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China Coal Energy sets up task force to evaluate overseas acquisitions

China Coal Energy Co. Ltd. is reviewing large overseas acquisition targets and established a task force to seek more opportunities, Zhu Jieli, general manager of the company's strategic planning department, told S&P Global Market Intelligence after an earnings briefing in Hong Kong on March 21.

"Restructuring or acquisition plans would not be limited to assets in China. We are interested in overseas assets. [The scale would be] large," Zhu said.

The coal producer's operations are highly focused in China, compared to rival coal major Yanzhou Coal Mining Co. Ltd., which acquired Coal & Allied Industries Ltd. from Rio Tinto in a US$2.69 billion deal.

"We are looking at some deals, and we have a team specialized in overseas markets," Zhu said.

The coal major's interests in overseas assets are increasing at a time when restructuring by its parent, China National Coal Group Corp., has progressed slowly.

Chinese authorities designated China National Coal Group and China Energy Investment Corp. Ltd formerly known as Shenhua Group Corp. Ltd., to lead restructuring initiatives in the domestic coal industry in 2016.

While China Energy has completed a merger with China Guodian Corp., China National Coal has not yet announced any deals under the initiative. Zhu said during the media event that the company does not have a restructuring or acquisition target domestically.

"We have not received any restructuring arrangement from the parent," Zhu said.

Though progress in domestic restructuring has been slow, Niu Jianhua, executive director and president of the company, said the wide range of the asset portfolio of its parent company would be a strength for it to advance restructuring, because it would allow them to look at restructuring targets within their business scope.

Niu expects production to be flat at about 75 million tonnes this year, whereas CapEx has been budgeted at 16.30 billion Chinese yuan, compared to 9.98 billion yuan in 2017.

The executive also expects coal prices to soften this year, as new domestic capacity will come online and the government will continue to make sure prices stay within a reasonable range for producers and power plants.

The domestic regulatory environment for the coal industry is expected to improve following institutional reforms across central government ministries, Zhu said. "We are paying close attention to the reform and the regrouping of regulatory functions. Eventually, I think it would streamline and simplify administration procedures for coal companies."

As of March 20, US$1 was equivalent to 6.33 Chinese yuan.