China creates largest power company in the world

August 28, 2017

Multiple media outlets carry the news today that Shenhua Group, China’s largest coal company, and China Guodian Corp, one of its largest power generators, are to merge – according to an announcement from the State-owned Assets Supervision and Administration Commission. The merged entity will have assets of RMB 1.8 trillion (US$ 271 billion), and combined generating assets of 227 GW, making it by far the largest power generating company in the world. The new entity will be known as China Energy Investment Corp (CEIC) or National Energy Group, now ranked as one of China’s largest state-owned firms.

 Can this development be seen as part of the country’s green shift? The new entity will have generating capacity 23% based on WWS sources – 8% on water, 14% on wind and 1% on solar – while 77% will be based on coal/thermal sources. While this does not look promising, the reality is that the merger will help Shenhua to reduce its reliance on coal (currently to the level of 90%) by absorbing clean energy assets from Guodian; while Guodian will be able to draw on the extensive infrastructure assets of Shenhua. While Shenhua has current generating capacity of 82 GW, Guodian has 145 GW – making 227 GW for the combined entity. Analysts point to the strategic interest that Shenhua will have in acquiring clean energy capacity from Guodian, in that generation hours for wind, solar, hydro (and nuclear) are guaranteed by regulation, while coal-fired generation is moving to 100% reliance on world market prices. The combined entity will be the world’s largest generator of wind power, having total generating assets of 33 GW. Further mergers of state-owned power/energy giants are mooted. (See the Bloomberg story ‘China is creating the world’s largest power company’, 28 August, at: https://www.bloomberg.com/news/articles/2017-08-28/china-approves-guodian-shenhua-group-to-merge)​

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