**12 ministries and commissions support coal chemical industry and coal enterprises staying together"

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On January 5, it was learned from the website of the **Development and Reform Commission** that 12 departments including the Development and Reform Commission and the Ministry of Finance recently issued the \"Opinions on Further Promoting the Merger, Reorganization, Transformation, and Upgrading of Coal Enterprises.\" By the end of 2020, efforts will be made to establish several large-scale coal enterprise groups with an annual production capacity of 100 million tons and strong international competitiveness across the country, as well as to develop and nurture a number of modern coal enterprise groups. The proposal suggests supporting mergers and reorganizations among coal enterprises that meet the relevant conditions, fostering the development of coal-power integrated operations, encouraging mergers and reorganizations between coal enterprises and those in the coal chemical industry, as well as between coal enterprises and those in other related industries. The recommendations also suggest using mergers and reorganizations to eliminate excess production capacity, improve the standards for safe coal mining, achieve an optimal allocation of coal resources, accelerate the resolution of \"zombie enterprises,\" and optimize the structure of the coal industry. The opinion emphasizes encouraging coal and coal chemical enterprises to carry out mergers and reorganizations based on market needs, develop modern coal chemical industries in an orderly manner, promote local conversion of coal, and develop products with high technological content and added value. Achieve the organic integration of upstream and downstream industries in the coal raw material sector, thereby enhancing their mutual driving effects. Opinions on Further Promoting the Merger, Reorganization, Transformation, and Upgrading of Coal Enterprises (Excerpt) I. Main objectives. Through mergers and reorganizations, the average size of coal enterprises has increased significantly, the number of coal mines at medium and low levels has decreased markedly, the integration between upstream and downstream industries has improved substantially, economic vitality has been enhanced, and the industrial structure has been optimized. By the end of 2020, efforts will be made to establish several large-scale coal enterprise groups with an annual production capacity of 100 million tons and strong international competitiveness across the country, as well as to develop and nurture a number of modern coal enterprise groups. II. Main Approaches and Objectives 　　 Support the merger and restructuring of coal enterprises that meet the relevant conditions. Vigorously promote mergers and reorganizations among coal enterprises of different scales, regions, ownership types, and coal varieties, so as to diversify product ranges, increase enterprise sizes, expand coverage areas, innovate business mechanisms, and further enhance the comprehensive competitiveness of coal enterprises. Advance the restructuring of central specialized coal enterprises and the coal mines affiliated with other central enterprises involved in the coal industry, so as to strengthen, optimize, and expand these specialized coal enterprises. State-owned assets regulatory agencies at all levels are encouraged to establish specialized asset management platform companies to consolidate the coal mining operations of state-owned enterprises through means such as asset transfer. It supports coal enterprises in transforming from pure production-oriented firms to production-service-oriented ones, accelerates the development of specialized companies, and drives the coal industry toward higher-end levels. 　　 Support the development of coal-power integration. Support coal and power enterprises in actively developing integrated coal-power operations by carrying out mergers and reorganizations, as well as through means such as making capital contributions for purchases or taking controlling or minority stakes. In line with the pattern of thermal coal transportation, with a focus on the central and eastern regions, efforts will be made to promote joint operations among relevant coal and power enterprises that aim to ensure long-term stability and a scientific and rational approach to thermal coal procurement and sales. It supports large power generation companies in restructuring coal enterprises to enhance the security of energy supply. 　　 Support the merger and restructuring of coal and coal chemical enterprises. Coal and coal chemical enterprises are encouraged to carry out mergers and reorganizations based on market needs, develop modern coal chemical industries in an orderly manner, promote local conversion of coal, and develop products with high technological content and added value. Achieve the organic integration of upstream and downstream industries in the coal raw material sector, thereby enhancing their mutual driving effects. 　　 Support the mergers and reorganizations of coal and other related industrial enterprises. Steel companies with sufficient capabilities are encouraged to merge and restructure with coal companies in line with their resource needs. Railway, port and shipping enterprises, as well as coal companies, are encouraged to carry out mergers and reorganizations, so as to leverage the advantages of the industrial chain in the transportation of bulk goods, improve the level of transportation support, establish stable supply channels, and enhance their ability to withstand market risks. 　　 