Beijing opens door to $273bn power merger

China Energy Investment Corporation could become one of the world's largest power players, accounting for close to 15% of China’s power generation.

China’s State Council has given its blessing to a merger between Shenhua Group and China Guodian Corporation which, if approved by the relevant regulatory authorities, will create the country’s – and perhaps the world's – largest power company. 

Shenhua, China’s biggest coal miner, and China Guodian, one of five major power generation companies in the country, will be reorganised to form a new entity called China Energy Investment Corporation. Shenhua reported in June that it had more than 1 trillion yuan ($151 billion; €126 billion) in assets, with around 72GW of coal-fired power and 10GW of renewable projects. China Guodian had a total installed capacity of more than 143GW, with more than 800 billion yuan in total assets as of this June.   

Once the merger is completed, the new power company will have total assets of more than 1.8 trillion yuan. Its combined 225GW capacity will account for 14.7 percent of the country’s total power generation capacity, which stood at 1,530GW as of 2015. 

The details of the merger were not disclosed. 

Separately, the two firms also signed a joint venture framework agreement yesterday to combine their thermal power generation businesses, creating a new entity with a combined installed capacity of 78GW.

Shenhua’s Hong Kong-listed arm and China Guodian’s Shanghai-listed coal-fired power subsidiary will inject assets worth 66.6 billion yuan into the JV. China Guodian’s GP Power, which will transfer 22 power projects worth 37.3 billion yuan to the new entity, will have a controlling stake in the company, while Shenhua is contributing the remaining 18 assets worth 29.2 billion yuan. 

Shenhua said in a filing with the Hong Kong Stock Exchange that the formation of the JV falls under China’s “structural supply-side reform”, as well as its state-owned enterprise reform. 

The Chinese government has been promoting reforms in the power sector to lower reliance on coal-fired power generation. Its latest Five-Year Plan on Energy aims to see 15 percent of electricity consumed nationally from non-fossil fuels by 2020. The total coal-fired generation is expected to remain at a level of 1,100GW, which would represent a 55 percent share of the power mix by 2020.