Shandong to merge its top two coal mining groups

Two of Shandong province’s top state-owned coal mining firms, Shandong Energy Group and Yankuang Group, are to merge into a single group, as part of the province’s scheme to improve the efficiency of state-owned capital utilization, according to a release by Shandong Provincial State-owned Assets Supervision and Administration Commission issued on Monday.
As the two groups’ major businesses are similar, the merger will optimize resource allocation and help improve their competitiveness, according to the report. “Shandong will reduce the number of the province’s state-owned companies by over 30% and improve the efficiency of state-owned enterprises by at least 30% over the coming three years,” the report about the merger quoted an order from the provincial government in March as saying. 

The chairman of the new group will be Li Xiyong, currently chairman of Yankuang Group, the report said. 

Though details on the planned integration have not been released yet, industry watchers note that as the chairman has already been decided and his name publicly released, the union of the two firms could be very quick.

Based on the financial reports of 2019, the two coal miners were also the top two state-owned groups by revenue in Shandong. After the re-organization, the total value the new group’s assets will be Yuan 637.9 billion ($91.1 billion) based on 2019 data, according to the report. The combined group’s revenue for last year would have been about Yuan 637.1 billion. 

The new group will be positioned as Shandong’s energy industry investor, and based on the two firms’ existing activities in coal, coal power and coal chemistry, the group will develop businesses in high-end equipment manufacturing, new energy materials and modern logistics and trade.

If the two enterprises are fully merged as announced, the new group will be China’s second-largest group for raw coal production after China Energy Group, according to analysts.

For 2019, Yankuang produced some 166 million tonnes of raw coal, or 4.4% of China’s total, according to the group’s data. No original data from Shandong Energy was available, but according to China National Coal Association, the group produced 145 million tonnes of raw coal last year, or 3.9% of the country’s total. Shandong Energy is also China's second-largest coking coal supplier after Shanxi Coking Coal based in North China's Shanxi, according to the company.

On Monday too, the Shandong provincial government announced a merger plan involving another two groups, namely Shandong Hi-Speed Group and Qilu Transportation Development Group, whose businesses are focussed on investing in and operating transportation infrastructure.

Written by Sean Xie,

Edited by Russ McCulloch,