(Corrects spelling of reporter's name in paragraph 13)
By Charlie Zhu and Grace Li
HONG KONG, July 17 Shares in China Resources
Power Holdings Co Ltd tumbled 10 percent on Wednesday
in what brokers said was a response to comments in Chinese media
alleging corruption in the state-run electricity producer.
In Hong Kong, six minority shareholders of the company
filed a lawsuit against former and existing executives of China
Resources Power for what they said was faulty approval of its
acquisition of coal mining assets in 2010.
Shares of the company plunged to a day low of HK$17.62 in
Hong Kong trading before recovering to close at HK$17.98. Nearly
46 million shares changed hands, five times its 30-day average,
making it the third most active counter on the exchange on
The company, an independent electricity producer that relies
on coal for over 92 percent of its power generating capacity,
told the Hong Kong exchange that it was unaware of any reason
for the fall in the share price.
The lawsuit filed with the Hong Kong High Court on July 5
alleged that China Resources Power "suffered serious loss and
damage" from its acquisition of coal mining assets in the
northern province of Shanxi in 2010, according to a copy of the
suit obtained by Reuters.
The exploration licences of some of the mines had expired
when China Resources Power made the acquisition, which resulted
in losses, the suit says, adding that executives breached their
duties. The shareholders demanded an unspecified amount of
Several Hong Kong traders linked the fall in China Resources
Power's shares on Wednesday to widespread Chinese media reports
citing a Chinese journalist affiliated with the official Xinhua
news agency who made similar allegations.
The journalist and China Resources Power could not be
immediately reached for comment. The company is yet to respond
to the lawsuit.
"It is because of the Xinhua report," said Peter Yao, an
analyst with BOCI Research, of the fall in the share price.
"It is having a big impact on its share price today," he
said, adding that the report could have a negative impact on
China Resources Power's planned merger with sister company China
Resources Gas Group Ltd.
China Resources Gas shares fell 3.6 percent on Wednesday.
In May, China Resources Power announced that it planned to
merge with the natural gas distributor to create what analysts
say will lead to a more integrated energy group. The combined
entity would have a total market value of $17 billion based on
Wednesday's closing prices.
The report posted on Xinhua's website and on Chinese
twitter-like Weibo feed had the journalist, identified as Wang
Wenzhi, accusing the executives of "intentionally causing a loss
of billions of yuan of state-owned assets" through the
acquisitions in the northern province of Shanxi.
The report - which was picked up by numerous Chinese media
and news portals - along with the full submission the journalist
made to the Chinese Communist Party's disciplinary authority,
was later removed from Xinhua but is still visible on Weibo.
China Resources Power has been regarded a relatively
well-run domestic power producer, a key reason why its shares
have outperformed its peers in the past few years, analysts say.
Its net profit soared 68 percent to HK$7.48 billion in 2012.
Its merger with China Resources Gas has yet to win
Earlier this month, Citi Group said in a research report
that it was highly likely that minority shareholders of China
Resources Power would oppose the merger proposal due to
valuation concerns and uncertainties over China Resources Gas'
(Additional reporting by Gregory Torode and Clement Tan in HONG
KONG and Beijing Bureau; Editing by Raju Gopalakrishnan)