(Yicai Global) May 31 -- Shares in Shanghai Electric Group plunged by the exchange-imposed limit in Shanghai and by 18 percent in Hong Kong today after the Chinese power generation equipment maker announced that it might rack up losses of CNY8.4 billion (USD1.3 billion) if a large amount of money owed to a unit goes uncollected.
Shanghai Electric’s Shanghai stock [SHA:601727] crashed 10 percent to CNY4.61 (USD0.72). Its Hong Kong-listed shares [HKG:2727] closed at HKD2.08 (USD0.27).
Shanghai Electric Communication Technology, in which the group holds a 40 percent stake, has failed to reclaim CNY4.1 billion (USD648 million) worth of accounts receivable, Shanghai Electric said yesterday.
In the worst-case scenario, if the bills go unpaid and the unit goes bankrupt, this might cause the company losses of CNY8.4 billion, including CNY526 million (USD82.6 million) of shareholders’ equity and CNY7.8 billion of shareholder loan losses, according to the announcement.
The subsidiary has taken the four customers, two of which are large state-owned companies, to court over the unpaid dues, it said. These two debtors are Beijing Capital Group, which is part of the Beijing municipal government, and Harbin Industrial Investment Group which belongs to the Harbin government in northeastern Heilongjiang province.
The unit is also at risk of defaulting on a CNY1.2 billion (USD188 million) bank loan, Shanghai Electric said. The parent firm was unable to provide a guarantee for the loan, but has provided liquidity support letters worth CNY902 million, it added.
Before this crisis, Shanghai Electric was doing well. Its net profit in the first quarter gained nearly six-fold from the same period last year to CNY661 million (USD103 million) and revenue jumped 74 percent to CNY25.5 billion (USD4 billion).
Editor: Kim Taylor