“The Shenhua-Guodian merger is just the beginning of a wave of massive consolidations in China’s energy sector,” an analyst at Wood Mackenzie told Bloomberg in reaction to the news (also reported on Bloomberg) that China was creating the world’s largest power company. China’s largest coal miner — Shenhua Group — will be joined with a leading power generator, China Guodian, to create a new company called China Energy Investment Corp.
The $271 billion merger is part of an effort by the State-owned Assets Supervision and Administration Commission to decrease over capacity — the economy continues to struggle with over reliance on coal and steel in particular — and increase the efficiency of the heavily indebted state-owned sector. Some commentators are skeptical that creating a “too-big-to-fail near-monopoly” will help with reform in the state-owned sector, while others accuse Shenhua of discounting internal prices on coal, a problem for the country’s clean energy goals that will only deepen with this merger.
Wood Mackenzie predicts that more mergers will follow, eventually tallying up to nearly $1 trillion in assets. China Energy Investment will now be responsible for a power capacity of 225 gigawatts, or about 13 percent of China’s total electricity generation capacity.
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