Drive the elimination of excess capacity through mergers and restructurings. Encourage the acceleration of phasing out outdated production capacity and other capacity that does not comply with industrial policies through mergers and reorganizations, and guide small-scale, unsafe, and inefficient coal mines to withdraw voluntarily. Guide and encourage the reduction and restructuring of coal mines that are not covered by the plans for addressing excess coal production capacity, so as to foster the development of advanced production capabilities; the total capacity of the remaining coal mines must not exceed the sum of their capacities prior to restructuring. Support the retained coal mines in carrying out unified development of the remaining coal resources from the restructured mines ； Coal mines with non-adjacent resources are allowed to undergo reorganization in different locations, with the resources being developed in phases after the reorganization. It is prohibited to extract the remaining coal resources from these reorganized coal mines before they cease operations; the enterprise responsible for the reorganization must commit to carrying out the development in phases, and the relevant provincial authorities shall announce this to the public. The relevant provinces (autonomous regions, municipalities) shall formulate specific plans and organize their implementation. 　　 Advance technological progress and upgrading through mergers and reorganizations. Further research and improvement of standards for advanced coal production capacity are needed; enterprises should be encouraged to carry out mergers and reorganizations in order to make better use of their advantages in terms of resources, technology, equipment, management, and capital. Efforts should be made to develop advanced production capacities that feature sophisticated processes, high production efficiency and resource utilization rates, strong safety capabilities, high levels of environmental protection, and low energy consumption per unit of product, thereby achieving safe and environmentally sustainable mining practices. By 2025, a new coal supply structure will be established, with large enterprises as the backbone and advanced production capacity as the main element. It supports enterprises in carrying out mergers and reorganizations to promote the use of mature, advanced, and suitable technical equipment, strengthen efforts in technological research and development and the transformation of scientific and technological achievements, thereby further improving the levels of mechanization, automation, informatization, and intelligence. 　　 Optimize the allocation of coal resources through mergers and reorganizations. Coal resources shall be developed in a intensive manner. In accordance with the principle that, in principle, one entity should develop each mining area, efforts shall be made to promote the merger and reorganization of coal enterprises within mining areas. For coal mine resources that do not conform to the optimized layout, mergers and reorganizations should be carried out through market mechanisms, so as to further concentrate resources in superior enterprises and improve resource utilization efficiency. 　　 Improve the level of safety assurance in coal mining through mergers and reorganizations. Through mergers and reorganizations, coal mines with low safety standards are encouraged to shut down more rapidly, thereby further reducing the number of coal mines and minimizing potential accident risks. By implementing mechanization, automation, and intelligence, the production systems in coal mines are upgraded, improving both the level of technical equipment and safety measures. 　　 Accelerate the disposal of \"zombie enterprises\" through mergers and reorganizations. Adhering to a problem-oriented approach and starting from practical realities, support is provided for \"zombie enterprises\" that are temporarily in difficulty due to factors such as lax management, excessive staff, low technical levels, and low labor productivity, but which possess certain potential for development and value for restructuring, so as to improve their operational efficiency and economic performance. For those \"zombie enterprises\" with outdated production capacity that do not comply with industrial policies, all forms of unreasonable subsidies must be halted; enforcement measures related to environmental protection, energy consumption, quality, and safety should be strengthened to accelerate their withdrawal from the market. 　　 Optimize the layout of the coal industry through mergers and reorganizations. By taking into account factors such as resource endowments, development intensity, market location, environmental capacity, and transportation routes, and in accordance with the principle of \"reducing production in the eastern region, restricting it in the central and northeastern regions, and optimizing it in the western region,\" efforts will be made to further reduce the production scale of coal bases in western Shandong, central Hebei, Henan, and the two Huai regions. The production scale of coal bases in eastern Mongolia, eastern Ningxia, northern Shanxi, central Shanxi, eastern Shanxi, and Yunnan-Guizhou will be controlled, while coal bases in northern Shaanxi, Shendong, Huanglong, and Xinjiang will be supported to expand their scale to a moderate extent through mergers and reorganizations, thereby reducing the number of entities engaged in coal exploitation in these areas. In areas where small coal mines are concentrated, such as Central-South, Southwest, and Northeast China, elimination and withdrawal should be the main approach. 　　 