Li Hejun Pushed Jack Ma Aside to Become China's Richest Man. What Business Is He Actually In?

Topping Hurun's 2015 Rich List is Li Hejun, chairman of Hanergy Holding Group. What business is his company in?

Mainland China has a new richest man. On last September's Hurun Rich List, Jack Ma was still No. 1. On the new list this February, Li Hejun took his place. How reliable is the ranking? And who is Li Hejun?

Li Hejun has in fact appeared for years on another ranking, the "New Fortune 500 Rich List." In 2003, when his company was still called Huarui Investment Group, he debuted at No. 23 with a net worth of 2 billion yuan. After 2009 he vanished from the list. Then last year, this same list named him China's richest man, a step ahead of Hurun.

On the 2015 Hurun Rich List, Hanergy Holding Group chairman Li Hejun returned to the top spot with a net worth of 160 billion yuan.

Li Hejun's New Energy Business Looks Like a Concept Stock

Li Hejun has struck it rich twice before, and the timing roughly matches his showing on the New Fortune 500 list. Three years stand out: 2003, 2009 and 2014.

2003 marked the start of his first surge in wealth. Before that, he said, he had poured his entire fortune into the 20.6 billion yuan Jin'anqiao hydropower project in Yunnan, which then finally went into operation. In August 2012, all four of the station's generating units were connected to the grid, producing more than 13 billion kWh a year, enough to meet a year's household electricity use for a city of 30 million people.

After the financial crisis, in 2009, Hanergy Holding bought Apollo Precision and moved into solar photovoltaics, betting on thin-film technology. This became the Hong Kong-listed Hanergy Thin Film Power, 73% owned by Hanergy Holding Group today. Judging by its profit margins, the company is growing fast.

Yet in 2009 solar photovoltaics was named one of ten industries suffering from overcapacity. Thin film held less than 1% of the market, faced higher technical barriers and had a slower cost-decline curve, so its prospects looked bleak too.

Why enter an industry with overcapacity, and pick a relatively backward technology? To buy at the bottom. Over the next few years Hanergy acquired Germany's Solibro and America's MiaSolé and Global Solar Energy, all once well-known names in the industry.

Like the hydropower station that took nearly ten years to build, these deals were just another round of groundwork.

In 2014 Li Hejun's second surge in wealth began. This time the driver was a string of photovoltaic power projects and solar-cell factories approved in second- and third-tier cities. But can projects so heavy on research really make money? Because the government encourages clean energy, such projects easily win subsidies, and bank loans are relatively easy to get as well. All of this is also easier to arrange in second- and third-tier cities.

How are the projects actually doing? Last year the UK's Financial Times visited a Hanergy Holding Group factory near Chengdu and found slack production and outdated equipment.

After two surges, where does Li Hejun's fortune mainly come from? According to the list's explanation, mostly from his stake in the Hong Kong-listed Hanergy Thin Film Power, worth 80 billion yuan at market value. Multiply the closing share price before the list's cutoff date by the total share capital and by his holding, and you get this portion of his wealth.

The rest of the 160 billion yuan comes from Li Hejun's unlisted hydropower, solar and other businesses. In other words, half his net worth comes from the parent company, Hanergy Holding Group, whose finances are opaque. It spans three industries, hydropower, wind power, and energy conservation and emissions reduction, plus a string of eye-catching projects and clients.

One is a tie-up with IKEA to sell household solar power systems. According to the company's website, since the partnership began in July 2013 the project has launched in the Netherlands, the UK and Switzerland. In Switzerland, each system is expected to earn 18,000 Swiss francs (about 1.2153 million yuan) over its 25-year warranty period.

Hanergy's two automotive partnerships offer even more reputation and even fewer numbers. Whether supplying solar chips to Aston Martin race cars to cut the energy use of on-board equipment, or becoming the first Chinese charging-station supplier for electric-car pioneer Tesla, the publicity says nothing about how revenue is shared.

Hanergy is in the new energy business. But so far, what we have seen is mostly broad concepts, technology, grand government-scale plans and pilot projects far overseas. So how does Hanergy actually make money? The giant Yunnan hydropower project from years ago may still be its main source of income, but Hanergy Holding publishes no financial data anyone can check.

Richest Man for the Sake of Being Richest Man

The solar photovoltaic industry now minting a richest man looks more like a capital game. Shortly before the Hurun list came out, the company's shares jumped for three straight days, January 23, 26 and 27, gaining 32% in total and lifting its market value to HK$150 billion. Why did they rise so fast?

Put all this together and you may notice that the new richest man has been busy building hype: clean energy favored by policy, internationally known industry names, aloof fringe technology, and famous partners. And new-energy investment has one quirk: as long as oil prices stay high and international demand might grow, bets on hot themes in the field can still make money. The businesses that "may have helped it grow its asset base" could in fact be invented or inflated, perhaps to raise funds.

Indeed, since last year some media have questioned whether Hanergy Holding Group is profiting through a backdoor listing. In 1999, Pacific Century CyberWorks, founded by Richard Li, went public in Hong Kong through a backdoor listing. Its shares rose 23-fold in a day, and Richard Li made more than HK$30 billion overnight, multiplying his net worth a hundredfold: a textbook case of cashing out through a backdoor listing.

So the Hurun list may also be part of Li Hejun's effort to hype his projects.

The Hurun list itself has long been controversial. Hurun has explained that his research team weighs the rich people's company financials, media reports, personal interviews and other sources to arrive at an approximate figure.

Generally, such wealth rankings are compiled from listed-company filings and business-registration and tax data, combined with insider information.

