Lu Qizhou, General Manager of China Power Investment Corporation: Coal-fired mergers and acquisitions face multiple dilemmas

According to a statistical report released by China Electricity Council recently, due to the continuous increase in coal prices, from January to August this year, there have been losses in thermal power companies in 10 provinces across the country, and some power plants have even had no money to buy coal. Earlier on August 25, the State Council executive meeting proposed to promote the merger and reorganization of coal mining enterprises, and encouraged enterprises of various ownership coal mines and electric power industries to take property rights as a link and shareholding system as the main form to participate in mergers and acquisitions. Some experts in the industry said that promoting coal-electricity mergers and acquisitions and implementing coal-fired power integration operations will be a realistic choice for power companies to get rid of difficulties.

It is understood that as the first power generation enterprise in China to promote the reorganization of coal-fired power and the integration of coal-fired power, China Power Investment Corporation (referred to as China Power Investment Corporation) has indeed gained a lot in promoting cross-industry mergers and acquisitions. However, when Lu Qizhou, the general manager of China Power Investment Corporation, accepted the exclusive interview with the Economic Information Daily, he talked more about the hardships as an explorer. He said that China's coal-fired power mergers and acquisitions currently have multiple obstacles in at least the management system, price mechanism, market position and transportation channels.

Exploration: Promoting coal-fired power restructuring, China Power Investment has benefited a lot
At the beginning of the separation of the power system implementation network at the end of 2002, the indicators of China Power Investment Corporation's generator set size, operating income, and corporate efficiency were ranked among the top five power generation groups. In the first half of 2010, data released from the SASAC website showed that China Power Investment Corporation The main operating indicators such as the increase in operating income and total profit have leapt to the forefront of the industry. From "Little Brother" to "Big Brother", an important reason for the development of China Power Investment is to promote the merger and reorganization of coal and electricity.

It is understood that after the separation of the factory network, when other power generation groups are committed to “staking the horses and building the project”, China Power Investment Corporation has taken a different approach and quietly initiated the merger and reorganization in accordance with the general idea of ​​“not seeking large scale but seeking superior assets”. pace. In particular, after the outbreak of the financial crisis in 2008, CLP invested in the “risk” to find the “machine”, seized the opportunity of low market asset prices during the economic downturn, and comprehensively increased the merger and reorganization efforts to create Guizhou Jinyuan and Ningxia Energy Aluminum. A series of joint-stock companies such as Mengdong Energy have realized the strategic transformation from a single power generation group to an integrated energy enterprise group.

"We have always adhered to a basic principle in mergers and acquisitions: electricity as the core, coal as the foundation, and industrial integration to develop synergistically." Lu Qizhou stressed that the restructuring of China Power Investment is not a simple "coal-electricity joint" but a property right Ties, cross-regional and cross-industry capital operations in the form of shareholding system; instead of engaging in “diversified” development, it is promoting “integrated” operations with the optimization of production factor allocation as the core; The core, extending up to coal and transportation, extends down to the aluminum industry, forming a complete industrial chain and value chain, thereby enhancing the core competitiveness of the company.

The "Economic Information Daily" reporter learned in an interview that there are three main modes of mergers and acquisitions of coal and transportation industries promoted by China Power Investment Corporation.

The first is to hold a coal mine and use its own coal to send its own electricity. This is the real coal-electricity integration. For example, China Power Investment Corporation in Mengdong formed a coal production capacity of 50 million tons through the holding of Huolinhe open-pit coal industry, and the total installed capacity of large-scale pit-mouth power plants reached 6.576 million kilowatts. Mengdong has become an important profit support point for China Power Investment Corporation.

The second is coal-electricity joint ventures. Represented by Huai'an Huaihu Coal-fired Power Project in Anhui Province, through the mode of 50% of each of Shanghai Power and Huainan Mining's share-to-equity ratio, the two sides established Huaihu Coal and Electricity Co., Ltd., which invested in the construction of Tianji Power Plant and Dingji Coal Mine. And the power plant is an internal accounting unit, this model does not bother and benefit both parties. After the 2×600,000-kilowatt unit of Tianji Power Plant and the Dingji Coal Mine were put into operation, the coal supply was stable, the power generation operation was good, and the coal-electricity joint venture achieved good results.

