April 15, 2016 / 10:37 AM / 2 years ago

UPDATE 1-Sinopec taps govt asset firms to restructure overseas upstream unit

(Adds company comment, background)

By Chen Aizhu

BEIJING, April 15 (Reuters) - China’s state-run Sinopec Group has brought in two government asset firms as strategic investors to its overseas upstream unit to shore up profits amid low oil prices.

China Chengtong Holdings Group Ltd and China Reform Holdings will hold a combined 70 percent stake in Sinopec International Petroleum Exploration and Production Corp (SIPC), while Sinopec Group holds the remaining 30 percent.

“The introduction of strategic investors will help optimise the firm’s capital structure ... readjust the business configurations, cut the operating cost ... and reduce the financing cost,” SIPC said in an emailed statement to Reuters.

Sinopec will remain the operator of the company, SIPC said, without giving further details including the amount of the fund injections.

Both of Sinopec’s new partners are investment platforms under the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

SIPC, Sinopec’s vehicle for operating its oil and gas assets outside China, had spent billions of dollars on large oil and gas acquisitions between 2009 and 2013, before the recent oil market crash, including costly investments in deep-sea concessions in Brazil and oil sands projects in Canada.

Most of SIPC’s assets are not under the group’s listed entity Sinopec Corp.

This is not the first time that state energy firms have brought in state asset managers to boost a company’s financial standing.

Last November, a unit of China Reform Holdings bought a 50 percent interest in PetroChina’s Trans-Asia Gas Pipeline Company Limited, which owns the Central Asia-China Gas Pipeline, for about 15 billion yuan ($2.32 billion).

SIPC has been undergoing internal reshuffle as well. Company sources told Reuters last July that it was relocating nearly 40 percent of its staff back to its headquarters, in a major shakeup aimed at cutting costs and boosting efficiency.

$1 = 6.4770 Chinese yuan renminbi Editing by Christian Schmollinger

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