In June 25th, the SFC pre-disclosed the prospectus (draft declaration) of Qinhuangdao Port Joint Stock Co. Ltd. (hereinafter referred to as the "Qinhuangdao Port"). It says that as the major pivotal port of "West-to-east coal transportation" and “North-to-south coal transportation” in China, Qinhuangdao Port is busy coping with another important problem of oversize coal stock in the port while busily preparing for IPO. The data published in Qinhuangdao coal web shows that up to July 1st, there is 8.565 million tons of coal stock in Qinhuangdao Port while normal stock level should be 5 million tons. As summer is approaching, Qinhuangdao Port overloaded with coal had to face a severe threat of self-ignition. In addition to the coal stock pressure, the former chairman of the company was sentenced to suspended death for taking bribes just before IPO, and 6.6 billion net assets of the controlling shareholders of the company "disappeared". These two big problems may also cause "self-ignition" on the company’s road to IPO.
Coal stock pressure of the port triggered summer crisis
According to the prospectus, Qinhuangdao Port planned to issue 1.425 billion shares this time. Share capital after issuing is 5.7 billion shares. It planned to be listed on the Shanghai Exchange. The main business of Qinhuangdao Port since the establishment has mainly been port loading and unloading, storage, warehousing and transportation, etc. As the main goods of business, coal occupies 72.28% throughput and 86.89% of main business income of Qinhuangdao Port. But just in this summer, when Qinhuangdao Port is making final preparation for IPO and coal price is keep falling, stock capacity of this port is in challenge and risk brought by the descending demands of coal market.
The published data in Qinhuangdao coal web shows that up to July 1st, Qinhuangdao Port coal stock is 8.565 million tons. In June, the port stock is almost all above 9 million tons, and in June 19th, stock in this port once reached an extremely high volume of 9.46 million tons, breaking the 9.415 million tons record made in 2008 November 19th. This is close to the designed capacity of 10 million tons of this port. Normal stock levels should be controlled around 5 million tons.
Coal overstock is testing of the limit of the company\'s stock capacity. If the coal is stocked for too long time in the port, it requires being turned over, otherwise might easily lead to self-ignition, collapse and other accidents of production safety. Some insiders pointed out, oversize coal stock brings very great pressure to safe production. It is known that in some places of the port, coal from Inner Mongolia port (such as lignite) already had self-ignition due to low burning point. In July and August, the hot weather will bring even greater risk of coal self-ignition. The high-incidence season of self-ignition will bring severe fire pressure to the port.
The other two major potential risks of IPO
In addition to the coal storage pressure in the port, the company still has two major potential risks, one is the arrest of former chairman of the board before IPO, and the other is concealment of assets by controlling shareholder of the company. Relevant report in 2011 showed that at the beginning of 2010, Hebei Port Group announced the start of Qinhuangdao Port Group IPO procedure. Shortly after that in July, 2010, the Hebei Provincial Commission for Discipline Inspection began to lead survey of Hebei Port Group, and investigated around the company chairman Huang Jianhua. In December 4th of the same year, the chief of Hebei State Assets Administration Committee announced that Huang Jianhua had received "double regulations". In February 13th, 2011, Huang Jianhua was approved to be arrested for bribery. In November 3rd of the same year, according to the Hebei Provincial High Court, Zhangjiakou City Intermediate People\'s court sentenced Huang Jianhua to death penalty for the crime of accepting bribes, suspended for two years. Huang Jianhua was found taking more than 20.23 million yuan. He has started to serve his prison sentence because he did not appeal after the judgment. It is not rare to see "chairman arrested in IPO companies, and it is not easy to eliminate the effects in short term ever after changing into a new chairman", said Zhou Ming of the Everbright Securities, that the company has launched IPO when the chairman was arrested, this may be the biggest obstacle for them to pass the inspection of stock supervisory committee.
As a controlling shareholder of Qinhuangdao Port, the Hebei Port Group holds 73.38% of pre-IPO equities of the company. According to the prospectus, total assets of Hebei Port Group by the end of 2011 are 30.965 billion yuan; net assets are 14.756 billion yuan. While the total assets of issuer at the end of 2011 is 23.7 billion yuan; net assets are 9.41 billion yuan; net profit is 1.351 billion yuan. We can see that, in addition to the issuer held shares, Hebei Port Group also has huge assets. In the 80th page of the prospectus, in addition to the issuer held shares, Hebei Port Group also controls equities of 11 other companies, but the total assets of the 11 companies add up to only 1.216 billion yuan, which means that the Hebei Port itself at least holds nearly 6.6 billion of net assets. But the prospectus does not disclose the details of the 6.6 billion assets.