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Our reporter Li Zhe reports from Beijing

On July 26, Beijing OriginWater Technology Co., Ltd. (hereinafter referred to as “Origin Water", 300070.SZ) announced that its founder Wen Jianping was investigated and detained.

Wen Jianping has been deeply involved in the field of water resources for many years. From founding OriginWater in 2001 to resigning as chairman in 2023, Wen Jianping and OriginWater have experienced many key development periods together. In recent years, with Wen Jianping's resignation and multiple reductions in OriginWater's equity, the two seem to be drifting apart.

Regarding Wen Jianping's detention this time, OriginWater told a reporter from China Business News that Wen Jianping is currently mainly serving as a director, consultant and other positions in OriginWater, and is not specifically responsible for daily business operations and management, which will not have a significant impact on the company's daily operations.

Detained under investigation

According to the announcement of Bishuiyuan, it received the "Notice of Case Filing" and "Notice of Detention" issued by the Mile City Supervisory Committee on July 26. Wen Jianping, a shareholder holding more than 5% of the company's shares and director, was investigated and detained.

Wen Jianping was born in 1962, started working in 1987, and has been engaged in environmental research for a long time, according to his public resume. From August 1987 to October 1989, he served as an assistant researcher at the Ecological Environment Center of the Chinese Academy of Sciences; from November 1989 to May 1994, he served as deputy director of the Ecological Environment Division of the Social Development Department of the State Science and Technology Commission; from June 1994 to March 1998, he served as deputy director and chief engineer of the China International Science Center of the State Science and Technology Commission, and concurrently served as executive deputy director of the China Wastewater Resource Research Center; from September 1998 to July 2001, he went to Australia to study.

After returning to China in July 2001, Wen Jianping and Beijing Huahao Water Conservancy and Hydropower Engineering Co., Ltd. jointly invested in the establishment of Beijing OriginWater Technology Development Co., Ltd. (the predecessor of OriginWater), with Wen Jianping serving as chairman and general manager (no longer serving as general manager since June 2006); on June 3, 2007, Beijing OriginWater Technology Development Co., Ltd. was changed to OriginWater, and Wen Jianping served as chairman and general manager of OriginWater. Since then, Wen Jianping has served as chairman of OriginWater for a long time until July 18, 2023, when he resigned as chairman for personal reasons. After resigning, he still served as a director. In April 2024, when the board of directors and the board of supervisors of OriginWater were replaced, Wen Jianping was elected as a member of the sixth board of directors of OriginWater, and also served as a non-independent director of OriginWater.

Judging from Wen Jianping’s work experience, he has held core positions in OriginWater for a long time since the founding of OriginWater.

Regarding Wen Jianping's detention, OriginWater told reporters that he currently serves as a director and consultant in the company and is not specifically responsible for daily business operations and management, which will not have a significant impact on the company's daily operations. "Currently, the company's production and operations are normal, the company's board of directors is operating normally, and daily operations and management are the responsibility of the senior management team. Other directors, supervisors and senior managers are performing their duties conscientiously. The company has not yet received relevant notices and is not aware of the progress and conclusion of the investigation. The company will continue to pay attention to the follow-up of the above matters, and strictly comply with the provisions and requirements of relevant laws and regulations, and promptly fulfill its information disclosure obligations and remind of relevant risks."

Multiple reductions

Information on OriginWater's official website shows that it is a benchmark enterprise in China's environmental protection and water industry, one of the world's leading membrane equipment manufacturers and suppliers, and ranks 36th among the "Top 50 Global Water Companies". As of the close of July 31, OriginWater closed at 4.23 yuan per share, with a total market value of 15.33 billion yuan.

During his tenure at OriginWater, Wen Jianping sold off his shares in OriginWater on several occasions.

In July 2023, shortly after Wen Jianping resigned as the chairman of OriginWater, some of his shares were auctioned off by the court. The reporter learned that a total of 40,868,884 shares of OriginWater were auctioned off, accounting for 14.25% of the OriginWater shares held by Wen Jianping and 1.13% of the total share capital of OriginWater.

The judicial auction of some of the OriginWater shares held by Wen Jianping was due to the application by China Minsheng Bank Co., Ltd. for execution of the case between Wen Jianping and Liu Zhenguo. During the execution process, the Beijing Financial Court intended to dispose of the 40,868,884 shares of OriginWater held by the executed party Wen Jianping. The above-mentioned execution objects have entered the auction procedure.

The reporter noticed that the 2018 financial report showed that Wen Jianping held 22.77% of the shares in OriginWater, making him the company's largest shareholder.

