SASAC restores Datanang’s reputation; five major power companies enter the coal industry on a full scale

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On March 25, the State-owned Assets Supervision and Administration Commission announced the main business scope of Datang Power Group, which includes \"electricity production, heat production, and supply\"； \"Power-related coal resource development and production\" has been added to \"relevant professional technical services\". Starting from today, Datang Group can enter the coal industry in a legitimate manner; this also means that the five major power groups under the State-owned Assets Supervision and Administration Commission are beginning to get fully involved in the coal industry as well. Industry experts analyze that the failure of the previous negotiations regarding coal and electricity in Fuzhou has exposed the conflicts between coal companies and power companies to full view. The fact that the five major power companies under the State-owned Assets Supervision and Administration Commission have been allowed to enter the coal industry reflects the Commission’s intention to ease these conflicts and further promote cooperation between coal and electricity sectors. To restore the “reputation” of Datang: In response to the growing imbalance between coal supply and demand, Datang Group began to get involved in the coal business as early as around 2005. They adopted a strategic approach centered on \"electricity as the core, with diversified development,\" expanded the electricity industry chain, and focused on developing the coal industry as a key sector for various other industries. At present, the coal projects of Datang Group are spread across provinces (regions) such as Inner Mongolia, Shanxi, Jilin, and Shaanxi. Among them, the Shengli Donger Mine and Eji Coal Projects have been approved, while a number of other coal projects including Kongduigou Coal Mine, Hongtai Coal Mine, Xiwangzhai Coal Mine, Xiertala Coal Mine, and Nantun-Xisumu Coal Mine are being advanced in an orderly manner. However, this approach is clearly contrary to the principle set forth by the State-owned Assets Supervision and Administration Commission, which called for focusing efforts on the core business. In the first classification of Datang Group’s core businesses in 2007, no activities related to the coal industry were included among those core businesses. Industry experts say that the SASAC’s adjustment to Datang Group’s core business is essentially a permission for it to engage in the coal industry once again. Just a few months ago, the coal and electricity negotiations in Fuzhou failed; coal companies and power companies failed to sign any contracts due to price disputes. There are also reports that some large power generation companies intend to form groups to purchase coal overseas. It seems, therefore, that this adjustment by the SASAC is highly necessary. “If power generation companies can own a certain amount of coal resources on their own, they will have more confidence in negotiations, which gives them more leverage in those discussions. ” Wang Wei from Guotai Junan Power Research Institute explained. Wang Wei said, “By including coal within the core business scope of Datang Group this time, the goal is mainly to make use of some coal resources as a supplement and safeguard; it’s not necessarily the intention to develop coal as the main business or to operate in the coal industry.” ” The five major power companies have officially entered the coal industry. Datang Group, which has now seen adjustments to its coal-related operations, is the last of the five major power companies under the State-owned Assets Supervision and Administration Commission to undergo such adjustments. Industry experts say that this further adjustment to the core business scope of Datang Group implies that the integration of coal and power generation is not only a major strategy that Datang Group is actively pursuing, but it is also clearly reflected in the approach to developing coal and power generation. According to the first classification of the core business areas of central state-owned enterprises carried out by the State-owned Assets Supervision and Administration Commission in 2007, among the five major power generation groups, the core businesses of China Huaneng Group Corporation and China Huadian Group Corporation involve not only electricity-related activities but also the development and utilization of coal resources ； The main business of the other three companies is merely “electricity production, heat production, and supply” ； “Relevant professional technical services”. Subsequently, the State-owned Assets Supervision and Administration Commission adjusted the core business of China Power Investment Group, adding \"the development of primary energy sources such as coal related to electricity, as well as related transportation\" as its core business. In May 2008, the core business of State Power Investment Corporation also shifted from its previous focus on \"electricity production and heat generation and supply\" ； \"Relevant professional technical services,\" with the addition of \"development of primary energy sources such as coal related to electricity.\" ” With this adjustment in Datang’s core business, the five major power groups under the State-owned Assets Supervision and Administration Commission have begun to get fully involved in the coal industry.