Baosteel subsidiary files liquidation petition against General Nice HK company, GN to sue back

Ningbo Steel (宁波钢铁), a subsidiary of state-owned Baosteel (宝钢), filed a petition earlier this month at the Hong Kong’s High Court earlier to wind up General Nice Resources (Hong Kong) Ltd. (俊安資源(香港)有限公司), claiming unpaid debts related to iron ore transactions dating back to last year. Although General Nice acknowledge the debt, they have now countersued, alleging that the winding-up petition seeks to hurt their reputation, and are asking for $100m in compensation, equivalent to some 80 times the debt owed and over three quarters of Ningbo Steel’s 2014 net profit (東網, Quamnet).

Ningbo’s case against General Nice will be heard in mid June.

Ningbo Steel started as a private company, led by (now .85-billionaire) Zhang Zhixiang 张志祥, but was later bought by Baosteel Group, a central SOE and one of the world’s largest steelmakers. Executives at Ningbo Steel must have more pressing concerns than all that suing and countersuing in Hong Kong, such as wondering if they won’t get arrested as a corruption crackdown spreads through state-owned Big Steel. The campaign has claimed several heads at Baogang, the most senior of which so far has been deputy GM Cui Jian 崔健. Mr Cui spent part of his career at Ningbo Steel, after its acquisition by Baosteel, and his “discipline violations” (a euphemism for corruption) are rumoured to have taken place during his stint at Ningbo.

General Nice Resources HK is owned by Mainland-based General Nice Group companies, partly through General Nice Development, the Hong Kong company that owns the Isua iron mine in Greenland through a Jersey entity. That is, the owner of the Greenland license is not being directly targeted by the lawsuit in Hong Kong.

In media statements reacting to Ningbo Steel’s filing, General Nice say that, far from being insolvent, they’re a major ore trader with a large turnover and stakes in several listed companies. The figures the company brandishes when describing itself indeed make it hard to imagine it would have any trouble mustering the meagre debt claimed by Ningbo Steel. On the other hand, while profit figures for the whole group aren’t available, there are multiple signs that it isn’t going through its best times. The Group is moving away from its historical core coal business, and these aren’t good days for iron trading in China. Current iron prices mean that Group assets like the Greenland mine, unlikely to be developed any soon, or the Cockatoo Island project in Australia (owned by a troubled company I might be writing about soon) aren’t precisely profit sources. Loudong General Nice, the Group’s HK-listed company, posted losses in both 2013 and 2014.

I discussed General Nice’s various investments and their interesting history in a long-ish article last month.

In the latest news about General Nice’s changing strategy, General Nice Resources CEO Jaffe Lau (柳宇) said yesterday in an interview that the group is looking to increase cooperation or even mergers with Chinese state owned companies, since as private players they find it hard to compete with SOEs for funding from state-owned banks. Although General Nice’s political contacts have arguably been key to the group’s growth in the past, a merger with a state entity would surely give them access to cheaper funding. Assuming a scenario where the Isua mine is eventually developed, having a SOE around would move it closer to getting the billions in investment it’s been estimated to require.

To finish on a bright note, shares of Loudong General Nice, the group’s loss-making HK-listed company, have been doing very well of late and suddenly jumped in the last few days.

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Sichuan Road & Bridge official arrested on corruption charges

Sun Zhong 孙忠, deputy GM and Party secretary at a Sichuan Road and Bridge Group (SRBG, 四川路桥) branch, has been arrested on suspicion of “accepting bribes”, the People’s Procuratorate of Sichuan Province (四川省人民检察院) informed yesterday. As I reported a fortnight ago, Mr Sun had been placed under investigation by Party organs and handed over to the court system after being found to have committed “serious discipline violations”, a standard euphemism for what the Procuratorate has now officially translated as corruption. Another former company official, Huang Jinping 黄金平, was likewise found to ‘seriously violate discipline’ in September.

The Sichuan procuratorate announced Mr Sun’s arrest and those of a few local officials in quick succession, without specifying if they are part of one corruption probe or rather coincidentally took place within a few days. The most prominent person arrested in the last couple of days has been former Chengdu assistant mayor Chen Zhengming 陈争鸣. Mr Chen had long served under disgraced Sichuan deputy party secretary Li Chuncheng 李春城 and his fall has been linked to Li’s. Li Chuncheng was seen as an ally of former security czar and Party bigwig Zhou Yongkang 周永康.

