainland China, in 1999, Ye Jianming moved to Hong Kong, and in 2002 he returned and founded five small companies in Fujian. They were engaged in the sale of fertilizers, processing wood and bamboo. Things went extremely sluggishly: the competition was big, the incomes were small, no one gave loans.
In 2005, the businessman registered the company Fujian CEFC Holdings Company, which began to deal with "finance" (in the real economy sector, Mr. E, according to the sources of the newspaper, by this time disappointed). It is noteworthy that at that time on the company's website it was designated as E Hongmin. The use of several names by the Chinese is quite common, but the frequency with which E Jianming changed personality is unusual even for his country. In 2009, when he moved to Shanghai, the businessman called himself E Yumin in addition to other names. The documents that were obtained by Caixin also indicate that the businessman was born on February 23, not June 5, as indicated on the CEFC website.
The origin of the first major asset of a businessman remains unclear. In an interview with the Chinese version of Fortune, he claimed that he received assets and licenses from the bankrupt oil company Xiamen Huahang Oil Company in 2006, which he purchased with partners at auction. But then in the first interview with Caixin, he already stated that he could not acquire the company, but lured out of it experienced experts. In the second interview, Caixin's version changed again: after the bankruptcy of Xiamen Huahang Oil, its licenses passed to the state, and the businessman received them during negotiations with the authorities of Xiamen City. It is well known that E Jianming tried all his life to attract former military men to the company, and often they helped him out in a difficult moment.
Mostly these were retired employees of the People's Armed Police (something like Russian internal troops), which was part of the structure of the People's Liberation Army of China. Most often they got the positions of "consultants", that is, lobbyists and defenders against harassment on the part of the state. When in 2012, E Jianming created a cell of the Communist Party in the company, he appointed the deputy of the political commissar of the Shanghai garrison of the People's Armed Police (part of the army) Jiang Chunyu. Many former military businessmen were employed in specially created charitable organizations.
Jiang Chunyu, as one of the former CEFC employees later said, did not have any important skills for the company, but he opened doors for the businessman to the world of high-ranking military. Another representative of this circle, former employee of the Central Military Council's office, Wang Hongyuan, headed a group of generals who served as consultants to the CEFC. Officially, they "read lectures at subsidiaries about how to implement the precepts of President E". In practice - served as a transfer link between the CEFC and the army units, which in China in the late 2000s often led illegal or semi-commercial activities.
The sequence of feigned operations
Before moving to Shanghai from Fujian province in 2009, the CEFC cases were so bad that the company often did not pay salaries to employees. The model of its functioning at that time assumed that the leaders of the branches of business invest their own funds, which enabled E Jianmin to call her "a collective private enterprise". The company was engaged in everything from the sale of aromatic oils to real estate transactions with the help of credit receipts.
CEFC was constantly on the brink of survival: huge interest was taken from loans to repay interest on previous loans and operations. The whole scheme worked only because the end of the 2000s was a time of unrestrained economic boom (the Chinese GDP grew at 9-10% per year), and money flowed all over the river.
In 2011-2012, luck was over. The first company to sell rubber colleague E Jianmin on the board of directors Lin Honghuei, then - the business of steel trading. The stories of former CEFC managers explaining the reasons for the failures, paint a picture of the total chaos in the financial markets of China at that time. "You could walk with the same contract from one bank to another and in each receive money for future profits. This worked until the price of the goods grew, but when it fell - the whole chain crumbled, "- said one of them.
E Jianming always wanted to trade in oil, but to form a large business in this area did not work. To extract, process and sell hydrocarbons, licenses were required, which CEFC could not count on with the available capital. The businessman decided to build a huge oil storage on Hainan Island and become a trader. At the ceremony of commencement of construction in 2011, many prominent persons were invited, including army generals, but in fact they started only in 2013, when CEFC was able to obtain from China Development Bank its first major loan of 2.44 billion yuan ($ 388 million for the current course). The repository was the first major capital facility of the CEFC, on the security of it it was already possible to attract serious sums.
After this, E Jianming undertook to strengthen the image. In the promotion of the image invested a lot of money. In Hong Kong media in the early 2010-ies published an article about him, entitled "Oil tycoon from the mainland buys a villa for $ 25.5 million." The businessman did not actually buy the house: he just needed to create an image of a successful man for Chinese creditors. The situation with the search for financing remained extremely acute. In an effort to obtain available funds, on May 20, 2013, CEFC bought 60.78% of Huaxing Chemicals for 1.9 billion yuan ($ 302 million), which was about four times cheaper than the company's value on the stock exchange. Five days later, CEFC laid this package of Huarong International Trust LLC, and, according to Caixin, even with a 60% discount for collateral, E Jianming managed to raise at least 2 billion yuan ($ 318 million) in excess of the cost of buying Huaxing Chemicals, which somewhat eased the financial position of the company. But the businessman found a real gold mine when he mastered the scheme of trade with state companies.