The third type is the cross-regional “coal-transport-electricity” integration joint venture. China Power Investment has two coal mines in Mengdong, and the third is under construction. The production capacity will exceed 100 million tons in the future. The China Power Investment Power Plant will use up to half of the production capacity in the local area. Another 50 million tons of coal needs to be sent out. Therefore, it is necessary to build railways and terminals. The coal-powered coal transportation underwater channel will be realized to realize the North Coal South Transportation. At the same time, in the eastern provinces where the coal is transferred, the seaport storage and coal blending center and the large-scale thermal power projects along the coast will be planned to realize the cross-regional coal-electricity joint venture. At present, the coal terminal project built by China Power Investment Holdings in Jinzhou Port has been approved and started by the state, and the railway project is under active construction.

Status: deepening the reorganization of coal power, there are multiple dilemmas
“As a pioneer in the cross-industry merger and reorganization of coal and electricity transportation, China Power Investment has enjoyed both the success and the hardship of exploration in the process of building an industry chain to pursue the value chain.” Lu Qizhou said that in the case of power companies, the promotion of coal and electricity mergers Restructuring faces multiple dilemmas.

The first is the institutional dilemma. At present, most of China's coal resources or coal enterprises are controlled by local governments, while large power generation companies are mostly central enterprises. In the process of mergers and acquisitions, not only the economic interests of the central and local, power and coal, but also the implementation of the policies of the central and local enterprises, these constitute a systemic obstacle to the merger and reorganization of coal and electricity.

“Especially some local governments with large resource provinces are not willing to promote coal-electricity joint ventures.” Lu Qizhou said that power generation companies are almost required to implement a certain proportion of coal when some coal-rich provinces merge and reorganize coal resources. Land conversion, and often do not agree with coal-electricity integration projects as resource conversion projects, power generation enterprises have to invest in coal chemical, smelting and other projects, the cost of acquiring resources is higher.

The second is the price dilemma. On the one hand, China has not yet established a reasonable electricity price mechanism. From the perspective of economic operation, electricity prices should have been adjusted with fluctuations in coal prices, but China's coal prices and electricity prices have long been separated. On the other hand, institutional problems are an important cause of price distress. Some major coal provinces such as Shanxi, Henan, and Anhui have adopted the policy of “raising coal prices and lowering electricity prices”. "Because low electricity prices are low to the central government, high coal prices are high to local governments. More importantly, low electricity prices are conducive to the development of local high-energy-consuming industries and enhance their competitiveness in the market." Lu Qizhou said.

"On the one hand, promoting mergers and acquisitions and realizing coal-electricity integrated operation can indeed alleviate the contradiction between coal and electricity prices; on the other hand, the existence of price contradictions has constrained the promotion of mergers and acquisitions." Lu Qizhou said, "Since electricity prices are still subject to State management, affected by factors such as inflation and end-user affordability, it is difficult to adjust electricity prices in time, resulting in serious losses in the current thermal power companies."

The third is the dilemma of unfair market position. "In the 1980s and 1990s, foreign capital had entered China's power generation market on a large scale. Later, they gradually withdrew their funds. In the end, they almost all withdrew. Private capital also withdrew from the power generation market. Why?" Lu Qizhou asked himself, "Because China's energy Under the price system, coal prices have risen in marketization, electricity prices have been strictly regulated, and market-oriented reforms of electricity have been difficult. Power generation companies are at great risk. At present, thermal power units below 60 kW have begun to lose money. In contrast, local coal mines are at risk. The peak profit period."

It is said that the widening of the difference in profit levels and the unequal market position have become a major obstacle to the merger and reorganization of the coal-fired power industry. Some local governments, such as Shanxi, Henan, Shandong, etc., did not have a place to involve the central enterprise power generation group when reorganizing coal enterprises.

Fourth, the transportation channel is in dire straits. China's coal resources are mainly distributed in North China and Northwest China. The consumer market is mainly concentrated in the developed areas of the southeast coast. For example, from Shanxi to coal to Qinhuangdao no more than 1000 kilometers, according to the normal freight should be less than 100 yuan / ton, in fact, Shanxi coal mining price of about 500 yuan / ton, to Qinhuangdao will be more than 700 yuan / ton, circulation links The cost actually reached 200 yuan / ton.

