Shenhua Group Acquires State Grid Energy, Installed Capacity to be Among Top Five in China

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Researched by Industrial Info Resources (Sugar Land, Texas)--Through nearly two months of negotiation, Shenhua Group Corporation Limited (Beijing), the parent company of China Shenhua Energy Company Limited (SHA:601088) (HK:01088) (Beijing), successfully signed the share transfer agreement with the State Grid Corporation of China (SGCC) (Beijing) to acquire 100% of the shares in State Grid Energy Development Company Limited (Beijing) on August 15, 2012, according to China Shenhua announced on August 16, 2012.

In April 2012, it's reported that the SGCC would sell its major power generation business, the State Grid Energy to Shenhua Group. In the beginning of June 2012, China Shenhua disclosed that China Shenhua would not participate in the acquisition of State Grid Energy, but had signed the non-competition agreement with Shenhua Group. China Shenhua will have preemption rights to acquire State Grid Energy in the future.

As a fully owned subsidiary of the SGCC established in April 2008, State Grid Energy is mainly engaged in power generation, coal development, sales and transportation. State Grid Energy has a number of thermal power subsidiaries (with a total installed capacity of 12.2 gigawatt (GW)) and several large-scale coal mining projects located in Xinjiang, Shanxi, Inner Mongolia and Helongjiang. As of the end of 2011, State Grid Energy has total assets of about $8.6 billion, accounting for about 2.5% of the total assets of the SGCC, and the total business income of State Grid Energy is about $3 billion in 2011.

As the largest coal producer in China, Shenhua Group, via China Shenhua, currently has an installed capacity of 45 GW, plus the 14.2 GW of installed capacity acquired from State Grid Energy. The total installed capacity of Shenhua Group will reach 59.2 GW, including about 2 GW of wind power and 57.2 GW of thermal power, which will surpass the total installed capacity of China Power Investment Corporation (CPIC) (Beijing), one of the five national power producers established during the power system reform of China in 2002, and make the company one of the top five power producers in China.

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