Shares of five thermal power plants of Sinocoal connected to SDIC

Recently, SDIC Power Holding Co., Ltd. (hereinafter referred to as "SDIC power") announced that it has signed a contract to transfer 51% of the equity in Xuancheng, 60% of the equity in Ili, 51.22% of the equity in Jingyuan second power, 35% of the equity in Guoan, Huaibei and 45% of the equity in Zhangye power generation to China Coal Energy Group Co., Ltd. (hereinafter referred to as "China coal"). It is understood that as early as October 2019, the board of directors of SDIC power deliberated and passed the proposal on equity transfer scheme of subsidiary companies of the listing and transfer department, listing and transferring 55% equity of SDIC Beibu Gulf and the above five equity on Shanghai United Property Rights Exchange, and the listing period expired on November 4, 2019. As of the expiration of the second listing period, according to the work flow of Shanghai United Property Rights Exchange, the transferee of the equity of the five target companies is finally determined to be China coal. The non-performing assets drag down the notice of SDIC Power Holding Co., Ltd. on the equity of the branch company of the pre listing transfer department issued by SDIC power before SDIC business receipt. The five thermal power plants transferred this time are in a state of loss for a long time. As of December 31, 2018, the total assets of six thermal power plants are 9.675 billion yuan, the revenue in 2018 is 4.525 billion yuan, and the net profit is - 661 million yuan.

As of June 30, 2019, the total assets of the above six thermal power plants amounted to 9.025 billion yuan, with revenue of 2.419 billion yuan and net profit of - 43 million yuan. According to the 2019 half year report of SDIC power, as of June 30, the liabilities of Jingyuan erdian, SDIC Beibu Gulf, SDIC Ili and SDIC Xuancheng were RMB 1.562 billion, RMB 1.032 billion, RMB 2.025 billion and RMB 1.989 billion respectively, totaling RMB 6.608 billion. Among the above assets to be transferred, the net profits of Jingyuan erdian and Guotou Yili are - 105 million yuan and - 33 million yuan. Net profit of Beibu Gulf of SDIC increased by 113.04% year-on-year to 37 million yuan, and that of Xuancheng of SDIC reached 60 million yuan. However, the profits of the two power plants are relatively low among the thermal power enterprises controlled by SDIC. In the first half of 2019, SDIC power realized a net profit of 2.276 billion yuan, up 44.92% year-on-year, of which hydropower business contributed a net profit of 1.598 billion yuan, up 4.16% year-on-year, accounting for over 70%. It is understood that the current clean energy installed share of SDIC power is 54.15%, of which hydropower installed share is 48.77%, which is the third largest hydropower listed company in China. Even though the performance of thermal power sector has recovered in the first half of the year, it is far less "profitable" than hydropower. During the 13th Five Year Plan period, coal power experienced the policy squeeze of strictly controlling new production capacity, eliminating backward production capacity, reducing electricity price, removing coal production capacity, and liberalizing the power generation plan, showing a long-term situation of difficult development pressure.

The reporter combed and found that SDIC power's one-time transfer of shares in five thermal power plants is not an isolated case. In 2019, thermal power enterprises dispose and sell loss coal power assets in succession, among which Datang thermal power had one bankruptcy and four transferred shares; Huaneng International had one bankruptcy and one was about to close down; Guodian power Yunnan Xuanwei thermal power plant declared bankruptcy in November 2019. Lin Boqiang, Dean of China Energy Policy Research Institute of Xiamen University, China Coal aims at integration of coal and electricity, told reporters that the power demand has declined, resulting in the current surplus of thermal power. In addition, the power price may continue to fall in 2020, so the pressure on thermal power is huge. Some industry analysts also pointed out that the high price of coal, the excess power and the development of new energy all led to the squeeze of thermal power profit space, the disposal of non-performing assets and the gradual transformation of new energy, which became the development trend of thermal power enterprises. During this year's "two sessions", Wang Huisheng, chairman of the state investment group, said that the state investment group had completely withdrawn from the coal business and began to invest in new energy.

It is understood that in mid-2016, SDIC announced to promote the transformation of coal companies to mineral resource development enterprises, and planned to withdraw all coal businesses within five years. In this regard, some industry experts pointed out that at present, the profitability of new energy is weak, and the transformation of thermal power enterprises is still a long-term and risky process. According to the 2019 half year report of China coal, its coal business income is 48.275 billion yuan, accounting for 79.25%, other businesses such as coal coking business income accounts for 15.42%, and coal equipment manufacturing business income accounts for 6.43%. The business structure of China coal is still coal and related business owners. For the acquisition of five coal-fired power plants by China coal, Lin Boqiang believes that China coal may want to take the road of coal power joint venture. "This acquisition should be an integration of coal and electricity. There are both coal and power plants. Many problems can be solved internally. At present, the situation of the industry is usually that the electricity is not good when the coal is good, and the coal is not good when the electricity is good, so China coal uses its own coal resources to integrate the power plant for power generation. " Market analysts believe that after the acquisition, coal power joint venture may guarantee and smooth the profits of enterprises.