(Yicai Global) July 28 -- The chairman of Shanghai Electric Group has become the subject of an enquiry by Shanghai regulators as the Chinese power generation equipment maker stands to lose CNY8.4 billion (USD1.3 billion) due to a large amount of uncollected bills owed to a subsidiary.

Zheng Jianhua, who is also chief executive officer, is under investigation, the Shanghai Discipline Inspection Committee said yesterday. The company is already being probed by the China Securities Regulatory Commission for suspected fraud, Shanghai Electric said on July 5.

The enquiries are unlikely to impact the firm’s day-to-day operations, Shanghai Electric said. The company will fully co-operate with the investigations.

Shanghai Electric Communication Technology, in which the group holds a 40 percent stake, has failed to claim CNY4.1 billion (USD648 million) of accounts receivable, the parent firm said in May.

Shanghai Electric stands to lose around CNY8.4 billion, equivalent to two years of net profit, should the bills go unpaid and the subsidiary goes bankrupt. Most of this is made up of a CNY7.8 billion loan lent to Shanghai Electric Communication and the rest is shareholders’ equity.

Shanghai Electric is doing everything possible to get to the bottom of Shanghai Electric Communication’s uncollected accounts, the firm said. Its disciplinary department has initiated an investigation and is setting up an accountability mechanism.

Editor: Kim Taylor