Integrating coal and electricity should push forward electricity institutional reform, says the paper. Currently the two sectors are poorly matched, with lower coal prices not leading to decreasing electricity prices for consumers. The merger should ease relations between coal and electricity generation, and also increase industry concentration, notes Xing Lei 邢雷 Central University of Finance and Economics Coal Economy Research Institute. The merger could increase the bargaining power of the electricity industry, adds Xing, as Shenhua's focus might shift towards electricity-generation and away from coal. The energy sector has a large demand for M&As, adds Zhou Dadi 周大地 China Energy Research Society deputy director, which help them to avoid repetitive construction and ineffective investment, and increase international competitiveness. State-owned Asset Supervision and Administration Commission revealed plans to push forward central SOE M&As in coal-fired power and other sectors the same day of the Shenhua and Guodian announcement, adds China Business News. China National Nuclear Corporation and China Nuclear Engineering Corporation revealed their plan for a merger in March.
China's largest coal enterprise, Shenhua Group Corporation, and one of the five major power companies, China Guodian Corporation, issued identical announcements on 4 June that 'key matters' were awaiting approval by supervising agencies, spurring market speculation that they will merge, notes China Business News.