III. Policy Measures 　　 Support for the disposal of land and minerals. It supports merged and restructured enterprises in legally and compliantly expanding certain marginal resources, deep-seated resources, and niche resources for which no new mining rights can be established. It supports merged and restructured enterprises in revitalizing their land assets; if the land in question meets the criteria for use under grant arrangements, it may continue to be used in that manner with the approval of the people’s government at or above the county level where it is located ； If the conditions for land allocation are not met, its use shall be carried out on a paid basis in accordance with the law. For the land of enterprises that undergo mergers and reorganizations and for which there is a change in land use, approval may be granted to handle the land-use procedures through negotiated transfer. If the enterprise shifts to engaging in productive service industries that are encouraged for development, it may continue to use the land for its original purpose and under the original land rights category for a period of up to 5 years ； For industrial land where there is no change in use, it may not be necessary to pay additional land fees to improve land utilization efficiency and increase the building density. State-owned enterprises that have been approved for merger, reorganization, or restructuring by people’s governments at or above the provincial level may dispose of the originally allocated land for production and operation purposes by contributing it as capital (in the form of shares) ； In the event that collective construction land involved in mergers and reorganizations is transferred, the relevant enterprises may negotiate with the entities holding ownership of the rural collective land to determine the land use period, sign a land use contract, and go through the legal procedures for transferring the rights to use the collective construction land. 　　 Improve the approval criteria for new coal mine projects. In line with the demand for coal in national economic and social development, and to ensure a dynamic balance between coal supply and demand, on the premise of implementing a long-term mechanism for capacity replacement, priority is given to supporting coal-fired power generation projects as well as new projects undertaken by enterprises involved in mergers and reorganizations, for those coal mines that truly need to be built. 　　 Subject to strict safety standards. Strengthen law enforcement inspections regarding coal mine safety. Coal mines where major work safety accidents have occurred recently, as well as those with serious work safety hazards that still fail to meet standards even after being given a deadline for rectification, shall be included in the list of enterprises targeted for mergers and reorganizations. For any remaining resources among them that indeed have mining value, upon obtaining approval from relevant provincial government departments and making a public announcement, the leading enterprise involved in the merger and restructuring shall integrate these resources and re-plan and design the mining plan. The coal mines subject to merger and restructuring must seal off their shafts and may not retain their original production systems. It is strictly prohibited to extract coal using multiple systems or from multiple shafts, so as to prevent mere superficial combinations aimed at evading the requirement to cease operations. 　　 Subject to strict environmental protection regulations and standards. Strengthen law enforcement inspections for environmental protection in coal mines and enforce strict environmental access requirements. M&A and restructuring projects shall comply with the overall plan for the mining area as well as the requirements of environmental impact assessment for planning, and the relevant environmental impact assessment procedures must be carried out in accordance with the law. Various ecological protection measures should be implemented during the project’s production process to ensure that emissions during extraction meet the required standards. Projects that have been illegally constructed and put into operation must be punished in accordance with the law, cease production, and be included in the list of enterprises targeted for mergers and reorganizations. 　　 Subject to strict quality standard constraints. Coal mines that produce high-sulfur, high-ash coal should limit their production, with that production decreasing year by year. Coal mines that produce low-quality coal with high sulfur and ash content, and whose quality after washing still fails to meet the standards specified in the Interim Measures for the Quality Management of Commercial Coal, are included in the list of enterprises targeted for merger and restructuring. 　　 