“Continuous “losses”! Datang Power’s involvement in coal chemical projects has brought it a lot of trouble

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“Continuous “losses”! Datang Power Enters Coal Chemical Projects and Runs into Trouble Author/Source: HuiCong.com Date: 2019-08-09 Clicks: 8 Recently, the coal chemical projects of China Datang Group Co., Ltd., a state-owned enterprise (referred to as “Datang Power”), have not only suffered losses year after year but have also had to assume joint liability for financial guarantees on a continuous basis. A guarantee of 6 billion yuan failed to be repaid on schedule; on August 5, the Shanghai Stock Exchange took a close look at Datang Power Generation! According to the announcement, on December 24, 2015, and January 30, 2016, Datang Power disclosed that it had provided guarantees for two loans granted to its former wholly-owned subsidiary, Datang Energy Chemical Co., Ltd. (referred to as “Datang Energy Chemical”). The amounts of these loans were 4 billion yuan and 2 billion yuan respectively, with maturity dates of November 23, 2018, and January 29, 2019, respectively. On June 30, 2016, Datang Power Generation announced that it would transfer 100% of the shares of Datang Energy Chemical to Sinovative Energy & Chemical Technology Co., Ltd. (referred to as “Sinovative Energy & Chemical”). On December 30, 2016, Sino-Singapore Energy Chemicals issued a Letter of Counter-Guarantee to the company, providing counter-guarantees for the above two loans to Datang Power Generation. Thereafter, Datang Energy Chemical failed to repay the aforementioned two loans on schedule; the amounts of these two loans accounted for 233.64% and 116.41% of Datang Power’s net profit attributable to the parent company in 2017, respectively. The above two loans are overdue and involve large amounts of money; Datang Power Generation may have to assume guarantee responsibilities. If the guaranteed party fails to fulfill its repayment obligations within 15 trading days after the debt becomes due, Datang Power Generation shall disclose this information promptly. However, Datang Power did not disclose the overdue status of the aforementioned guaranteed loans until March 29, 2019. According to information available online, Datang Energy Chemical has currently completed the payment of the principal and interest on the aforementioned two loans, with a total amount of 6 billion yuan. Losses for consecutive years! The joint liability for financial guarantees continues to persist; several coal chemical projects under Datang Power have suffered frequent losses. According to Datang Power’s 2015 annual report, as of the end of 2015, the total investment in coal chemical projects that were not funded through raised capital amounted to nearly 64.2 billion yuan, while the total investment in its core business of thermal power generation was only 49.8 billion yuan. However, the investment does not correlate with returns, as Datang Power’s coal chemical business has suffered losses for consecutive years. It incurred a loss of 4.3 billion yuan in 2015, with cumulative losses of around 9.6 billion yuan in 2014 and 2015. By the end of 2015, the coal chemical business unit of Datang Power Generation had liabilities of 65.3 billion yuan, resulting in a debt ratio of over 95%. Not only that, but the three subsidiaries formerly under the control of Datang Power Generation – Dolun Coal Chemical Company, Hulunbuir Fertilizer Company, and Xilinhot Mining Company – also failed to repay their loans, forcing Datang Power Generation to assume joint liability for those repayments. Between 2008 and 2016, the aforementioned three subsidiaries entered into loan agreements with four financial institutions respectively; at that time, Datang Power provided joint and several guarantees for such financing. At the end of 2018, Datang Power received four \"Payment Notice Letters\" from relevant financial institutions, requiring it to fulfill its guarantee obligations under the guarantee contracts signed previously and still in force. Datang Power was instructed to pay interest for the period from September 21, 2017, to September 20, 2018, to these four financial institutions by December 21, 2018; the total amount involved was approximately 327.9252 million yuan.