Shenhua Energy Plans USD19 Billion Acquisition in China’s Largest-Ever Energy Sector Deal

(Yicai) Dec. 22 -- China Shenhua Energy, the country’s largest state-owned coal and energy company, said it plans to spend CNY133.6 billion (USD19 billion) in what will be the biggest-ever asset acquisition deal in China’s energy sector.Shenhua Energy will pay CNY93.5 billion (USD13.3 billion) in cash and issue new shares worth CNY40.1 billion to CHN Energy Investment Group to acquire 12 core subsidiaries from its controlling shareholder, the Beijing-based company announced late on Dec. 19.The new shares are priced at CNY29.40 (USD4.18) each, a 28 percent discount on Shenhua Energy’s closing price of CNY40.59 in Shanghai on Dec. 19. The stock [SHA: 601088] ended 0.7 percent higher at CNY40.88 today, while its Hong Kong-listed shares [HKG: 1088] fell 0.6 percent to HKD39.44 (USD5.07).In addition, Shenhua Energy will issue additional new shares to as many as 35 outside investors to raise CNY20 billion, and will mainly use the proceeds to cover part of the cash payment and costs of the deal. Their pricing has not yet been decided.The deal, expected to be completed by the end of next year, will see CHN Energy's stake in Shenhua Energy rise to 71.5 percent from 69.5 percent.The target assets span the full coal value chain, including coal mining, coal-fired power, coal chemicals, port shipping, and logistics, Shenhua Energy said, noting the deal is intended to strengthen its core coal business and enhance integration across coal power, coal liquidation operations, and downstream polyolefin production.The acquisition will boost Shenhua Energy’s coal reserves to 68.49 billion tons from 41.58 billion tons, nearly double its recoverable coal reserves to 34.5 billion tons from 17.45 billion tons, and increase its annual coal production to 512 million tons from 327 million tons, the firm said.It will also boost the company’s installed thermal power capacity to 60.88 gigawatts from 47.63 GW, and increase its annual coal‑to‑polyolefin production capacity to 1.88 million tons from 600,000 tons.The target firms had combined revenue of CNY114 billion last year, net profit after deducting non-recurring gains and losses of CNY9.4 billion (USD1.3 billion), and net profit after deducting non-recurring gains and losses and the impact of long-term asset impairment losses of CNY10.6 billion.Shenhua Energy's net profit after deducting non-recurring gains and losses was CNY60.1 billion on operating revenue of CNY338.4 billion, according to its annual financial report.Editor: Martin Kadiev