SH ELECTRIC (02727.HK): Court Rules in RMB 1 Billion Loan Recovery Case, Ordering Borrower to Pay Interest, Compound Interest and Default Interest

NewTimeSpace News: On 8 September 2026, Shanghai Electric Group Company Limited (stock code: 02727) announced progress in its major litigation, having received a civil judgment from the Shanghai Pudong New Area People's Court in Action II concerning the recovery of remaining debts under loans provided to China Energy Engineering Group Co., Ltd. (China Energy). The court ordered China Energy to pay interest, compound interest, default interest and legal fees, with Zhongji Guoneng Engineering Co., Ltd. (Zhongji Guoneng) bearing joint and several liability.

According to the announcement, the company provided loans totalling RMB 1 billion to China Energy in 2019 and 2020, of which the borrower repaid only RMB 1 million of principal and part of the interest. After negotiation, on 29 September 2024 the company signed a settlement agreement with guarantor China Pufa Machinery Industry Co., Ltd. (Pufa Machinery) and its wholly-owned subsidiary Shanghai Pujin Enterprise Development Co., Ltd. to settle the repayment plan for the principal portion of the debt, concluding that part of the proceedings. In August 2025, the company commenced Action I and Action II against China Energy and other guarantors, including Shanghai Zhongyou Guodian Energy Co., Ltd., Shanghai Changtai Electric Co., Ltd. and Zhongji Guoneng, to recover the remaining debts.

Under the judgment, China Energy must, within ten days of the judgment taking effect, pay interest of RMB 32,532,500, compound interest of RMB 15,376,462.60 accrued to 30 June 2026 and compound interest thereafter calculated at an annual rate of 8.3655%, default interest of RMB 167,305,170.32 accrued to 29 June 2026 and default interest thereafter until the day before Pufa Machinery makes its final payment under the relevant civil mediation, plus compensation of RMB 150,000 for legal fees. Should China Energy fail to perform, the company may reach agreements with Zhongyou Guodian and Changtai Electric respectively to be satisfied in priority from the discounted value or proceeds of auction or sale of pledged equity interests; Zhongji Guoneng bears joint and several liability for the above payment obligations. Court acceptance fees and property preservation fees totalling RMB 1,249,076 are to be borne by the company as to RMB 129,817 and jointly by China Energy, Zhongyou Guodian, Changtai Electric and Zhongji Guoneng as to RMB 1,119,259.

The company noted that the judgment is a first-instance ruling not yet effective, as the defendants may appeal within the prescribed period, and the final outcome remains uncertain; the impact on the company's current or future profits is therefore uncertain, and the company will make corresponding accounting treatments in accordance with applicable accounting standards and fulfil its disclosure obligations in a timely manner. Shareholders and potential investors are advised to exercise caution when trading in the company's securities.

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