Datang Group takes control of subsidiary’s loss-making coal and chemical assets
After losing billions of yuan for years, heavily indebted industrial businesses bought for a token 1 yuan
Datang International Power Generation, the flagship listed unit of one of the nation’s five state-backed power generation majors China Datang Group, has agreed to sell its hugely loss-making portfolio of coal, chemical and other heavy industrial businesses to its parent, for a token 1 yuan.
The transfer of ownership’s main purpose is for Datang International to avoid further losses and financial burden from the troubled projects, so it can shift its focus back to its core business of power generation.
During the early 2000s, the company diversified into coal mining and later further ventured into riskier projects that turn coal into chemicals and natural gas – businesses whose commercial viability had not been proven at the time.
In order to convince its parent to take on the troubled assets, Datang International was forced to agree to a token selling price of only 1 yuan and has to agreed to waive up to 10 billion yuan of loans owed by the troubled businesses to it.
The portfolio of projects has been bleeding cash for years.
They were first developed by Datang International during the coal boom almost a decade ago, and their offload means the company will be able to devote its efforts to its core business of power generation, it said in a filing to the Hong Kong stock exchange late on Thursday.
“The operating loss of its coal-to-chemical business segment has been increasing annually and the operating conditions continue to deteriorate,” it said.