China's Sinochem Group has tapped three banks, including Morgan Stanley, to work on the possible Hong Kong listing of its key oil assets, as it seeks to raise capital and revive the company, said four people with knowledge of the matter. Citic Securities and BOC International are also advising China's fourth-largest oil company on the planned initial public offering, which will likely take place in the second half of next year, the people said.
No formal mandate for the IPO has been awarded yet, they said, adding preparations for the market float are at an early stage, and unlisted Sinochem has yet to decide the size of the public offering. The IPO plan also comes amid Beijing's latest push to revive its bloated state-owned enterprise sector via the so-called mixed-ownership reforms by injecting private capital into state enterprises.
"Our people are preparing for it (IPO) ... but it's still far away," Sinochem Chairman Ning Gaoning told Reuters on the sidelines of the Communist Party Congress. The planned listing will likely include Sinochem's refining, fuel marketing, trading and storing assets, but not its struggling upstream business - mostly overseas oil and gas production - three of the people said.
"These assets are considered the best under the company," said one person who was briefed by Sinochem management, referring to the businesses likely to be part of the listing. "Sinochem is looking to offload its upstream business to the government rather than to investors."
All the people declined to be named as details of the listing process are not yet public. Sinochem did not respond to a request for comment. Morgan Stanley, Citic and BOCI declined to comment. Hit by low oil prices, Sinochem has aimed to shift from oil exploration and production to the more value-added refining and retailing businesses. It has been looking to sell a stake in Brazil's Peregrino offshore oilfield.
Beijing has been working towards creating bigger, stronger state firms, and building enterprises capable of competing globally. It is also weeding out excessive capacity in bloated sectors, but wants to avoid any risk of mass layoffs or a blow to economic growth. China will prevent the loss of state assets, deepen reforms of state firms and develop a mixed-ownership economy, President Xi Jinping said at the opening of the twice-a-decade congress on Wednesday.