Is Shenhua Datang set to merge? Listen to what the industry has to say

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Source: 21st Century Business Herald. Rumors of a potential merger between Shenhua and Datang have attracted attention from investors; Datang Power Generation (601991.SH) saw its share price rise sharply on the afternoon of the 30th, reaching a limit-up price of 4.71 yuan per share, with a daily increase of 10.05%. Datang Group is one of China’s five major power generation groups, while Shenhua Group is the largest state-owned coal enterprise in China. Datang Power Generation and China Shenhua (601088.SH) are the listed companies affiliated with these two power and coal giants, respectively. On the evening of the 29th, some media outlets reported that the State-owned Assets Supervision and Administration Commission had asked Shenhua Group and Datang Group to discuss the possibility of a merger. ”It immediately attracted attention within the industry and in capital markets. On the morning of the 30th, influenced by rumors, the stock price of Datang Power Generation began to rise, and the Hong Kong-listed share of Datang Power Generation (0991.HK) also showed an upward trend. At noon on the 30th, Datang Power Generation issued a clarification statement, saying that the company had noticed various rumors published in some media outlets. After communicating with the company’s controlling shareholder, China Datang Group Corporation, the latter stated that it had received no such information. There are no matters that should be disclosed but have not been disclosed by the company. Meanwhile, a spokesperson for Shenhua Group also clarified to the media that no such information has been received at present, and if any such information does arise, a announcement will be made publicly. Recently, there have been many changes in the management of Shenhua Group, which has led outsiders to believe that Shenhua might be about to take significant action. In January this year, Han Jianguo, president of China Shenhua, a listed company under Shenhua Group, resigned from his position. On March 28, Zhang Yuzhuo, former chairman and party secretary of Shenhua Group, was transferred to serve as the secretary of the Tianjin Municipal Party Committee and the Binhai New Area Party Committee. At present, Shenhua Group is temporarily led in all its operations by Ling Wen, the deputy secretary of the Party group and general manager. In fact, since the beginning of this year, against the backdrop of state-owned enterprise reforms and capacity reduction, the capital market is highly optimistic about the industry consolidation and restructuring to take place in the coal and power sectors. In addition to the rumors of a merger between Shenhua and Datang, there are also various other rumors in the market regarding a potential merger between Shenhua Group and CGN, as well as between Shenhua and China National Coal Group. According to a source close to Datang Power Generation, as told to 21st Century Business Herald, “If the State-owned Assets Supervision and Administration Commission decides that Shenhua and Datang should merge, there is no need for the two companies to discuss such a possibility separately; the logic behind this rumor is flawed.” ” However, another official from the institution told a reporter from 21st Century Business Herald that \"judging from both sides’ statements that they have not received any notice, a merger is not entirely impossible.\" ”In previous cases of restructuring and merger between Baosteel and Wuhan Iron and Steel, the two listed companies also denied such claims on multiple occasions, stating that they had received no such notifications. ” According to the financial reports recently released by Datang Power Generation, the company achieved revenue of 59.124 billion yuan in 2016, a 4.47% decrease compared to the same period the previous year. The net loss attributable to the shareholders of the listed company was 2.623 billion yuan, whereas in 2015 the figure was a net profit of 2.788 billion yuan.