Beijing approves Shenhua-Guodian marriage to become the world’s biggest energy juggernaut

Chinese authorities have approved a mega-merger between the country’s largest coal producer and a top electricity firm, the government said on August 28, reportedly creating the world’s biggest power company in terms of capacity.

The merger of Shenhua Group and Guodian Group, both state-owned, comes as Beijing is also trying to shrink a glut of coal production, but Monday’s announcement gave no indication whether the companies would reduce output. Its total assets reached 803.1 billion yuan ($121 billion) as of 2016, the company said on its website.

“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 combined entity would have an installed capacity topping 225 gigawatts (GW), 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. It ranked 397th among the global Fortune 500 in 2017. Ltd., the State-owned Assets Supervision and Administration Commission said in a statement.

SASAC has been actively restructuring SOEs this year in a bid to improve their efficiency, with the number of central SOEs falling to 98 after Monday’s announced merger, down sharply from 196 in 2003.

In Shenhua Energy’s filing, it said it will combine coal-fired power assets with Gourdian’s listed unit GD Power, creating a new subsidiary that will include 40 plants across all major regions.

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