Shenhua, Guodian merge to create new energy group

State- owned coal mining and energy company Shenhua Group and energy producer China Guodian Corp merged on Monday, creating State Energy Investment Group with total assets of up to 1.82 trillion yuan ($ 274.07 billion).

The merger was approved by the State Council, the country’s cabinet, said a statement on the website of the State- owned Assets Supervision and Administration Commission ( SASAC) on Monday.

Guodian will maintain a controlling stake in the new joint venture with an initial investment of 37.4 billion yuan, while Shenhua is going to invest 29.3 billion yuan, according to the plan.

Shenhua’s assets were valued at 1.01 trillion yuan in April, while Guodian’s assets totaled 803.1 billion yuan at the end of 2016, so the resulting entity is estimated to have combined assets of 1.82 trillion yuan.

The two energy providers’ combined revenue reached 361.6 billion yuan in 2016, making the merged entity the second- largest domestic energy supplier in revenue after State Grip Corp of China, according to a report on industry website guangfu. bjx. com. cn on Monday.

The new company will be the world’s largest utility provider by capacity, said the report.

The merger will benefi t both Stateowned enterprises ( SOEs), an insider was quoted as saying in thepaper. cn’s report on Monday.

“As the world’s largest coal miner where 90 percent of its power capacity comes from coal, Shenhua can diversi- fy its capacity mix by taking advantage of Guodian’s heavy investment in clean energy such as wind power and solar,” said the insider.

As Guodian’s investment in the clean- energy sector in recent years may be a negative influence on short-term profit, the merger with Shenhua can stabilize supply and provide capital support, the insider noted.

Boosted by the merger news, the shares of China Shenhua Energy Co, Shenhua’s Hong Kong- listed unit, surged by 2.08 percent to HK$ 19.6 ($ 2.51) at Monday’s close.

The deal further reduced the number of centrally administrated SOEs to 98, compared with 1996 in 2003, when SASAC was founded.

On August 21, the State Council also approved a plan to merge Sinolight Corp and China National Arts & Crafts Corp with China Group Corp. Poly G