BEIJING/PRAGUE (Reuters) - Inside four years, CEFC China Energy has emerged from relative obscurity as a niche fuel trader to become a rapidly growing oil and finance conglomerate with assets across the world and an ambition to become one of China's energy giants.
It has a rare contract to store part of the nation's strategic oil reserve, gained financing from the state-owned China Development Bank (CDB) and has hired a number of former top officials from state-owned energy companies, CEFC officials said. It also has layers of Communist Party committees across its subsidiaries – more than at many private Chinese companies.
Its influence goes well beyond Beijing. Czech President Milos Zeman has appointed CEFC’s founder and Chairman Ye Jianming as an advisor on economic policies, and the company has become one of China’s biggest investors in central Europe.
Still, the privately-owned company’s opacity could become hurdles to its expansion as regulators reviewing deals around the world increasingly seek to understand how companies are controlled and financed. Little is known about how Ye raised the money to build the company or about its ownership structure.
A deal to take a 50 percent stake in a Czech-Slovak bank that was announced in March is taking a long time to approve. One condition that needs to be satisfied under Czech law is whether the origin of funds for the acquisition is transparent. European Central Bank rules have some related requirements.
A CEFC executive said it expected clearance for the acquisition by the middle of this year.
A spokesman for the company said it has no special connections with the Chinese government, adding that its “rapid growth in recent years was because its corporate strategy fits well with China’a macro-development strategy and policy.”
The Shanghai-based company – which was set up in 2002 in Ye’s home town in Fujian province - had 263 billion yuan (31.35 billion pounds) in revenue in 2015 and 30,000 employees at the end of that year.
Ye told a board meeting in July he wants it to become a second Sinopec, China's second-largest energy giant and Asia's top oil refiner.
He plans to build a retail fuel network in Europe through acquisitions and supply it with gasoline from refineries in Romania and China, the latter after consolidating some independent Chinese refineries known as "teapots", according to a script of his presentation reviewed by Reuters.
Ye, 40, declined to comment for this story but three current and former company executives and two CEFC press officers all told Reuters CEFC wants to become an integrated oil company that also owns banks, insurers and brokerages.
"The big plan is to acquire over the next four to five years upstream and refining assets with a combined size of one million barrels per day," said a senior director of CEFC.
CEFC's oil ambitions started to take shape when it built a 3.05-billion yuan oil storage facility on Hainan island in southern China. It began operating in June last year and is one of the few privately owned facilities used to store the national petroleum reserve.
Company officials have also said it has a 30 billion yuan trade financing line of credit with CDB, which funds infrastructure projects.
In the past year, CEFC has done a series of deals.
A year ago, it agreed to acquire KMGI, the international business of Kazakh's state oil and gas firm KazMunaGaz for $680 million.
Then in March during President Xi's first visit to the Czech Republic, CEFC announced it was raising its stake in the J&T Finance Group to 50 percent from 9.9 percent for 980 million euros ($1.04 bln).
J&T has banks operating in the Czech Republic, Russia, Croatia, Barbados and euro zone member Slovakia, and a larger stake in the group should help CEFC gain better access to the euro zone. The firm was already a shareholder in Czech brewery group Lobkowicz, publishing house Empresa Media, and the nation’s top football club Slavia Praha. For factbox of major assets [L4N1F01UU].
The European Central Bank and the Czech central bank are yet to clear the J&T deal. The Czech and Slovakia central banks declined to comment. An ECB spokesman said it doesn’t comment on individual banks.
CEFC's wide range of investments in the central European nation and its hiring of politically-connected figures there has led to questions in the Czech media about whether CEFC is purely commercially driven or is operating under the influence of the Chinese government.
Also Czech Finance Minister Andrej Babis, whose party rules in a coalition with the Social Democrats, told reporters in October that CEFC’s focus on private companies “brings no yield to the Czech Republic.”
There is little public information about Ye, who company officials said loves reading works about Confucianism and Daoism, and rarely attends business dinners. Unlike many other Chinese entrepreneurs, Ye also strictly bans relatives from working at CEFC, officials said.
CEFC describes itself on its website as having a "unique, innovative management model…that combines merchant economy, Confucianism and military-style management".
A CEFC spokesman said Ye’s ownership of the group is held through stakes at subsidiaries not the holding company, though he did not provide a full explanation of the ownership structure.
Company officials said Ye, who once worked in the forest police force in his home province in Fujian, made his first 10 million yuan in his early 20s’ from a property deal there. He moved into the oil business after buying his first oil assets in an auction.
Reporting by Chen Aizhu and Jan Lopatka; Additional reporting by Jason Hovet in Prague and Tatiana Jancarikova in Bratislava; Editing by Martin Howell