China's state-owned Assets Supervision and Administration Commission asked coal miner Shenhua Group Corp. Ltd. and power generator China Datang Corp. to look into a possible tie-up, Bloomberg News reported March 29, citing people with knowledge of the matter.

The proposed merger would create a company with assets worth about 1.66 trillion Chinese yuan, equivalent to about US$241 billion.

However, the talks are at an early stage and may not result in a combination. A merger would also be in line with the country's supply-side reform policies, the sources noted.

According to Jefferies Group analysts Laban Yu, if the merger goes through, "Datang will basically take out coal price risks from operations, which would be a huge advantage."

Other than coal mining, Shenhua's power-generation capacity was 78.5 gigawatts in 2015, and it also owns railway infrastructure, while China Datang had 127.2 gigawatts capacity in 31 provinces across China, Myanmar, Cambodia and Laos.

As of March 29, US$1 was equivalent to 6.89 Chinese yuan.