China Guodian Group is one of the top five state-run power generators in the country.
The merger was announced by China’s State-owned Assets Supervision and Administration Commission (SASAC). However, the SASAC did not disclose the details about the deal.
The combined entity is expected to hold assets worth $271bn, emerging as the world’s largest power company by installed capacity, according to Bloomberg New Energy Finance.
The deal is part of a move undertaken by the Chinese authorities to reduce excess capacity in the industrial sector.
In a filing, Shenhua’s subsidiary China Shenhua Energy said that its parent company will absorb Guodian as part of the transaction.
The new company will be known as National Energy Group, according to the filing.
The Chinese authorities also plan to cut the number of state-owned enterprises, as part of their efforts to improve global competitiveness of these companies in various sectors, including power generation, Reuters reported.
At the end of April 2017, Shenhua had assets worth 1.04 trillion yuan ($157.38bn), while Guodian had assets worth 800 billion yuan.
Shenhua Energy said in a filing that it integrate coal-fired power assets with Gourdian's listed unit GD Power to form a new subsidiary that will operate 40 plants.
Acting as the controlling shareholder in the combined entity, GD’s contribution will account for nearly 37.37 billion yuan of the total value of the company.
Image: The Chinese authorities also plan to cut the number of state-owned enterprises. Photo courtesy of alex_ugalek/FreeDigitalPhotos.net.