Strict technical standards for scale. Coal mines whose production technologies and equipment fail to meet the requirements set forth in the “Policy Guidelines on Coal Production Technologies and Equipment”, and which are identified in the “Opinions on Promoting the Resolution of Overcapacity and Facilitating the Development of the Iron and Coal Industries in 2017” (Document No. Fa Gai Yun Xing ﹝2017﹞691) as mines requiring accelerated merger and reorganization, are included in the list of key enterprises subject to such merger and reorganization efforts. 　　 Strengthen the policy guidance on honesty and trustworthiness for coal enterprises. Led by the competent authorities and industry associations, with the participation of third-party credit rating agencies, efforts are made to build an industry credit system. Coal production enterprises should establish credit records with qualified third-party credit rating agencies. Enterprises that have not established a credit record, or those with serious acts of dishonesty and thus listed on the blacklist of highly untrustworthy enterprises, shall be included in the scope of key enterprises for mergers and reorganizations. 　　 Implement a management system for lists of key target enterprises and core enterprises involved in mergers and reorganizations. A roster system shall be implemented for the enterprises included in the scope of key targets for mergers and reorganizations as specified in Articles 16 to 20. Establish a list of leading enterprises for mergers and reorganizations among coal companies and large thermal power plants that possess economic, technical, and managerial advantages. Enterprises on the list of entities encouraged for mergers and reorganizations are urged to carry out such mergers and reorganizations with key target enterprises. The coal industry regulatory authorities, in conjunction with relevant departments and entities, are responsible for formulating regulations on the management of lists of enterprises that are targets for merger and reorganization as well as of the main enterprises involved, and for carrying out tasks such as the identification of these entities and their public disclosure. 　　 Support market financing and asset and debt restructuring for enterprises undergoing mergers and reorganizations. For eligible enterprises involved in mergers and reorganizations, they are encouraged to raise funds through capital markets and other financing channels. They should carry out mergers and reorganizations of enterprises with restructuring potential, and, in accordance with the principles of lawfulness, compliance, and equal negotiation, determine specific arrangements for assuming debts with the creditors of the enterprises being merged or reorganized. Banking financial institutions are encouraged to give full play to the role of the creditors’ committee and carry out debt restructuring in accordance with the provisions of documents such as the \"Notice from the Office of the China Banking Regulatory Commission on Properly Handling Matters Related to the Creditors’ Committee of Banking Financial Institutions\" (Yin Jian Ban Bian Han [2016] No. 1196). For merger and reorganization enterprises with genuine funding needs, banking financial institutions are encouraged to, in accordance with the principles of compliance with laws and regulations, independent decision-making, controllable risks, and commercial sustainability, adopt measures such as syndicated loans to actively and prudently carry out merger and acquisition loan services, so as to prevent any acts of evading debt obligations. Provincial people’s governments are encouraged to establish local asset management companies in accordance with laws and regulations, so as to further broaden the channels for disposing of non-performing assets of coal enterprises. 　　 A prudent credit policy should be applied to coal enterprises that lack the conditions for long-term development and are identified as key targets for merger and restructuring. Banking financial institutions should strengthen risk monitoring and identification, effectively assess the development prospects, financial conditions, and sources of repayment for enterprises. They should provide credit support cautiously to coal enterprises that lack the conditions for long-term development and are identified as key targets for merger and restructuring. 　　 Prudent related-industry policies should be implemented for coal enterprises that lack the conditions for long-term development and are identified as key targets for mergers and restructurings. Coal enterprises that do not comply with **industrial policies and whose products and processes fall under the category of those to be phased out are not allowed to participate in direct electricity trading. Relevant departments shall not assign export quotas to it, nor shall they provide subsidies from central government funds for safety-related technological upgrades. 　　 Strengthen bond risk prevention for coal enterprises that lack the conditions for long-term development and are identified as key targets for mergers and restructurings. In such cases, rating agencies shall promptly conduct follow-up ratings, while relevant departments shall prudently carry out the registration and issuance of corporate bonds in strict accordance with relevant rules and guidelines. For companies that have already issued corporate bonds, supervision over the use of those bond funds should be strengthened, dynamic monitoring of their debt repayment capacity should be implemented, and comprehensive measures should be taken to prevent credit default risks.