For a concrete example, look at how the Forbes rich list is calculated. Personal wealth = listed holdings (the highest share price in the month before the list's release × total share capital × shares held) + unlisted holdings (interviews with the rich person | estimates based on industry averages and insider information) + inherited family assets (when split among several heirs, counted only above 1 billion) + personal assets (art collections, real estate and so on) − debt.

Every year Forbes sends a team of more than 50 people around the world to track the lives of the rich. After a round of basic research, it draws up a shortlist. Calculating wealth is the hardest step. First, researchers judge each subject's baseline wealth according to whether he tends to exaggerate, likes to show off, or chooses to hide his money. Then they compute the total with the formula. Some of the world's rich owe their wealth to inherited thrones or dictatorship; they are left off the list.

In short, whether at home or abroad, such wealth rankings involve many human judgments, with plenty of room for imagination and manipulation.

However Many People Work for You, You Need a Vision

(The following is translated from The New York Times.)

Li Hejun is the founder and chairman of Hanergy Holding Group, which specializes in alternative energy.

Q: Do you think you are a natural-born leader?

A: Yes. When I was a kid, around 7, I liked leading the neighborhood children in games. Then in my second year at Beijing Jiaotong University, I organized more than 30 classmates to sell photographic film outside the school canteen. My job was to give each classmate a different task according to their personality and strengths. Some bought the film, some sold it, and some handled the money.

Looking back on this simple experience, I think it contained some basic principles of team management: setting a common goal, knowing what each team member is good at, assigning them the right jobs, managing the whole process and sharing the results. What struck me most was that making money is never easy, but I also came to see the power of teamwork.

Then at about 26 I started my own business. There were only about 7 of us, mostly my classmates, so we were all the same age. I don't know why they followed me, but maybe they trusted me and trusted our mission.

Q: You were all the same age and knew each other from school. Did that make managing them, and selling the film, easier?

A: Managing people takes a strong vision, and the confidence to hold on to it. In a sense, starting a company with my classmates did make managing people easier, because we knew each other and had a degree of trust and understanding. But as I said, I had to be firm, set high standards for everyone, and start with myself.

Q: Can you recall the early days of the business?

A: At the beginning there were many difficulties, over strategic direction and funding, for example. For most startup teams, the latter may be one of the biggest challenges. It took us eight years to build the Jin'anqiao hydropower station, the largest hydropower station in the world built by a private company. At the peak, we needed to put in as much as 10 million yuan (about US$1.6 million) a day, which was a heavy burden for me. In fact, the challenge went beyond the money itself. The key was whether you could persevere and whether you could set the right strategic direction for the company. But in the end, by holding on to our long-term vision and focusing on clean energy, we came through these tests and succeeded.

Q: What qualities does a leader need?

A: Having faith in what you do matters. I have enough money to live on and could retire to play golf, but I am still fighting for my belief, which is to change the world with clean energy. When you believe in a shared cause, you can unite everyone around you, and that is very exciting.

I think this shared goal is what sets Hanergy apart from other companies. We are not just thinking about making money, nor trying to make a name for ourselves. We are focused on finding the ultimate solution for energy use, making life better by getting energy more safely, more conveniently and more cheaply. That is why, five years ago, we chose thin-film power generation out of all solar technologies. Many people in the solar field questioned our choice, but we believe the industry as a whole is moving our way.

Q: As a leader, how do you motivate your employees?

A: Your team has to trust you. If they don't, you will fail. But to win trust, you must prove to them that you are trustworthy. In Chinese philosophy, the highest form of trust is inner trust: you don't have to defend or justify yourself. In a way, people respect you first, and then trust you. And it is not only employees. Your customers and clients must also trust you, and trust your belief and confidence in yourself.

Q: When you started out, China was very different from today. How hard was it then?

A: Actually, 25 years ago it was easier, because there were no competitors. China had just begun reform and opening up, and the ideas of entrepreneurship and private enterprise were still new and exciting. The period felt stirring and full of opportunity, because everyone was racing to get rich. But starting a business has never been easy. It takes a vision, a long-term one, not just a focus on immediate wealth. By concentrating on China's shift from fossil fuels to clean energy, we built a sustainable, effective long-term plan.

Q: What is the secret to business success?

A: People, people and people. Knowing how to inspire others to work with enthusiasm is very important.

Q: How do you do that?

A: If someone believes in what we are doing, I will give them a chance. I am not the kind of person who does everything myself. It is more about giving people an overall vision and not managing too closely. I have to trust the people I work with. Obviously, getting the right people to work for you is important, and I think that is my strength.

Q: How do you spot the right management talent?

A: Everyone defines success differently. For me, success is not making a lot of money but whether you have done something different from others. I think so much talent comes to us because we have a vision and people trust what we do. Because of this shared vision, our employees motivate themselves and are passionate about their work at Hanergy. That is also why Hanergy keeps its talent.

Q: Now that more than 10,000 people work for you, has your view of leadership changed?

A: Nothing has fundamentally changed. I still have a sense of mission, and I still persevere.

Q: What advice do you have for young entrepreneurs?

A: Persevere. Stick with one thing for more than 10 years, or for as long as it takes. We tend to overestimate what will happen in a year or two and underestimate what will happen in the next 5 to 10 years. In my industry, if you stick to your plan, after a long time you will be surprised by what you have achieved. Of course, you have to find the right thing to do (laughs).

Q: If you could talk to your younger self, what would you say?

A: By the time you are 50, you won't regret your efforts!

Translated by iS Translation Society, Ge Zhongjun

Graphics: Wang Shiyun