In China, state-owned enterprises have a turnover plan, and therefore are interested in the most active trading operations. CEFC was called to "help", chasing goods between state enterprises, the parent company of CEFC and its subsidiaries. For this, the state company was thanked by its credits on preferential terms.
Such operations were not entirely legal, and in 2016 the head of one of the main partner companies of CEFC, Port of Rizhao Group, was detained by the anti-corruption Commission for Discipline Inspection. He was charged with "illegally providing large loans to private companies", "reckless management of finances" and the creation of a "personal treasury." Later, E Jianming admitted that a third of his trading operations were feigned, but argued that this was a condition for obtaining loans for real trading.
Confused tangle of muddy bargains
E Jianming earned money from operations with state-owned companies from 2015 onwards to invest in assets around the world. He bought up football clubs, breweries in the Czech Republic, the right to develop deposits in Africa. Methods everywhere were similar: to find a local intermediary, to give him resources and full carte blanche to receive assets, legally or illegally. Sam E Jianming came to the country only after the completion of transactions, and he was accepted as a major investor in the local economy. In general, the successful scheme only once gave a serious failure: in late 2017, a criminal case was filed against the partner of businessman, ex-Minister of the Interior of Hong Kong Patrick Ho. He allegedly on behalf of the CEFC bribed the governments of Chad and Uganda to obtain licenses for the development of deposits. The local mediator was ex-Minister of Foreign Affairs of Senegal Sheikh Gadio.
Economically, the motives inevitably entailed geopolitical: E Jianming became not just a businessman, but a conductor of the new Chinese foreign policy, one of the builders of the "Belt and the Way" of President Xi Jinping.
The entrepreneur considered Kazakhstani KazMunayGas International N.V (KMGI) as an active asset on this path. KMGI (the main brand is Rompetrol) is a subsidiary of Kazakhstan's KazMunayGaz, whose main assets are concentrated in Romania - two refineries with a total capacity of 5 million tons per year and about 900 filling stations, as well as about 200 filling stations in Moldova, Bulgaria and Georgia. The company also trades in oil and oil products. In December 2016, a deal was agreed on the sale of CEFC 51% in KGMI, but according to open data, it has not been closed. In 2017, the company's EBITDA was $ 242 million, net profit - $ 80 million.
By 2016, Ye Jianming had already entered the Fortune 500 list, but his company was still a tangled ball of loans, opaque trading operations and muddy deals. Up to 80% of the turnover was accounted for by trade, and it was still difficult to separate the real from the fictitious one. The businessman announced that the new focus of the strategy will be the purchase of oil and gas assets with an emphasis on gaining control over the real deposits. In September 2016, 35% of the company was bought in Chad, in February 2017, it was announced that it had acquired 4% in one of the subsidiaries of the Abu Dhabi National Oil Company (ADNOC). This share, according to E Jianming, gave him the right to receive 3 million tons of oil a year, but supposedly additionally the CEFC received from ADNOC a contract for the purchase of another 10 million tons of oil per year. It was at this stage that the businessman turned a gold mine - "Rosneft".
The history of the sale of the stake in Rosneft fully corresponded to the habitual for E Jianming situation of turbidity and confusion. In December 2016, the Swiss trader Glencore and the sovereign fund of Qatar jointly purchased 19.5% of Rosneft shares for $ 11.6 billion. The transaction was financed by the Italian bank Intensa SanPaolo and unnamed Russian banks. According to E Jianming himself, when nine months later (September 8, 2017) the Rosneft package was proposed for C $ 9 billion by the CEFC, the Qatarians would lose about $ 300 million on this and expect "some political concessions" from Russia.
The businessman explained the necessity of selling to China by the fact that Rosneft, according to him, was under American sanctions and needed capital. The recipient of funds for the sale of a stake in Rosneft in December 2016 was the Russian budget, and not the company. According to Caixin, Glencore and Qatar, as part of the transaction, they were the transmission link, and "their task was to keep the asset until the buyer could find it."
E Jianming rushed to buy out the Rosneft package "like a kamikaze", although the CEFC did not have its own money, but had huge debts. The businessman considered two ways of raising capital. The first is to buy a stake in Rosneft for a separate company in which CEFC owns a minority stake, and most of the funds would have been made by other shareholders (this could have caused problems for these shareholders because of US sanctions). But in the process of discussion they decided to choose the second option: borrowing from large banks and using their own funds to the maximum. "Russian banks wanted to lend us, and we ourselves could easily raise $ 2 billion," explained Caixin E Jianming. "There was no shortage of money, many of us wanted to join, in particular, some large Chinese state-owned enterprises."
