China’s carbon neutral goal: Beijing approves creation of power grid equipment giant to meet decarbonisation needs
- The move will create a company with more than 100 billion yuan (US$15.5 billion) in assets
- Merger to create a big equipment maker and service provider that can compete well in nations targeted by Belt and Road Initiative, analyst says
Beijing has given the green light for the formation through merger of a central government-controlled electricity transmission and distribution equipment giant, as part of a reform of industry and state-owned enterprises to drive efficiency.
The move, which involves the consolidation of XJ Group and six units under dominant power distributor State Grid Corporation of China, will create a company with more than 100 billion yuan (US$15.5 billion) in assets according to state media reports.
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“Stripping out the noncore businesses of State Grid and enhancing the competitiveness of the entire sector is a big topic under China’s power system reform,” said Dennis Ip, head of utilities and renewables research at Daiwa Capital Markets. “[This drives the company to] focus more on power grid operation, power supply, power trading and dispatch, and the construction of transmission and distribution projects.”
The latest restructuring involves its distribution equipment businesses, which will result in the establishment of a yet-to-be named company under the supervision of the central government. It will absorb China XD Group and six State Grid units – XJ Group Corporation, Ping Gao Group, Shandong Electrical Engineering and Equipment Group, Jiangsu Nari Group Hengchi Electrical Equipment, Jiangsu Nari Turbostar Electric and Chongqing Nari-Bori Transformer.
“As informed by XJ Group, and upon approval by the State Council, it is agreed that XJ Group will be merged with companies including China XD Group,” Hebei province-based XJ Electric said in a statement to Shenzhen’s bourse on Wednesday.
XJ Group is a provider of automation and grid management solutions. China XD is a Xian, Shaanxi province-based maker best known for its high-voltage switches, transformers and insulators. Henan province-based Ping Gao makes switch gear and circuit-breakers and Shandong Electrical is China’s largest power transmission equipment maker, focusing on transformers, towers, cables and wires. The three Nari units belong to State Grid and have different product focuses.