Overhaul of power plants is a must for China’s long-term benefit
China is reportedly mulling merging its major power generators to cut overcapacity, a move which UBS says is a “must-do” for the sector’s long-term benefit
A drastic consolidation of the mainland’s major power generators is a “must-do” that is in line with Beijing’s massive efforts to cut overcapacity and lower greenhouse gas emission, according to UBS.
“It is a necessary move to conduct a huge consolidation of the industry,” said Alex Liu, a UBS analyst whose research focuses on power producers. “A consolidation targeted at reducing the number of coal-fired power plants will be of long-term benefit to the country’s power generation sector.”
Liu’s remarks came after reports earlier this week of Beijing’s attempt to create three energy giants through merging eight large-size companies.
The Chinese leadership is considering a major overhaul of the state-owned power sector as a way of deepening the reform of the world’s second-largest economy which has been saddled with overcapacity, excessive stockpile, high leverage ratio and severe pollution problem.
Under the proposed move which was reported by Bloomberg, the central government plans to create three power-generating behemoths through the mergers of eight existing state-owned power producers.
A consolidation targeted at reducing the number of coal-fired power plants will be of long-term benefit to the country’s power generation sector
China Huadian Corp and China Guodian Corp could merge with China National Nuclear Corp; China Datang Corp is likely to be combined with China General Nuclear Power Corp; and China Huaneng Group may merge with State Power Investment Corp.