In 2020, Wen Jianping reduced his holdings of OriginWater by 45,000,000 shares to repay loans and personal debts, which was no more than 1.42% of OriginWater's total share capital. At that time, Wen Jianping's shareholding ratio in OriginWater was 17%. Subsequently, Wen Jianping reduced his holdings several times. The 2023 financial report showed that as of December 31, 2023, Wen Jianping held a total of 239,397,572 shares of OriginWater, and his shareholding ratio dropped to 6.61%.

Regarding Wen Jianping's share reduction, OriginWater told reporters that the previous share reduction was due to performance commitments. Because the performance commitments for 2021 were not achieved, the equity reduction was used to compensate for the performance commitments.

The reporter noted that in the 2019 financial report of OriginWater, Wen Jianping and the relevant parties made a commitment to the company's operating performance. From 2019 to 2021, the net profit attributable to the parent company's owners will grow by no less than 10%, 15%, and 20% respectively compared with the net profit attributable to the parent company's owners in the previous full fiscal year. If the performance commitment is not achieved, the party making the commitment shall pay the difference between the actual performance and the promised performance to the company in cash within 30 days after the annual report of that year is published.

In 2021, OriginWater's operating income fell by 0.72% year-on-year, and its net profit fell by 48.93% year-on-year. The reporter learned that due to the failure to achieve the performance commitment in 2021, in September 2022, the Beijing Regulatory Bureau of the China Securities Regulatory Commission took administrative supervision measures to order Wen Jianping and four others to correct their failure to fulfill their performance compensation commitments as scheduled, and recorded them in the integrity file of the securities and futures market.

Meeting the challenges

In March 2020, China Urban-Rural Holdings Group Co., Ltd. (hereinafter referred to as "China Urban-Rural") acquired shares of OriginWater by subscribing to non-publicly issued shares in cash. According to the "Share Subscription Contract", China Urban-Rural intends to subscribe to non-publicly issued shares for 15.21% of the total share capital of OriginWater before the issuance, i.e. 481,344,780 shares, with an issue price of 7.72 yuan per share. After the completion of this non-public offering, China Urban-Rural holds 22.00% of OriginWater's shares. China Urban-Rural becomes the controlling shareholder of OriginWater.

In recent years, with China Urban-Rural Development's equity acquisition of OriginWater and Wen Jianping's successive share reductions, the shareholding ratios of both parties in OriginWater have risen and fallen. The 2023 financial report shows that China Urban-Rural Development holds 33.04% of OriginWater, while Wen Jianping holds 6.61%.

However, some of Bishuiyuan's previous mergers and acquisitions are still affecting its performance. According to the 2023 financial report, its operating income in that year was 8.953 billion yuan, a year-on-year increase of 3.03%; its net profit was 765 million yuan, a year-on-year increase of 7.74%; and its net profit attributable to the parent company was 420 million yuan, a year-on-year decrease of 6.83%.

In this regard, OriginWater mentioned in its investor relations activities that its controlled Liangye business suffered a loss of about 330 million yuan in 2023.Yunnan Water AffairsThere will also be a large loss in 2023. The company's management is paying close attention to these issues and is taking active measures to address these challenges.

The Liangye business mentioned by OriginWater originated from a merger and acquisition in 2017. At that time, OriginWater acquired 70% of the equity of Beijing Liangye Environmental Technology Co., Ltd. (later renamed Liangye Technology Group Co., Ltd., hereinafter referred to as "Liangye Technology") for 849 million yuan. As of the end of 2023, OriginWater holds a total of 90.10% of the equity of Liangye Technology. Liangye Technology mainly provides customers with optical technology products and overall solutions for cities, scenic spots and homes.

The reporter noticed that for Bishuiyuan, whose total assets were 76.531 billion yuan in 2023, its accounts receivable reached 11.044 billion yuan by the end of that year, accounting for 14.43% of total assets.

In this regard, OriginWater stated in an investor relations event that the company's total accounts receivable was 11 billion yuan, an increase of 1.29% over last year. The company attaches great importance to it. Although this growth rate is slightly lower than the growth rate of the main business, the total amount is indeed relatively large. In 2023, the company is actively seeking the integration of internal and external resources to speed up the recovery of accounts receivable. The collection situation in 2023 is better than in previous years. "In the future, we will continue to improve our internal management system and enhance our employees' risk awareness and collection skills to comprehensively improve the work of clearing accounts receivable. At the same time, we will also pay close attention to policy developments, strengthen communication and cooperation with customers, and formulate appropriate collection strategies for different project situations."