On Monday, China’s government and president Xi blessed the merger between the country’s top coal miner, Shenhua Group and China Guodian Group, one of the country’s top five state power producers, in a deal that will create the world’s largest power company, worth 1.8 trillion yuan, or $278 billion. Putting the sheer size of the two merged behemoths in context, the resulting entity will be the world’s second-biggest company by revenue and largest by installed capacity.
As the following Bloomberg chart shows, the vast majority of the new company’s power generation will be coal-driven.
A fascinating comparison emerges when putting just this one company in the context of the entire US coal industry: with an estimated 326,000 staff, the combined entity will have a workforce that is four times bigger than the entire U.S. coal-fired power industry in 2016 (at roughly 77,000).
Some other comps: the combined entity will have an installed capacity topping 225 gigawatts, eclipsing European energy giants EDF and Enel to become the world’s biggest power company by capacity. It will also be the largest wind power developer in the world with 33 gigawatts of capacity and, more importantly, the biggest coal producer.
The giant Shenhua-Guodian tie-up is among the first mergers in China’s power industry that have resulted as top policy makers try to cut industrial overcapacity and the number of state-owned enterprises. Monday’s announcement concludes months of speculation about the combination, which was first reported by Bloomberg in June.
“People have been waiting for the other shoe to drop,” said Tian Miao, a Beijing-based senior analyst at Sun Hung Kai Financial Ltd. “This confirms the direction of state-owned enterprise reform, with companies in the same industry merging to reduce redundant investment and improve efficiency.” Of course, improving efficiencies would require mass layoffs, and it is unclear whether the resulting company will do that, or it will simply combine two state-supported zombies into one giant state-supported zombie.