Five Miners Tapped to Create Coal Powerhouse in North China

The central government plans to create the country’s second-largest coal mining conglomerate by merging at least some of the assets of at least five of the seven major coal mining companies in the northern province of Shanxi.

The companies to be consolidated include Datong Coal Mine Group Co. Ltd., Jinneng Group Co. Ltd. and Shanxi Jincheng Anthracite Mining Group Co. Ltd. — which had more than 1 trillion yuan ($147 billion) in combined assets as of June 30, according to a statement released by Datong on Sept. 30.

The consolidation of the trio would make the new company China’s second-largest coal mining company by output, as they produced a total of 316 million tons of the combustible black rock in 2019, according to data from the China National Coal Association. The country’s top producer, China Energy Investment Corp. Ltd., produced 510 million tons of coal last year.

Caixin has learned that the new conglomerate will be wholly owned by a company affiliated with the provincial branch of the national state-owned assets overseer.

Datong Chair Guo Jingang will be the new company’s chairman, while the presidents of Jinneng and Jincheng, Li Guobiao and Li Hongshuang, will take vice chairman positions alongside Cui Jianjun, who is currently Datong’s general manager, according to the company's statement.

The statement did not reveal a timeline for the plan.

The new conglomerate will also take on some of the assets of two other major coal mining companies in Shanxi, according to the statement, though it didn’t provide details. The China Taiyuan Coal Transaction Center, a major coal exchange, will also be incorporated into the new company.

A new Chinese coal giant can increase Shanxi’s pull in the industry and make it more competitive, a person working for the province’s state asset regulator told Caixin.

The central government has also urged the companies to improve their financial health and called for the creation of “world-class energy conglomerates” that can accumulate experience for countrywide energy reform in the future.

Of the companies mentioned, Jincheng is in the worst financial shape, with its debt-to-asset ratio at 75.6% as of June 30, according to its 2020 first-half report. Industry experts generally see anything above 70% as dangerous. Jinneng is approaching the threshold with a debt-to-asset ratio of 67.6%, according to its own first-half report.

Consolidation has been a favored tactic of the Chinese government looking to shore up its faltering coal industry as the country bets heavy on renewable resources like wind and solar.

In May, China’s top state-owned asset supervisor required 40 coal plants in five provinces to consolidate to create one leading power generation company for each province, with the aim of reducing their losses by half.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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