Two Chinese coal giants mulling merger

sxcoal.com General,  Company 2020-07-13 11:05:49

Chinese two state-owned coal mining majors, Yankuang group and Shandong Energy Group, are planning a strategic merger, said Yankuang's listed company Yanzhou Coal Industry Co., Ltd. in an announcement on July 12.


Yanzhou Coal said the combination was still in the progress of getting approval from relevant authorities. The two giants, both controlled by State-owned Assets Supervision and Administration Commission of Shandong Province, will make a significant difference in the industry if approved.


Among top 10 largest coal producers by output last year, Yankuang and Shandong Energy ranked fourth (166 million tonnes) and fifth (125 million tonnes), respectively, behind China Energy Investment Group (508 million tonnes), China National Coal Group (210 million tonnes) and Datong Coal Mine Group (179 million tonnes ).


The latest data showed that Yankuang and Shandong Energy produced 73.23 million and 64.24 million tonnes of coal, respectively, in January-May, ranking the same places they had for 2019.


The consolidation means Yankuang/Shandong Energy will become the second-largest just after China Energy Investment, and be the third group nationwide with an annual production outstripping 200 million tonnes.


Market analysts view the business marriage as a win-win alliance, not only driving significant efficiencies and cost savings by avoiding regional competition, but also strengthening their resilience to market risks.


In 2019, Shandong Energy topped 26 state-owned enterprises in Shandong province in revenue, reaching 358.5 billion yuan, up 5.74% year on year, followed by Yankuang Group, 285.5 billion yuan, a 10.97% rise.


Shandong Energy has a total coal resource of 44.6 million tonnes, and its production has been more than 100 million tonnes annually in the past eight years running. It also has equities in power companies totaling 102.1 GW.


The idea of merging has been contemplated for a long time. The time Shandong Energy was founded by six regional companies in 2011, there was a plan to incorporate Yankuang in, but finally it didn't happen because Yankuang has several listed companies.


The merger is the second of this kind this year in China. In April, Shanxi Coking Coal Group, the largest coking coal producer in the country (the second is Shandong Energy), announced a plan of merging with Shanxi Coal Import & Export Group Co Ltd.


(Writing by Alex Guo  Editing by Harry Huo)
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