Sichuan Road and Bridge is building the steelwork for Hålogaland bridge in Norway, a major achievement for the company and the first such project with Chinese participation inside the Arctic circle. That tender was the object of a court case in Germany that ended with two four-year jail sentences, as I recounted a couple of weeks ago.

this just in: another Sichuan Road & Bridge official under investigation

Sun Zhong 孙忠, the Party secretary at a Sichuan Road and Bridge Group (SRBG, 四川路桥), has been found to have committed “serious discipline violations”, usually a euphemism for corruption, and handed over to judicial authorities, Chinese media report. Party secretary Sun is the second victim of such investigations at the Sichuan government-owned company: Huang Jinping 黄金平, a former vice-general manager, met the same fate last September.

Sichuan Road and Bridge was awarded last year a contract to build steel structures for Hålogaland bridge in northern Norway, the company’s first project in a developed country and the first such contract for a Chinese company inside the Arctic circle. The offer that won the Hålogaland tender for SRBG, in tandem with a little-known Serbian partner, has also been the object of court proceedings, this time in Germany: a state-level court in Saarbrücken has recently found He Saizhong, a Chinese engineer, and his colleague Frank Minas guilty of defrauding their employer, DSD Brückenbau, by bidding for the Norwegian contract and then relegating DSD, who funded the bid, to the role of a subcontractor.

a bridge too far: four years’ jail for ‘Sichuan Road & Bridge representative’ in Hålogaland bridge deal

A Chinese engineer who helped Sichuan Road and Bridge Group (SRBG, 四川路桥) win a tender to build the steelwork for a large bridge in Norway has been found guilty of embezzlement and sentenced to four years’ imprisonment by a German court, the Saarbrücker Zeitung reports.

As I’ve been repeating for a year now, SRBG won that tender in some sort of partnership with DSD, a German based group of companies with extensive experience in bridge building. Only that partnership was remarkably little talked about, and its nature remained unpublicised: the steelwork contract had been awarded to SRBG together with a little-known Serbian company somehow connected to a local DSD subsidiary. The nature of this partnership, it would now seem, wasn’t entirely clear to DSD themselves.

He Saizhong, a Chinese engineer who worked with DSD for years, was involved in preparing the Hålogaland bid for DSD, but then presented it as including SRBG and the Serbian company as bidders, with DSD only as a subcontractor and a company run by his and his accomplice’s wives in charge of managing the project, it emerged during the trial. Through this clever bypass operation, Mr He and his partner caused DSD large losses, though they claimed they weren’t motivated purely by greed but by a “fascination with bridge building“.

Back when the contract was signed, an announcement on the website of Statens vegvesen, Norway’s public road administration, had shown a picture of a radiant He Saizhong, captioned as a “representative from SRBG”.

The Hålogaland bridge, under construction in Narvik, a couple hundred kilometres into the Arctic circle, is to be the second longest suspension bridge in Norway. It’s the first project of its kind for a Chinese company in the area, and SRBG’s first contract in Europe, which it won by offering just 2.5% less than the second cheapest bidder, MT Højgaard from Denmark.

While their activities abroad are not that important (their most significant operations have been in Eritrea, Tanzania and the Federated States of Micronesia; a Russian foray might be in the works), SRBG have built some of the largest bridges in China, including for example the Xihoumen 西堠门 joining Zhoushan to the mainland and the Jingyue 荆岳 over the Yangtze in Hubei.

They also have a less stellar side though. In my 2013 article I detailed how, while their own bridges seem to fail quite seldom and under arguably exceptional circumstances, Chuanjiao (四川川交路桥有限责任公司), a company related to SRBG and with which it shared some of its top management at the moment, was responsible for a bridge that suffered a tragic collapse during construction in May last year.

Corruption isn’t unknown to them either. In 2008, a manager with SRBG admitted to bribing an official to help the company win the tender to build the Xinlongmen 新龙门 bridge near Chongqing. More recently, Huang Jinping 黄金平, who used to be a vice-general manager at SRBG and chairman at Chuanjiao, was reported to be under investigation for ‘serious discipline violations’, usually a euphemism for corruption.

At the moment there’s no indication of the German process affecting the project in Norway in any way, of course as long as they can go on without Mr He’s expertise.