Coal miner and power plant operator to merge
June 12, 2017 Category Mergers & Acquisitions, Weekly
China’s largest coal miner, China Shenhua Energy Co, and Guodian Technology and Environment Group, a coal-fired power firm, are reported to be in merger discussions. Their listed units halted share trading ahead of the announcement of a “significant event”. China is also considering merging two of its nuclear power giants, China National Nuclear Corp and China Nuclear Engineering Corp Group. Lin Boqiang, Dean of the China Institute for Energy Policy Studies at Xiamen University, warned that in addition to increased competitiveness in the international market as a result of the mergers, there might also be excessive concentration that damages domestic market competition. Shenhua had CNY1.04 trillion in total assets as of the end of April, including 83 gigawatt (GW) of power generating capacity. Guodian owned assets of CNY803 billion at the end of 2016. Coal still make up 70% of the 1,800 GW of power producing capacity in China. Emissions obligations under global treaties are compelling the Chinese government to reduce coal’s maximum share to 1,100 GW by 2020, or 55% of the country’s total power capacity. A merged entity between Shenhua and Guodian will potentially facilitate the closures of certain unprofitable coal plants.
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