On January 6, the civil lawsuit brought by Beijing Haohua Energy Co., Ltd. (Haohua Energy) against Shanxi Zhongbo Real Estate Development Co., Ltd. (Shanxi Zhongbo) claiming 1.085 billion yuan (RMB) was rejected by the court.
According to the announcement released by Haohua Energy on the same day titled “Announcement on the Progress of Litigation by Beijing Haohua Energy Co., Ltd.,” the lawsuit for the claim of 1.085 billion yuan against Shanxi Zhongbo was ruled on by the Beijing First Intermediate People’s Court.
The court’s decision dismissed all of the plaintiff Haohua Energy’s litigation requests, and the plaintiff was ordered to bear the court acceptance fee of 5,469,300 yuan and the preservation application fee of 5,000 yuan.
Regarding the impact of the lawsuit being rejected on the company, the announcement stated: “The ruling is a first-instance judgment, and the impact on the company cannot be determined at present.”
After the announcement was made, the stock price of Haohua Energy plummeted, closing at 7.6 yuan per share on January 10, reducing its total market value to 10.944 billion yuan.
Commenting on this, Huaxia Times on January 10 mentioned that the claim of 1.085 billion yuan is not a small amount for Haohua Energy. As of the end of the third quarter of 2024, Haohua Energy had monetary funds of 5.146 billion yuan, short-term borrowings of 1.331 billion yuan, non-current liabilities due within one year of 490 million yuan, and long-term borrowings of as much as 5.362 billion yuan. The company’s debt-to-assets ratio stood at 48.76%.
Huaxia Times believes that in such financial conditions, a successful claim could provide the company with more cash flow. However, if the claim fails, not only will it not recover the losses, but the company will also have to pay high litigation costs, which will undoubtedly have a certain impact on its financial condition.
In June 2010, Haohua Energy signed a “Equity Transfer Agreement” with Shanxi Zhongbo, agreeing to transfer 60% of the equity of Western Energy for a price of 108.52 million yuan. In the agreement, Shanxi Zhongbo promised and guaranteed that all properties transferred, including mining rights, were free of defect, and there were no other liabilities except for disclosed debts, undertaking all debts prior to the delivery date.
After the contract was signed, Haohua Energy paid the equity transfer payment as agreed, and Shanxi Zhongbo transferred 60% of the equity of Western Energy to Haohua Energy. However, problems arose during the process of obtaining mining rights certificates.
Haohua Energy believed that Shanxi Zhongbo should guarantee that Western Energy had full ownership of the 74.168 million tons of reserves, ensuring there were no legal obstacles to obtaining mining rights certificates.
The Inner Mongolia Autonomous Region Higher People’s Court ruled that the area involved in the mining rights case was a “nationally funded confirmed mineral property,” but Shanxi Zhongbo set up mining rights in a “blank space” area and acquired them. Therefore, there existed an implicit statutory debt for the unpaid mining rights.
Haohua Energy claimed that Shanxi Zhongbo did not fulfill the investment obligation required for coal resource allocation transformation projects, and the 74.168 million tons of reserves under the mining rights were not granted government resource allocation permits. Before the delivery date, Western Energy did not obtain complete ownership of that reserve amount, and the mining rights certificate could not be processed promptly. In this case, Shanxi Zhongbo intentionally concealed the situation despite being aware of it.
A netizen named “Huili” remarked, “Haohua Energy doesn’t even tighten their own controls, and they dare to sign unreliable contracts?”
Public records show that Beijing Haohua Energy Co., Ltd. was established in December 2002. It is a state-owned holding company jointly initiated by Jingmei Group, Shougang Corporation, China Coal Group, Minmetals Development, and the Coal Research Institute, with a registered capital of 1.2 billion yuan.