Shenhua-Guodian Merger Won't Have Immediate Impact on Outlook Rating, Moody's Says
Dou Shicong
/SOURCE : Yicai
Shenhua-Guodian Merger Won't Have Immediate Impact on Outlook Rating, Moody's Says

(Yicai Global) Aug. 31 -- The upcoming merger between China's two largest coal power firms will not immediately impact China Shenhua Energy Company Ltd.'s [SHA:601088;HKG:1088] (China Shenhua) A1 issuer rating or stable rating outlook, international agency Moody's Investors Service said.

The State-Owned Assets Supervision and Administration Commission approved the merger of Shenhua Group Corp. (Shenhua Group) and China Guodian Corp. (Guodian) on Aug. 28. The deal will create China Energy Investment Group Corp.

"In our view, the merger will likely weaken the credit metrics of Shenhua Group since Guodian has higher financial leverage than the group. However, the adverse impact will likely be offset by the expected benefits from the combined entity's higher degree of integration and continued strategic importance to the Chinese government," said Gerwin Ho, Moody's vice president and international lead analyst for China Shenhua.

With Shenhua Group and Guodian engaging in coal mining and coal-fired power generation, respectively, the combined entity will benefit from a more integrated business model, Moody's explained.

"However, the details of the merger have yet to be announced. We will assess its impact on China Shenhua's rating once more information becomes available," said Ho.

The merger will also not affect China Longyuan Power Group Corp.'s [HKG:0916] A3 issuer rating, Moody's said. China Longyuan is a wind-power producer owned by Guodian.

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Keywords: Moody's , China Shenhua Energy , China Guodian , China Longyuan Power Group