Shenhua absorbs parent’s coal assets as it looks to the future in a decarbonising China
The deal to acquire US$18.9 billion of assets is meant to reduce excessive competition and enhance efficiency among state-owned enterprises
China Shenhua Energy’s 133 billion yuan (US$18.9 billion) acquisition of a dozen assets could help the mainland’s largest listed coal miner take on competition as the era of coal power starts winding down in the world’s largest market for the fossil fuel, according to analysts.
The miner in a filing to the Hong Kong stock exchange last week provided an update to its August proposal to acquire equity interests in 12 enterprises from its controlling shareholder, China Energy Investment Group.
The deal, which involves assets in coal production, power generation, coal chemical industry and coal logistics, is expected to take Shenhua’s total assets to over 200 billion yuan and expand its coverage to mines in the Xinjiang and Inner Mongolia autonomous regions.
“The deal reflects a broad move to reduce excessive competition and enhance efficiency among state-owned enterprises in China amid low profit margins and deflationary pressures,” said Gary Ng Cheuk-yan, a senior economist at Natixis Corporate and Investment Bank.
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The acquisitions were aimed at realising the promise of ending the two-decade same-industry competition between Shenhua and its controlling shareholder, concentrating coal-focused assets into the listed company, according to Guosheng Securities.