China: State-owned energy giants merge

China’s top coal miner Shenhua will take over China Guodian, another of the country’s top five state power producers, in a deal that will create the world’s largest power utility worth US$278 billion.

The companies have been in talks about a merger for several months as Beijing aims to shake up its indebted and inefficient state sector, streamline the number of companies and create globally competitive firms in sectors including power generation, shipping and metals.

The Guodian-Shenhua deal was announced on Monday, August 28, by China’s State-owned Assets Supervision and Administration Commission in a one-line statement that gave no other details.

In a filing later on Monday, Shenhua’s listed unit China Shenhua Energy Co Ltd said its parent will absorb Guodian as part of the deal and the new company will be called National Energy Group.

The combined entity will have an installed capacity topping 225 gigawatts, leapfrogging EDF and Enel to become the world’s biggest power company by capacity, according to Frank Yu, principal consultant for Asia-Pacific Power and Renewables at Wood Mackenzie.

The Shenhua-Guodian tie-up may be the first of a handful of mergers in China’s power industry as top policy makers try to cut industrial overcapacity and the number of state-owned enterprises. Monday’s announcement concludes months of speculation about the combination, first reported by Bloomberg.

“People have been waiting for the other shoe to drop,” said Tian Miao, a Beijing-based senior analyst at Sun Hung Kai Financial. “This confirms the direction of state-owned enterprise reform, with companies in the same industry merging to reduce redundant investment and improve efficiency.” reported Bloomberg.

The companies have been in talks about a merger for several months as Beijing aims to shake up its indebted and inefficient state sector, streamline the number of companies and create g

Full Content: Bloomberg

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