In most cases, since 2013, the money for the transaction of the company was given by the Chinese state-owned China Development Bank. By June 2017, the CEFC owed it to him already at 34.8 billion yuan ($ 5.3 billion) and about 25 billion yuan ($ 4 billion) to other banks. The company expected to pay this debt by the end of 2017 and then take a new loan to fulfill its obligations to purchase the stake in Rosneft. Relying on the stake in Rosneft as a basic asset, E Jianming then hoped to switch to self-processing oil and selling oil products.
But the plans failed. The deal between CEFC and the current owners of the Rosneft-Glencore package and the Qatar Qatar was announced in September 2017. In October, the Chinese company received a bridge loan from VTB for $ 5.1 billion. According to Caixin, the loan was issued for up to two years, but with the condition that it can be repaid in a year. The rate, according to the interlocutors of the publication, was only 4.1% (less than in such cases in China, not to mention foreign banks).
However, when E Jianming began to look for additional funds, it turned out that he underestimated the force of sanctions. According to Caixin sources, no foreign bank decided to lend to the businessman: "People E Jianming traveled around the world in search of funds, asked them from such giants as Citibank and HSBC, but in return received a request to provide a letter confirming that the money was not will be used in transactions with Russia, as Igor Sechin and Rosneft are under US sanctions. And the Chinese banks did not give money because the PRC government did not support the deal publicly. " As a result, the ceremony, scheduled for mid-January 2018, at which E Jianming was to report on raising funds, was canceled.
All sides were in an extremely uncomfortable situation: E Jianming put his reputation on the deal, in Russia it was presented as a "breakthrough of the American blockade." In addition, in case of delaying the process, the consortium QIA and Glencore may require a penalty. "It's hard to get off the tiger if you've already climbed it," the Chinese proverb describes the situation. Now the businessman is detained, his company is torn to pieces, and whether the Chinese government will "pick up" the deal with Rosneft to "not lose face" is not known.
Master of good impression
In the biography of E Jianmin, there are so many blank spots and inconsistencies that you hardly see a living person behind them. Article Caixin draws a businessman as a leader charismatic, obsessed with power and at the same time incredibly secretive.
In open sources of information about the recent past, the youngest Chinese billionaire is almost none. On the CEFC website, he was designated simply as an "industrialist and philanthropist" before his arrest, and even his employees did not even know about what parts of the company he was and how the company was managed. The company formally posed as a private structure, but the presence of the word "China" in the name aroused many doubts: it was usually present only in titles of state enterprises. A cell of the Communist Party and a Commission for Discipline Inspection, present in all major state companies, but practically absent from private enterprises, were formed in the CEFC. E Jianming did his best to create the image of a businessman completely integrated into the official Chinese ideology and executing the will of the country's leadership, even being at the head of a private structure.
The subordinates with whom Caixin correspondents communicated, called the forty-year-old businessman a "chairman", like Xi Jinping or Mao Zedong, and the board of directors is called a "standing committee." Its palace-like headquarters is decorated as the House of the People of Beijing (the building of the Chinese parliament), but he dressed himself very simply (another feature of the top Chinese leadership). Completing the image of an impenetrable expression, more characteristic of Chinese officials than, for example, another Chinese businessman and owner of Alibaba Jack Ma. In conversation with journalists Caixin, Ye Jianming notes that meeting with them is a great service on his part, because in turn to him are "party secretaries and governors of the provinces."
The businessman sincerely believed that luxury "is capable of winning hearts and minds" and assuring others that one can deal with a person. In 2013, E Jianming purchased a private jet Gulfstream G550 for seven-year leasing, and later Airbus A319-115. All top-managers of the company had apartments in the elite residential complex Bel-Air in Hong Kong. Former employees of E Jianming informed Caixin that even if they did not agree with his ideas, it always struck the businessman's ability to "integrate political, economic and other resources and make money out of them, and then even more money." Later, however, it turned out that the strategy has limitations: E Jianmina ran on the bridge that burned behind him and at some point just did not have time.
E Jianming behaved as if he were a direct conductor of the will of the Communist Party of China. The creation in his company of the atmosphere of the state enterprise, the appeal "chairman" and the constant hints of communication with the Chinese authorities served the same purpose as the rented luxury airplanes and super-expensive apartments for managers. Apparently, it was this external entourage, coupled with the company's giant turnover, that made an indelible impression on Russian officials. It is noteworthy, however, that the Chinese leadership, which could have warned the "strategic partner" about who he was going to deal with, did not do this before the deal was concluded.