Chinese central SOEs likely to merge coal firms in Shanxi

The State Council held an executive meeting before the National Day holidays to hear the working report on promoting the restructuring of central state-owned enterprises (SOEs). The meeting required steadily pushing for the restructuring of central SOEs in equipment manufacturing, coal, electricity, communications and chemical industries. Central SOEs can also direct their resources toward competitive companies or industries through asset restructuring and equity cooperation.

Restructuring of central SOEs in coal industry was mentioned again. Actually, the State Council and other relevant authorities have repeatedly stressed the restructuring of central SOEs in coal industry since the beginning of this year.

Early this year, Xiao Yaqing, chairperson of the State-owned Assets Supervision and Administration Commission (SASAC), proposed to promote the merger and restructuring of enterprise groups and accelerate the consolidation of steel, coal and electricity businesses. Later during the period of the National People’s Congress and the Chinese Political Consultative Conference, Xiao stressed that it cannot work without implementing restructuring in the steel, coal, heavy equipment and thermal power fields. At a press conference in early June, an official from SASAC confirmed again that China will push for the restructuring in thermal power, heavy equipment and steel industries.

Not long before, the country’s coal producer Shenhua Group and major power generator China Guodian Corporation announced their restructuring plans, marking a beginning of restructuring of central thermal power SOEs.

It needs to be mentioned that at the end of August, China Coal Energy Company Limited said in an announcement that the company’s subsidiary China Coal & Coke Holdings Limited signed an equity transfer agreement with China Coal Jinzhong Energy Chemical Co., Ltd., a subsidiary of its parent company, on August 23, under which it will transfer 100 percent equities of Shanxi Coal Transportation and Sales Co., Ltd. and 100 percent equities of China Coal Tianjin Company to its parent company at 13,421,400 yuan.

As expectations on the restructuring of central thermal power SOEs has risen, China Coal Energy Company Limited attracted more attention.

China set up a coal asset consolidation platform Guoyuan Coal Asset Management Co., Ltd. in last July. China National Coal Group Corporation is mainly responsibility for the consolidation of coal assets.

In August 2016, China Coal Xinji Energy Co., Ltd. under State Development & Investment Corporation (SDIC) transferred its 30.31 percent equities to China National Coal Group for free. In May this year, China Poly Energy Coo., Ltd. was transferred to China National Coal Group as a whole.

China Coal Energy Company Limited said in its semi-annual report that its parent company China National Coal Group has played a role as professional coal company manager in recent years to actively participate in the consolidation of coal assets in central SOEs. Since 2016, China National Coal Group has taken over coal business from some central coal SOEs, pushing for the integrated development and regional layout of coal and electricity industries. China Coal Energy Company Limited will take the reform as an opportunity to accelerate its business adjustment and transformation and upgrading to build itself a clean energy supplier with international competitiveness.

Haitong Securities analyst Wu Jie believed that central SOEs began to consolidate coal assets. Shenhua Group and China Guodian Corporation may merge and start a coal and electricity joint venture. As the only central SOEs in coal industry, China National Coal Group is very likely to become the next one to be merged.

It is noteworthy that, on September 11, the State Council issued the opinions on supporting Shanxi Province to further deepen the reform and promote the transformation of resource-based economy. It points out that China should push forward the transformation of energy structure while centering on the structural supply-side reform and breaking through the traditional mechanism.

It also encourages qualified coal and power enterprises to promote coal and power plant joint venture capital injection, equity swap, merger and reorganization, and equity transfer.

This is the first time that the State Council issued a document to support central SOEs to acquire local SOEs.

The coal research team from Haitong Securities noted that the State Council’s document on supporting the reform and development of Shanxi also aims at the SOEs reform, including the overall listing of enterprise groups and merger and reorganization.

In fact, many coal enterprises in Shanxi have started capital operation.

On the evening of September 27, Shanxi Coking Co., Ltd. disclosed a major asset restructuring plan. It intended to purchase a 49 percent stake of China Coal Huajin Co., Ltd. from Shanxi Coking Group by issuing shares and paying cash at 5.664 billion yuan, among which 5.064 billion yuan will be paid by issuing shares and 600 million yuan will be paid in cash. Meanwhile, Shanxi Coking Co., Ltd. plans to raise no more than 650 million yuan supporting fund via non-public offering of shares.

An analyst from a securities company told the Securities Daily reporter that apart from the restructuring of central coal SOEs, the State Council also stressed the restructuring of coal enterprises in Shanxi. It supported central SOEs to consolidate coal enterprises in Shanxi. Coal enterprises in Shanxi are likely to become major forces in the restructuring of central coal SOEs.

Source: Xinhua