CEFC takes centre stage in Russia-China relations

After investment in Rosneft and En+ the president of the low-profile Chinese oil trader sat on stage with Russia’s Putin at a packed conference in Moscow and promised more investment.

CEFC China Energy will continue to expand operations overseas, after making two high profile investments in Russian companies this year.

The hitherto little-know state-owned oil trader plans to set up a Sino-Russia investment fund with oil major Rosneft and plans deals in sectors such as infrastructure and logistics, CEFC’s president Chan Chauto said at an investment conference in Moscow on Tuesday.

In September CEFC agreed to buy 14.16% of Russian oil major Rosneft for $9.1 billion. CEFC has also emerged as a cornerstone investor in Russian aluminium and power producer En+’s IPO in London and Moscow, Russia’s biggest listing for five years.

“CEFC is strengthening its relations with companies in the Middle East, from Africa and Europe,” and also with Russian countries Chauto said via a translator.

Shanghai-based CEFC’s investments in Russia appear in line with China’s policy of building closer ties with countries along old Silk Road trade routes. Two of the routes rougly sketched out in China’s plans are across Russia.   

“Under the chairmanship of President Xi Jinping [and[ President Putin we can boast the best ever relations between our countries,” Chan said during the plenary session at the annual VTB Capital Russia Calling! investment forum in Moscow

CEFC China, a privately owned and secretive conglomerate founded by entrepreneur Ye Jianming, has taken a leap into the limelight, symbolised by Chan’s handshake with Putin on he conference stage in front of about 2,000 investors from around the world. It ranks 222nd on the Fortune 500 list of global companies. 

“The new Silk Road will embrace more countries and the initiative of the Eurasian economic union will contribute to the free flow of capital, work force and commodities in Europe and Asia,” Chan said during his speech.
 
Spotting winners
In China it is often hard to identify which company is in the ascendancy. Companies such as HNA and Anbang have swiftly risen from relative obscurity to acquiring landmark global assets. Then all of a sudden, they have fallen out of favour.

In some cases this has led to executives being detained and banks instructed to carefully scrutinise and curtail loans to these companies.

In 2014, highly acquisitive Fosun International’s chief executive Liang Xinjun sat on the same stage with Putin. Liang stepped down from his position at the leisure-to-insurance group in March.

“CEFC is one of the new winners,” said a person who has held talks with the company about overseas investments.

In recent years there have been several memoranda of understanding between Russian companies and Chinese state controlled enterprises, such as ChemChina, and Rosneft, however not all of them have resulted in capital ties and the volume of trade between the two countries has actually dropped.

In sharp contrast, CEFC’s investment in Rosneft appears to be moving ahead fast and financing has fallen into place.

“Major prospects for our exporters and in general for advancing cooperation and investment ties are opened by the integration process in Eurasia. In the same vein we are developing trade and business relationships with key countries in Asia and Middle East and other regions,” said the president of Russia, Vladimir Putin, in a keynote speech.

Russia's second-largest lender, VTB Bank, is in talks to extend a loan to CEFC for its acquisition of the stake in Rosneft from Glencore and the Qatar Invstment Authority. Chinese policy bank CDB will also help finance the deal at a later stage.

As part of the deal, Rosneft agreed develop fields in East Siberia with CEFC and sell it 11 to 13 million tonnes of Russian crude a year starting in 2018, turning CEFC into one of the world’s largest oil traders.

Over the past year, CEFC has invested in oil concessions in Chad and Abu Dhabi.

AnAn Group, a Singapore partner of CEFC, will sell $500 million of existing shares in the IPO of Russian tycoon Oleg Deripaska's En+ Group, according to the listing’s prospectus.

FinanceAsia and Pepeliaev Group will be hosting a “Russia: Opportunities for Corporate China” event, offering in-depth insights on opportunities and challenges of investing in Russia for Chinese investors.

For more information on the event please contact [email protected]

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