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Yanzhou Coal not in the market for big deals this year, says CFO

Chinese coal major Yanzhou Coal Mining Co. Ltd. is not in the market for major acquisitions this year as it prioritizes production ramp-up at its domestic projects, CFO Zhao Qingchun said in an interview with S&P Global Market Intelligence.

"We will focus on domestic production this year. There will not be any major acquisition [that could be as big as the US$2.69 billion acquisition of Coal & Allied Industries Ltd. from Rio Tinto] this year," Zhao said, adding that the owners of high-quality coal assets seem reluctant to sell at the current price level.

Through the acquisition of Coal & Allied Industries, the company doubled its annual production capacity of coal to about 80 million tonnes in 2017, and is looking to ramp up its capacity to about 100 million tonnes this year.

After posting a 346% increase in net profit for 2017, the company has budgeted CapEx for this year at 9.72 billion yuan, a majority of which will be invested at its domestic operations in Shaanxi and Inner Mongolia provinces in China.

In addition to the deal with Rio Tinto, the company paid 1.12 billion yuan to acquire a 65% interest in Yankuang Group Finance Co., Ltd. and 1.94 billion yuan for a 25% interest in a Chinese state-owned railway unit in 2017.

Along with the acquisitions, Zhao noted that the company has been working to diversify its financing methods to reduce risks, and referred to the US$2.5 billion private placement by its unit Yancoal Australia Ltd., in which the company introduced Chinese peers Shandong Taizhong Energy Co. Ltd. and General Nice Development Ltd as subscribers.

While the Chinese government has been encouraging restructuring among domestic coal producers, the country's cash-rich coal majors, including China Coal Energy Co. Ltd., are also eyeing overseas assets.

"It is possible that we may collaborate with other large companies [in acquiring major assets in overseas markets]," Zhao said.

The executive added that Yanzhou Coal's overseas plans, including the Coal & Allied Industries deal, has set an example for other Chinese companies to expand abroad.

"Our 'going out' strategy started earlier [than others], and it has been quite successful," Zhao said.

Zhao noted that over the long term, the company would be interested in acquiring assets in coal, coal chemical and electricity industries.

As of March 28, US$1 was equivalent to 6.30 Chinese yuan.