Coal and power: China’s $271 billion merger - China’s latest business and technology news - SupChina

Coal and power: China’s $271 billion merger – China’s latest business and technology news

“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.

Lucas Niewenhuis

Lucas Niewenhuis is an associate editor at SupChina who helps curate daily news and produce the company's newsletter, app, and website content. Previously, Lucas researched China-Africa relations at the Social Science Research Council and interned at the Council on Foreign Relations in New York. He has studied Chinese language and culture in Shanghai and Beijing, and is a graduate of the University of Michigan.