Chinese coal giants may merge

14 August 2017

State owned China Shenhua Energy Co Ltd and China Coal Energy Co Ltd, the nation's leading coal producers, which in June 2015 dismissed rumours of a merger, have now submitted merger plans to China’s State Council for approval.

The resulting entity, if the merger is approved, would be the world’s largest utility provider by capacity, with combined assets of $236bn (Bloomberg data).
The benefits of combining the companies are far-reaching, in terms both of increased negotiating power and the mix of resources. Shenhua derives about 90% of its power capacity from coal-fired power, while Guodian has invested heavily in wind power, solar and hydropower.

Renewed speculation about an impending merger were reported three months ago, causing stocks in both companies to jump in value.

The proposed merger is one of several consolidating moves being considered by China’s state controlled firms in the energy sector, which have been burdened by mounting overcapacity.
China Huaneng Group, China's largest power generator, and another top five company, State Power Investment, are also looking at a merger. State Power Investment chairman Wang Binghua has told local media that both sides are considering such a move, arguing that the crowded field is "negatively affecting the industry's overall efficiency and profits."

Bloomberg reports that Beijing is looking at three other large scale coal power mergers as possibilities, while it examines reforming the state-run power sector. The mergers would involve eight companies with combined assets of almost $855bn and create three new power giants.
China Huadian and China Guodian Corp., two of the biggest coal-fired power generators, may merge with China National Nuclear Corp., the second-biggest nuclear power operator in China. The combined company would have 297 GW of capacity and $295bn in assets, according to data published on company and other websites.
China Datang, one of the five biggest coal-fired generators, may merge with China General Nuclear Power Corp., the largest nuclear power operator, and Shenhua Group Corp., the country’s biggest coal producer, as well as a major rail operator and power producer. The combined company would have 241 GW of capacity and $302bn in assets.
China Huaneng, the country’s biggest coal-fired power producer, may merge with State Power Investment Corp., a coal-fired-power company that also owns State Nuclear Power Technology Corp., the unit building China’s Westinghouse-designed AP1000 third-generation nuclear reactors. The combined company would have about 262 GW of capacity and assets of $253bn.

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