China’s government announced on Monday it will combine the world’s biggest coal producer and a major power utility as part of a marathon campaign to make state industry, which dominates the economy, more efficient and profitable.
The merger of Shenhua Group and Guodian Group, both state-owned, comes as Beijing is also trying to shrink a glut of coal production, but Monday’s announcement gave no indication whether the companies would reduce output.
Chinese regulators have arranged a series of mergers in state-owned industries in an effort to create bigger, more efficient and financially robust competitors.
Monday’s one-sentence Cabinet statement gave no financial details or information about how public shareholders might be affected. Both Guodian and Shenhua have subsidiaries with shares traded on stock exchanges in Hong Kong and Shanghai.
Shenhua’s publicly traded subsidiary, China Shenhua Energy Co., reported 2016 profit of 24.9 billion yuan ($3.8 billion) on revenue of 183 billion yuan. It also operates power plants and railways.
Guodian’s main publicly traded subsidiary, China Guodian Power Co., reported 2016 profit of 4.6 billion yuan ($707 million). The parent Guodian company says it has a total of almost 120,000 employees and assets worth 803.1 billion yuan ($121 billion).
