Its coal chemical subsidiary is insolvent; Huaneng Group plans to get rid of it for 1 yuan"

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This post was last edited by kyr on 2018-5-30 at 16:41. The coal chemical companies under its ownership are insolvent; HuanDian Group plans to sell them off for 1 yuan each in an effort to get rid of these burdens. The state-owned enterprise HuanDian Group intends to sell off its two loss-making coal chemical companies as a package. On May 29, the Beijing Equity Exchange announced that Huadian Group intended to sell its shares in Huadian Yulin Natural Gas Chemical Co., Ltd. (hereinafter referred to as Yutianhua) for 1 yuan. The company’s revenue last year was 1.237 billion yuan, but its net profit was a loss of 633 million yuan; it was also insolvent. At the same time, it is planned to sell Shaanxi Huadian Yuheng Coal Chemical Co., Ltd. (hereinafter referred to as Yuheng Coal Chemical) for 310 million yuan; the company had zero revenue last year and its debt ratio exceeded 90%. The conditions for acquisition are not simple; according to information from Shaanxi Famous Brands Network, which has local government connections, the total investment required for the 1.4 million-ton coal-to-methanol comprehensive utilization project planned by Yutianhua is 4.048 billion yuan. Upon completion of the project, it is expected to generate annual sales revenue of 1.859 billion yuan, profits of 704 million yuan, and taxes of 420 million yuan. Huadian Coal Industry, a subsidiary of Huadian Group, entered Yulin in 2006 and acquired Yutianhua in 2011; this includes a facility with an annual production capacity of 510,000 tons of methanol produced from natural gas, as well as another facility under construction with a capacity of 600,000 tons of methanol produced from coal. At that time, Huaneng Group planned to rely on the specialized management of Huaneng Coal Industry to vigorously pursue a development strategy that integrated coal, electricity, and chemicals; Yutianhua thus became an important part of Huaneng Group’s development in the coal chemical industry. After being acquired by Huadian Coal Industry, Yutianhua’s profitability was not satisfactory. According to a announcement by the Beijing Property Rights Exchange, Yutianhua achieved revenue of 1.237 billion yuan last year, but incurred a net loss of 633 million yuan. Its total assets amounted to 4.415 billion yuan, while its total liabilities were as high as 7.374 billion yuan, indicating that it was in a state of insolvency. In the first quarter of this year, Yutianhua’s revenue was only 35,000 yuan; its net profit was in the red by nearly 50 million yuan. Its total assets decreased to 816 million yuan, while its total liabilities dropped to 2.605 billion yuan. Prior to this listing, the transferor also carried out debt-to-equity conversion and capital injection in Yutianhua. Although the listing price is set at 1 yuan, the conditions for acquiring shares in Yutianhua are not simple. Under the transfer conditions, the bidder must acquire all of the equity in Yuheng Coal Chemical Industry. At the same time, the bidder must also take on the related debt issues of Shaanxi Yulin Kaiyue Coal Chemical Co., Ltd., a wholly-owned subsidiary of Yutianhua. Furthermore, after successfully acquiring the subject matter, the bidder must maintain the existing labor relations with its employees to ensure their stability. Yuheng Coal Chemical Industry is also an important part of Huadian Group’s coal chemical operations. According to the official website information available locally, HuanDian Group initially planned to build a coal-to-methanol plant with an annual production capacity of 3 million tons, a coal-to-aromatics plant with an annual capacity of 1 million tons, as well as a coal mine with an annual output of 10 million tons. The goal was to create the largest integrated coal-electricity-chemical energy complex in China, with a total investment of around 38 billion yuan for these projects. However, from last year to the present, Yuheng Coal Chemical has had zero operating revenue and has remained in a loss-making state. The transfer can help reduce the pressure on the controlling shareholders. It is worth noting that both coal chemical companies entered the industry during its rapid development period, and their current profitability does not meet expectations. The controlling shareholders of the two entities being transferred are HuaDian Coal Industry, whose controlling shareholder in turn is HuaDian Group. The profitability of Huadian Coal Industry is also an important factor affecting the performance of Huadian Group. According to the official website of Huaneng Group, in the first half of last year, Huaneng Coal Industry’s total profit amounted to 1.853 billion yuan, an increase of 2.582 billion yuan compared with the previous year. Judging from last year’s financial performance, the two coal chemical companies weighed down Huadian Coal Industry; the transfer of shares will undoubtedly reduce the pressure on the company’s performance. Before Yutianhua was acquired, the coal chemical industry was developing at a rapid pace in various regions, and local authorities attached great importance to it; coal chemical projects once became the favorites of both local governments and investors. In June 2008, He Yongde, who was then a member of the decision-making advisory committee of Shaanxi Province and president of the Shaanxi Chemical Industry Society, believed that of the six coal chemical projects planned in Shaanxi at that time, only one was under construction, while other investors failed to proceed with their projects. This situation risked delaying the development opportunities for Shaanxi’s coal chemical industry. It is worth noting that local policy advisors have suggested that both Zengjiang Petroleum and Yutianhua have planned to build large-scale coal chemical projects in the Yuheng Industrial Park. The sites for the coal chemical projects planned by these two companies are both located on the east side of the Yuheng Industrial Park, separated only by a road. The planned products, scale, and production facilities are essentially the same; each company will need to provide its own utilities such as heat and power generation, as well as systems for wastewater treatment. If we can unite and plan and construct in a unified manner, the project will be built even better. However, the two companies did not seem to collaborate for further development thereafter; Yanchang Petroleum and Yutian Chemical each pursued their own coal chemical projects. On the afternoon of May 29, a reporter from Daily Economic News called China HuanDian Group Capital Holding Co., Ltd., the agency designated in the BESS stock exchange announcement for this transfer. A staff member at that company said it was merely a transaction agent and could not answer related questions. The reporter tried calling the phone number on Huadian Group’s official website, but was unable to get through. Go to NetEase Finance