World’s Largest Power Company Taking Shape in China

The world’s largest power company is coming into shape in China as a result of a merger between the country’s leading coal mining company Shenhua Group Corp. and one of its largest power generation companies China Guodian Corp. with assets nearing US$271 bn (1.8 trillion yuan), the new company will be the world’s second-largest company in terms of revenue and the largest in terms of installed capacity.

The merger between the two companies may be the first of a number of mergers to happen in the power industry of the country in the near future as policy makers are trying to cut down industrial overcapacity and the number of companies owned by the state. The recent announcement regarding the merger of the two companies confirms the path that state-owned companies in China are taking for a seemingly massive reform, with enterprises in the same industry entering mergers to improve efficiency and reduce redundant investment.

The new company is expected to be named the National Energy Investment Corp. It will have a total installed capacity of over 225 GW, surpassing the companies Electricite de France SA and Enel SpA. Electricite de France SA, France’s leading power generator, had a net capacity of 137.5 GW previous year, according to company records. The Italian company Enel had a net installed capacity of 83 GW as of June this year.

From the merger, Shenhua will be able to bring down its dependence on coal-fired capacity, which is nearly 90% presently, by gaining clean energy assets of Guodian. Meanwhile, Guodian will benefit from Shenhua’s price risk management, coal supply, and the integrated infrastructure of ships, harbors, and railways.