Chinese authorities have asked the coal mining giant Shenhua Group Corporations and power generator China Datang Corporation to consider a merger. According to a report by Bloomberg, the possible merger would unite China’s biggest producer of coal with one of its largest power generators creating a giant company with assets worth $241 billion. The Assets Supervision and Administration Commission of China is reported to have played a catalyst in the discussions as the two companies complemented each other and their merger would benefit the country’s supply-side reform policies.
The merger would develop Chinese President Xi Jinping’s efforts to reduce the industries’ superabundance in the country, fasten the reconditioning of its state-owned factor and diminish it’s over dependence on coal. According to the report, Shenhua’s assets were worth 931.4 billion yuan in 2015 and Datang. 729.5 billion yuan. Shenhua’s power generation capacity had been recorded at 78.5 gigawatts in 2015 while China Datang generated 127. gigawatts. A merger of both the companies would propel the company over China’s top power generator Huaneng Group which generates over 160. 6 gigawatts.
Such a development by China comes after the Indian government in their budget announced the idea to merge a few of their existing firms in the oil and gas sectors to be able to compete against international and domestic competitors. Finance Minister Arun Jaitley, in his budget speech, had claimed that a combination of the existing oil and gas companies would allow them the power to take higher risks, make bigger investment decisions and produce more value for the stakeholders. According to IE, the India Oil Corporation, ONGC, Hindustan Petroleum Corporation and GAIL are a few among the government-owned companies in the energy sector in India. The combination of a few or all these companies would give India an opportunity to bid for major exploration and production assets in the country and outside. Once the merger takes place, the Indian PSU assemblage would have the ability to be in competition with global competitors such as the United Kingdom’s BP Plc and Russian government’s Rosneft.
It was noted that the shares of oil companies had risen by up to 4.15% on the announcement. And to dodge energy security risks, the government is reported to have been building underground emergency storage sites.If the 3 existing reserves are to be added with the two newly planned, the reserve facilities would take India’s reserve capacity to 15.33 Million Metric Tonnes.