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under the new "nine national regulations", the m&a and restructuring market continues to heat up. in the second half of the year, power companies have frequently released restructuring updates, and the keyword "coal and electricity integration" has once again attracted market attention.

"large-scale coal companies have accelerated their investment in coal power projects and have become an emerging force in coal power construction. cooperation between traditional power generation companies and coal companies at the project level has also been deepening, and 'coal and power joint ventures' will become an important business model for power development. ” said huang haiwei, vice president of china huaneng energy research institute.

m&a and reorganization in the electric power industry are active

by straightening out the equity relationships with industrial chain companies, various power companies have begun asset integration to increase industry concentration.

the announcement disclosed that on june 12, gansu electric power investment energy development co., ltd. planned to acquire 66.00% equity of gansu electric power investment changle power generation co., ltd., which is also a subsidiary of gansu electric power investment group co., ltd., and integrate power generation assets; on july 18 on september 5, shaanxi coal and chemical industry group co., ltd. announced that shaanxi coal and chemical industry group co., ltd. (hereinafter referred to as "shaanxi coal group") intends to transfer all the equity it holds in shaanxi coal power group co., ltd. (hereinafter referred to as "shaanxi coal power group") to shaanxi coal co., ltd. (hereinafter referred to as "shaanxi coal"); on september 10, the hunan provincial state-owned assets supervision and administration commission planned to transfer 82.40% of the equity held by hunan provincial coal industry group co., ltd. to hunan provincial energy investment group co., ltd. for free.

from the perspective of the industry, mergers and acquisitions and reorganizations occur frequently in the power sector. on the one hand, it is consistent with the policy encouragement direction of "promoting the concentration of state-owned capital in important industries and key areas related to national security and the lifeline of the national economy"; on the other hand, it is consistent with the direction of the power industry. optimizing resource allocation and enhancing industrial competitiveness are not unrelated to our own needs.

"power companies need to adjust their business structures and enhance their ability to withstand market risks. mergers, acquisitions and reorganizations can help companies achieve economies of scale, reduce production costs and improve operational efficiency by quickly acquiring new technologies, new markets and new resources." li songze, investment consultant at sichuan cai securities pointed out.

taking the equity acquisition of huadian international as an example, the total installed capacity in operation of the eight targets to be injected is 15.9728 million kilowatts, accounting for 27.33% of the existing installed capacity of huadian international holdings. after the injection, the installed capacity of huadian international holdings will be significantly increased to 74.4226 million kilowatts. strengthen the company's assets and enhance its performance flexibility.

“coal and electricity integration” continues to accelerate

focusing on restructuring cases in the electric power sector, "coal and electricity joint ventures" run through the industrial layout and seem to have become the current m&a keyword.

shaanxi coal industry stated that the acquisition of shaanxi coal electric power group is an important measure to create a "coal-electricity integration" operating model, which is in line with the company's actual operating needs and strategic development direction, and can further reduce related transactions, increase operating income, and extend the main coal industry chain , promote high-quality development, and conform to the interests of the company and all shareholders.

public information shows that shaanxi coal industry is controlled by shaanxi coal group and is mainly engaged in coal mining, washing, transportation, sales and production services. coal products are mainly used in electric power, chemical industry, metallurgy and other industries. as of the end of the first half of the year, the company had coal reserves of 18.141 billion tons, mineable reserves of 10.441 billion tons, and achieved coal production of 86.4067 million tons, a year-on-year increase of 2.78%; coal sales were 132 million tons, a year-on-year increase of 2.29%.

shaanxi coal power group, as the power generation business entity of shaanxi coal group, currently has a power generation holding installed capacity of 10.82 million kilowatts, including 9.62 million kilowatts of coal power and 1.2 million kilowatts of new energy. its business scope covers thermal power generation, comprehensive utilization power generation, new energy power stations, comprehensive energy services and distribution and sales of electricity, etc. in 2023, the operating income will be 15.262 billion yuan, the total profit will be 1.798 billion yuan, and the power generation will be 35.4 billion kilowatt-hours. the operating performance will reach the best level in history.

li chunchi, co-chief analyst of power utilities at cinda securities, analyzed that thanks to the coordinated supply of coal resources, the unit price of shaanxi coal power group's standard coal into the furnace is 846.44 yuan/ton, which has obvious advantages over major thermal power companies. even if the coal consumption level of power supply is dragged down by thermal power units, still achieved a profit of 3.86 cents per kwh. after this merger, the impact of coal price fluctuations and changes in power demand will be smoothed out through "coal and electricity integration", which will help the stable operation of shaanxi coal industry.

li songze also said that the integration of the upstream and downstream industrial chains in the coal power industry is of great significance for stabilizing the supply of raw materials, controlling cost fluctuations, and improving the reliability of power production. "'coal and electricity joint venture', as an effective resource integration model, is expected to continue to accelerate in the coming period."

industrial collaboration alleviates “long-term worries and near-term worries”

escorting the coordinated development of “coal and electricity integration”, policies are blowing frequently.

in january 2023, the national development and reform commission proposed to continue to promote the optimization and structural adjustment of the state-owned economic layout and promote the "two joint ventures" of coal and coal power, coal power and new energy; in march 2024, the national energy administration issued the "2024 energy work "guiding opinions" proposed to promote the integrated joint operation of coal and coal power and rationally arrange supporting and regulating coal power projects.

"through the strengthening of the anti-risk attributes of the 'coal and electricity joint venture' industry, performance and profitability certainty are expected to increase. especially for coal companies, the study of the 'coal and electricity integration' transformation strategy is, firstly, out of concern for the 'double carbon' transformation." foresight', gradually reduce coal consumption, explore transformation and upgrading, and innovative development paths; second, establish a complementary and long-term mechanism in the profit distribution process of coal and electricity to ensure long-term stable supply of fuel for downstream power plants while obtaining coal profits, thereby locking in the downstream thermal power profits alleviate the 'near concerns' about performance," said zhou zhe, chief analyst of environmental protection and public utilities at sdic securities.

relevant data shows that the average price of coal in the first half of the year was 738.58 yuan/ton, down 9.0% from the same period in 2023. affected by the downward trend in coal prices, shaanxi coal mining’s revenue and profit in the first half of the year both fell year-on-year, with declines of 6.54% and 8.83% respectively. achieved 84.737 billion yuan and 10.556 billion yuan. the overall profit of thermal power companies in the first half of the year was higher, with a net profit attributable to the parent company of 40.463 billion yuan, a year-on-year increase of 47.7%, and the net profit margin increased by 3.1 percentage points compared with the same period last year. as the "coal-power integration" accelerates, the industry has reached a consensus on the future performance growth of shaanxi coal industry.

"the biggest advantage of the 'coal and electricity joint venture' is 'stability'. it can play a balancer role in 'stabilizing supply, stabilizing income, and stabilizing expectations' for both coal and electricity parties." huang haiwei believes that the "coal and electricity joint venture" as a benefit the cooperation model of sharing and risk sharing will still have strong vitality for a long time.

author | yi yuntong