Beijing approves Shenhua-Guodian marriage to become the world’s biggest energy juggernaut
The merger is part of efforts to raise competitiveness of central government-controlled enterprises and over time, cut their number down to 40
The merger of coal-to-power energy titan Shenhua Group and one of the nation’s big five state-owned power generators, China Guodian Group has received Beijing’s blessings, which will create the world’s largest power utility firm.
“With approval by the State Council, China Guodian Group and Shenhua Group will be merged and restructured into State Energy Investment Group,” Sate-owned Assets Supervision and Administration Commission, the manager of state firms under the direct supervision of the central government said in a statement on its web site on Monday.
The impending merger will see Shenhua, the nation’s largest coal miner with 420 million tonnes of annual capacity absorb Guodian’s 65 million tonnes and further its leading position on the fossil fuel.
It will also amalgamate Guodian’s 143 giga-watt (GW) of power generation capacity with Shenhua’s 83 GW, creating a 226 GW behemoth surpassing current leader China Huaneng Group’s 165.5 GW.
Guodian, already the world’s largest wind farm operator with 26 GW of capacity, will widen the gap with its domestic rivals further, after combining with Shenhua’s 7.4 GW wind capacity.
“The merged entity will have a market leading position in north China’s power market and seaborne coal sales ... we believe in the next three years, State Energy Investment will continue to consolidate other players both up and downstream of the supply chain,” said ICBC International analyst Zhao Dongchen in a note early this month.
The merger is part of Beijing’s ongoing effort to enhance competitiveness of the central government’s enterprises through mergers and acquisitions, with a long term target to cut their number to 40 from the current 98.
