A “snake swallowing elephant” asset restructuring in the coal power industry is imminent. On February 7, Huaihe Energy (Group) Co.Ltd(600575) announced that it planned to plan a major asset restructuring and suspended trading from February 8.
According to the announcement, Huaihe Energy (Group) Co.Ltd(600575) the suspension is mainly related to the two operations of absorption and merger and asset purchase. Among them, the operation object of the company’s absorption and merger is Huainan Mining (Group) Co., Ltd. (hereinafter referred to as “Huainan Mining”).
According to the announcement, Huaihe Energy (Group) Co.Ltd(600575) plans to issue shares, convertible corporate bonds (if any) and pay cash to all shareholders of Huainan Mining to absorb and merge Huainan mining. After the completion of this absorption and merger, Huaihe Energy (Group) Co.Ltd(600575) will become a surviving company, inherit and undertake all assets, liabilities, business, personnel and all other rights and obligations of Huainan mining, and the legal personality of Huainan mining will be cancelled.
In addition, Huaihe Energy (Group) Co.Ltd(600575) plans to purchase 10.70% equity of Huaihe Energy (Group) Co.Ltd(600575) Power Group Co., Ltd. held by it by issuing shares and convertible corporate bonds (if any) to Guokai development fund Co., Ltd. (hereinafter referred to as “Guokai fund”).
However, on the day of the above announcement on February 7, Huaihe Energy (Group) Co.Ltd(600575) shares rose strongly to close at 2.61 yuan / share. However, the restructuring announcement was issued immediately after that, which still made the market questioned.
In this regard, Lawyer Wang Zhibin of Shanghai Minglun law firm told the reporter of Securities Daily: “if there is no other public information that can cause stock price changes, it can be reasonably suspected that its insider information has been leaked in advance, and there is the possibility of ‘rat warehouse’ buying in advance in the stock price changes on that day.”
“In this case, there is a great possibility that the information will be leaked in advance.” Lawyer Yang Zhaoquan, director of Beijing Weinuo law firm, also told the reporter of Securities Daily.
The rise in the share price of Huaihe Energy (Group) Co.Ltd(600575) obviously has nothing to do with its performance. According to the performance forecast released by the company, Huaihe Energy (Group) Co.Ltd(600575) it is expected that the net profit attributable to shareholders of listed companies will decrease by 31.7 million yuan to 61.7 million yuan year-on-year in 2021, with a year-on-year decrease range of 6.67% to 12.98%.
For the reasons for this performance change, Huaihe Energy (Group) Co.Ltd(600575) said that affected by the changes in supply and demand in China’s coal market, the coal-fired cost of wholly-owned power plants increased and the performance of power generation sector decreased. In addition, the impact of non operating profit and loss is mainly due to the transfer and resettlement funds for resolving excess capacity received in the previous period and the central and local supporting funds obtained for coal mine safety transformation projects.
In contrast, Huainan Mining achieved an operating revenue of 44.5 billion yuan and a total profit of 2.628 billion yuan in 2018. By the end of the third quarter of 2019, the total assets of Huainan mining had reached 115.772 billion yuan. However, by 2021, the company’s net profit attributable to shareholders of listed companies is expected to be about 447 million yuan, with total assets of 17.6 billion yuan at the end of the year.
According to public data, Huainan mining is located in Huainan base, one of the six large coal power bases in Lianghuai mining area, with large coal resource reserves. The proven coal reserve in Huainan mining area is 20 billion tons, including 17.5 billion tons of recoverable reserves, and rich coal associated resources such as coalbed methane and kaolin.
In fact, this is not Huaihe Energy (Group) Co.Ltd(600575) the first time to plan the “snake swallowing elephant” restructuring. As early as 2019, Huaihe Energy (Group) Co.Ltd(600575) announced that it planned to absorb and merge Huainan mining, but it ended in termination. The reason for the termination is that the relevant ownership certificates of land, houses and other related assets related to the production and operation of some subordinate enterprises of Huainan Mining failed to be obtained as scheduled, and it is expected to be difficult to solve in the short term.
In recent years, the merger and reorganization of the coal industry has continued. The 2020 annual report on the development of coal industry issued by China Coal Industry Association emphasizes the need to cultivate three to five world-class coal enterprises with global competitiveness; Promote the merger and reorganization of enterprises and establish 1 billion ton coal enterprises; Encourage large coal enterprises to establish a fund for the revitalization and development of old mining areas, support cross industry, cross regional and cross ownership mergers and acquisitions of coal enterprises, and steadily solve the problems left over by history in old mining areas.
An unnamed coal industry analyst told the Securities Daily that putting Huaihe Energy (Group) Co.Ltd(600575) into the high-quality assets of the controlling shareholder is not only the requirement of the reform of state-owned enterprises, but also the general trend of the development of the coal industry.
For the latest merger intention, Huaihe Energy (Group) Co.Ltd(600575) said that the transaction is still in the planning stage, the parties to the transaction have not signed a formal transaction agreement, the transaction still needs to perform the necessary internal decision-making procedures, and there is some uncertainty whether it can be reached.
