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CITIC chief confirms talks to buy assets of troubled CEFC

State-owned Chinese conglomerate could add to its resources portfolio

CITIC Group Chairman Chang Zhenming said talks with CEFC do not involve his company's Hong Kong-listed subsidiary.

HONG KONG -- State-owned conglomerate China CITIC Group has confirmed it is in talks to acquire assets from CEFC China Energy, a formerly acquisitive private oil company recently brought to heel by Beijing.

CITIC Group Chairman Chang Zhenming said at an earnings briefing on Wednesday of Hong Kong-listed subsidiary CITIC Ltd., that the parent company and CEFC are in "preliminary contact." Chang, who is also chairman of the listed company, declined to give further details.

CEFC was once seen as a new spearhead of China's strategy of acquiring overseas energy assets and looked to play a significant role in President Xi Jinping's Belt and Road Initiative. The Shanghai-based company, founded by Ye Jianming in 2002, won concessions in countries including Kazakhstan, Qatar, Russia and Chad. Its dealmaking reached a pinnacle last September with an agreement to take a 14% stake in Russian state-owned oil company Rosneft for $9.1 billion. The deal has yet to complete.

CEFC also expanded beyond energy. In the Czech Republic, CEFC invested in a bank, a travel website, a soccer club, a brewer, a media company and other sectors. It also bought a German travel website and a French information technology business, in addition to investing in the former Soviet republic of Georgia.

According to local Chinese media reports, CEFC's revenues grew to about 290 billion yuan ($45.6 billion) in 2016. In the oil sector, this put it behind only the parent companies of state-run China Petroleum & Chemical (Sinopec) and PetroChina.

The office of the Czech president said on March 19 that it had been told by Chinese officials that Ye would resign from CEFC and that he was under criminal investigation. The news came as Beijing's stepped up efforts to curb profligate overseas acquisitions by private companies, taking control of Anbang Insurance Group and prosecuting its chairman as well.

According to local media reports, Ye is rumored to have used relationships with military and government officials to support his overseas acquisitions. CEFC had hit the headlines late last year after Patrick Ho Chi-ping, a former senior Hong Kong government official heading a CEFC-backed research group, was arrested in New York on charges of paying bribes to African officials on CEFC's behalf. He has pled not guilty.

CITIC Group is one of China's top state-owned conglomerates, under the direct control of the Ministry of Finance. The company, whose holdings span across financial services and real estate to mining and consumer goods, was established in 1979 under then-leader Deng Xiaoping.

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