Urban development environment “snake swallowing elephant”: to absorb and enlighten environment

On January 11, edification environment (000826. SZ) and Chengfa environment (000885. SZ) announced at the same time that their trading was suspended as they were planning a major asset restructuring. According to the announcement, the two sides plan to issue shares from Chengfa environment to all shareholders of edification environment for share exchange, absorb and merge edification environment, and issue shares to raise supporting funds. < / P > < p > for the merger of the two sides, relevant people of edification environment and Chengfa environment said in an interview with China Business Daily that at present, the announcement content is only a preliminary and intentional agreement, and the formal agreement has not been signed, and the specific transaction content has not yet come out. The relevant proposals and relevant considerations will be disclosed in the future. < p > < p > according to the public information, Chengfa environment is mainly engaged in the development and operation of expressways and the investment and construction of infrastructure; edification environment is a large domestic listed environmental protection company, and its business mainly focuses on environmental protection related fields such as sanitation, solid waste and sewage treatment. < / P > < p > the reporter noticed that while the performance of the merged party’s Enlightenment environment declined in recent years, the debt scale and debt cost continued to rise. In addition, according to the financial report data in 2019, the total assets and revenue of enlighten environment are several times higher than those of Chengfa environment, and the environmental protection business is not prominent in the main business of Chengfa environment. < / P > < p > edification environment was formerly known as “sound environment”. Since “Tsinghua Department” took over in 2015, edification holding has become the indirect controlling shareholder of edification environment, and Tsinghua holding has become its controller. The former controlling shareholder of sound group has gradually faded out by withdrawing from the management and reducing its shares. < / P > < p > at present, the main business of edification environment focuses on environmental protection related fields such as sanitation, solid waste and sewage treatment, but the company’s performance has been declining since 2018. < / P > < p > from 2018 to 2019, the revenue of edification environment was 11 billion yuan and 10.2 billion yuan respectively, with a year-on-year change of 17% and – 7% respectively; the net profit attributable to shareholders of listed companies was 640 million yuan and 360 million yuan respectively, with a year-on-year decrease of 49% and 44% respectively. In addition, in the first three quarters of 2020, its revenue was 6.45 billion yuan, a year-on-year decrease of 12%; the net profit attributable to shareholders of listed companies was 230 million yuan, a year-on-year decrease of 48%. < / P > < p > at the end of the third quarter of 2017-2020, the environmental liabilities of edification were 18.2 billion yuan, 24.5 billion yuan, 27.7 billion yuan and 27.6 billion yuan respectively, and the current financial expenses were 440 million yuan, 630 million yuan, 700 million yuan and 420 million yuan respectively. Taking the data of the first three quarters of 2020 as an example, 17.2 billion yuan of the 27.6 billion yuan liabilities of the enlightenment environment are current liabilities. < p > < p > according to wind data, as of the end of June 2020, the total liabilities of enlighten holdings and Tsinghua holdings behind enlighten environment were 104.4 billion yuan and 347.7 billion yuan respectively, with debt ratios as high as 74% and 72% respectively. Tsinghua holdings had a loss of 2.96 billion yuan in the first three quarters of 2020. < / P > < p > in this context, Tsinghua holdings planned to introduce “xiong’an system” in edification holdings by way of transferring shares and increasing capital in the end of 2019, but the transaction has not made progress so far. < p > < p > at the end of August 2020, Tsinghua holdings changed to public listing and transferred 14.84% (108 million shares) of edification’s controlling shares. This time, it successfully introduced local state-owned capital “Hefei Construction Investment”. On December 1, 2020, after the completion of the equity transaction, Baijun investment, controlled by Wang Jiwu, chairman of enlighten holdings, and Tsinghua holdings, will be the largest shareholder of enlighten holdings, and the enlighten environment will be changed to no actual controller. < / P > < p > on December 8, 2020, a few days after the successful introduction of Hefei Construction Investment Co., Ltd. into the edification holding level, edification environment immediately put forward a plan to increase edification holding by 2.5 billion yuan with a 20% discount. < / P > < p > the plan shows that the 2.5 billion yuan raised by edification environment will be used to repay the interest bearing liabilities and supplement the working capital. And after the completion of the fixed increase related matters, in addition to the fact that edification environment still has no real controller, Tsinghua holdings, Baijun investment and Hefei construction investment will hold 22.24% of the shares of edification holding by then, and the three parties will achieve “equal footing” at the level of controlling shareholders of edification environment. < / P > < p > for the progress of the fixed increase, relevant people of edification environment told reporters: “the fixed increase is still going on normally, but at present, it has not applied for the meeting.” < / P > < p > the major assets reorganization of the merger of fangchengfa environment, the main business is highway development and operation and infrastructure investment and construction, mainly engaged in highway development and operation in Henan Province. The actual controller of Chengfa environment is Henan Provincial Department of finance, and the controlling shareholder is Henan Investment Group Co., Ltd. < / P > < p > it is worth mentioning that in 2019, the total assets and revenue of edification environment will be 44.5 billion yuan and 10.2 billion yuan respectively, and the total assets and revenue of edification environment will be several times higher than that of Chengfa environment. At the same time, in the main business of Chengfa environment, the environmental protection business is not prominent. In 2019, Chengfa’s environmental protection related business revenue is only 66 million yuan, accounting for less than 3% of its revenue. < / P > < p > the reporter found that more than 40 bid winning announcements of Chengfa environment since 2019 mainly involve solid waste related fields such as waste incineration and sanitation, and most of the projects are located in Henan Province. < / P > < p > at the same time, the reporter noticed that 2017-2018 is the peak period for the disclosure of the bid winning announcement of edification environment. In addition, since the end of 2019, edification environment has successively terminated or cancelled the previous projects. Up to now, there have been five projects involving litigation due to termination and cancellation, involving more than 4 billion yuan. < / P > < p > it is worth noting that the balance of construction in progress of edification environment has remained high in recent years. At the end of the third quarter of 2017-2020, the total investment was 12.9 billion yuan, 13.3 billion yuan, 14.2 billion yuan and 14.8 billion yuan respectively. At the end of 2019, the reporter of China business daily went to Yingkou, Jinan, Baicheng and other places to investigate, and learned that some projects of edification environment were slow or even stagnated. < / P > < p > recently, edification environment plans to apply for a comprehensive credit line of 660 million yuan from financial institutions. “Among them, the 350 million yuan loan line, part of which is to be used in the company’s construction in progress.” Edification environment said. < / P > < p > in addition, on December 15, 2020, edification environment announced that edification holding and “Yuzi fund”, “zhongrongchuang”, “Zhengfa group” and “Donglong holding” signed an agreement. Edification holding contributed equity and cash, and Yuzi fund and other four parties contributed cash to establish edification technology services (Henan) Co., Ltd. (hereinafter referred to as “Henan science and technology service”). < / P > < p > the registered capital of Henan Kefu is 10 billion yuan. After the completion of the investment, edia holdings, Yuzi fund, zhongrongchuang, Zhengfa group and Donglong holdings hold 50%, 20%, 13%, 12% and 5% equity respectively. < / P > < p > Disclaimer: the purpose of this article reprinted by CNFC is to convey more information, and it does not represent the opinions and positions of CNFC. The content of this article is for reference only, and does not constitute an investment proposal. Investors operate on this basis at their own risk. < p > < p > Chinanet is a state key news website under the leadership of the Information Office of the State Council and the management of China foreign language publishing and Distribution Bureau. 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