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UPDATE 2-China's Shenhua, Guodian in power asset merger talks -sources
June 5, 2017 / 4:51 AM / 5 months ago

UPDATE 2-China's Shenhua, Guodian in power asset merger talks -sources

* Firms suspend shares citing unresolved “important” matter

* Shenhua Group to take over GD Power -source

* Merger talks at preliminary stage -source

* Shenhua Group, China Guodian merger to be tabled later -source (Adds analyst comment, context)

By Meng Meng and Adam Jourdan

BEIJING/SHANGHAI, June 5 (Reuters) - Coal giant Shenhua Group Corp Ltd and top-five state power producer China Guodian Corp are in talks to merge some assets, sources told Reuters on Monday, as part of a broader shake-up of China’s debt-ridden state-owned sector.

Several of the power firms’ listed units suspended trading in their shares on Monday citing a planned “significant event”, fanning market speculation over a merger. The shares of other listed units that continued trading rose sharply.

The talks come as the government seeks to streamline state-owned enterprises (SOEs), including those in the energy sector, by creating huge, globally competitive conglomerates. It has merged 15 SOEs since 2015 and currently manages 103 - a number that could eventually fall to about 40, state media reported.

In the latest merger talks, a person with direct knowledge of the matter said China’s largest coal miner, Shenhua Group, would take over Guodian unit GD Power Development Co Ltd .

“After merging Guodian’s GD Power into Shenhua, Shenhua will consider acquiring coal-fired power assets from the remaining top power firms,” said the person, who was not authorised to speak with media on the matter and so declined to be identified.

A second person with knowledge of the matter said merger talks were at a preliminary stage, and that the option of completely merging the two parents was likely to be tabled later.

Shenhua Group, its listed unit China Shenhua Energy Co Ltd , China Guodian and GD Power could not be immediately reached for comment.

“We think this merger is very likely to occur,” NSBO Research said in a note to clients, referring to a merger of some form between Shenhua Group and China Guodian. Any merger would be positive for their listed units, NSBO Research said.


China Guodian is one of five state power producers formed in 2002 after the restructuring of China’s state-owned power sector monopoly, along with China Huadian Corp, State Power Investment Corp, China Huaneng Group and China Datang Corp.

In March, the chairman of China’s State-owned Assets Supervision and Administration Commission (SASAC) said SOE restructuring would focus on the steel, coal, heavy equipment and coal-fired power sectors this year to tackle over-capacity.

With smog-plagued China moving toward cleaner fuel, a merger of Shenhua Group with a major state power provider such as China Guodian - also a leading hydropower and renewables developer - could ease its dependence on coal.

Other listed units of China Guodian - Guodian Changyuan Electric Power Co Ltd, Yantai LongYuan Power Technology Co Ltd and Ningxia Younglight Chemicals Co Ltd - also suspended share trading on Monday.

The listed firms said in statements they had been informed by their parent companies about a significant event that involved major uncertainties and required regulatory approvals.

Trading continued in the Hong Kong-listed shares of China Shenhua Energy as well as Guodian Technology & Environment Group Corp Ltd. The prices of both rose sharply in morning trading. (Reporting by Meng Meng, Adam Jourdan and David Stanway; Editing by Stephen Coates and Christopher Cushing)

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