The Chinese government is directing a potential merger between China Datang and the country’s biggest coal producer, Shenhua Group.
According to Bloomberg, China's state-owned enterprise regulator has asked Shenhua and leading coal-fired power generator China Datang to discuss a merger.
If the merger goes ahead it will create a massive utility worth $241bn in terms of assets. Analysts say the deal would be positive for Datang as it would remove coal price risks from the equation.
The State-owned Assets Supervision and Administration Commission encouraged the discussions as the two businesses complement each other and a merger would be in line with China’s supply-side reform policies, unnamed sources told Bloomberg.
A merger would build on President Xi Jinping’s efforts to cut the nation’s industrial overcapacity, accelerate the drive to overhaul its bloated state-owned sector and reduce its reliance on coal. China will speed up mergers and acquisitions of state-owned firms in coal, power, machinery and steel this year, Sasac vice-chairman Zhang Xiwu said in Beijing earlier this month.
“If successful, this may be a good model for China’s coal and power industry reforms as a company with strong coal and coal-fired power assets could maintain reasonable profits in almost all circumstances,” said Lin Boqiang, an adviser to the country’s National Energy Administration and director of Xiamen University’s China Center for Energy Economics Research.
Shenhua Group’s power-generation capacity totalled 78.5 GW in 2015, while China Datang had 127.2 GW, according to their websites. A combined company would top power behemoth China Huaneng Group’s 160.6 GW.
China Datang Corporation (CDT) is one of the five large-scaled power generation enterprises in the People's Republic of China, established on the basis of former State Power Corporation of China in 2002。