"The transport channel I mentioned includes two meanings, one is the railway-based coal logistics, and the other is the high-voltage line that transmits electricity over long distances." Lu Qizhou emphasized that "for a long time, there have been many links in China's coal logistics. Management, extensive management, low efficiency, low market transparency, logistics costs account for a high proportion of coal consumption prices; and high-voltage transmission lines also have problems such as fewer lines and insufficient transportation capacity, which affect the power and coal industry. An important factor in mergers and acquisitions."

Relieve difficulties: increase reform efforts and promote coordinated development of industry
In the face of many difficulties, what is the solution? Lu Qizhou, who has the reputation of “economist” in the power circle, has a response.

First of all, it is necessary to introduce rules as soon as possible on the basis of the State Council executive meeting, and formulate an industrial policy of “breaking the boundaries of the industry and encouraging the integrated operation of coal and electricity”, focusing on both incremental and stock. For example, the current China's large-scale coal base construction planning has been adjusted to include power companies in a unified layout; for the current power stock (ie, the existing thermal power unit capacity), a merger and reorganization support policy that encourages the allocation of coal resources is formulated. The stock of coal assets can be allocated to nearby power companies, or the stock of power assets can be combined into coal enterprises to achieve optimal allocation of resources and assets.

Second, we must accelerate the reform of the energy market, especially the power market reform, and gradually establish a scientific and rational electricity price formation mechanism, so that the electricity price can fully reflect the cost of coal power and market supply and demand, in order to improve the efficiency of power generation. Establish a mutually beneficial market entry mechanism for coal development and power development that is conducive to coal-electricity integration; prioritize the approval of coal-electricity integration projects in line with national energy planning and industrial policies to mobilize local governments' enthusiasm for power companies to participate in coal mine restructuring.

Third, it is necessary to break the barriers to the management system and establish an organizational structure that promotes the merger and reorganization of coal and electricity. Local governments need to fully respect the autonomy of enterprises. Through capital operation, coal and electric power enterprises will establish large-scale coal-electricity enterprises through asset restructuring, joint listing and mergers and acquisitions, so that they will gradually become the main body of optimizing industrial structure. The main body of development and construction, the main body of the balance of domestic coal-electricity market, the main body of competition in the international market and the main body of technological innovation.

Fourth, the lack of circulation is an important reason for the high coal prices. It is necessary to break the institutional barriers in the circulation and rationalize the intermediate links of coal and electricity. It is suggested to start from breaking the monopoly, encourage diversification of railway construction investment, and gradually realize multi-industry win-win in the industrial chain of coal, power generation, railway transportation, etc., and promote the full implementation of coal-electricity integration. The same is true for transmission line construction.

In addition, it is also necessary to combine the strategy of the development of the western region, actively promote industrial restructuring, and promote coal-fired high-energy industry joint ventures. China's economic center is concentrated in the eastern region, and the energy base is concentrated in the western region, thus forming a one-way flow pattern of energy resources. The allocation of high-energy industries, which are indispensable for national economic construction, to the western regions where energy resources are concentrated can not only reduce large-scale one-way flow of energy resources, improve energy efficiency, but also promote political, social and economic development in the western region. It has a very important significance and is an important way to achieve regional economic advantages. This requires the relevant government departments to consider all aspects of development planning and project layout.

However, Lu Qizhou also believes that for enterprises, the implementation of coal-fired mergers and acquisitions is a "frustration." "According to the principle of specialization costs, coal and power industry enterprises should not be mutually infiltrated, but under the current energy management system and price formation mechanism in China, coal-electricity restructuring has become a realistic choice." Lu Qizhou said, "On the one hand, power generation enterprises are subject to Trapped in transaction costs, they have to seek joint ventures in the upstream coal and transportation sectors to expand their living space. On the other hand, coal enterprises also have low industrial concentration, waste of resources and environmental pollution, frequent production safety accidents and overcapacity. Expectations and other issues, choose to join the downstream power companies. It is against this background that the State Council’s policy of encouraging mergers and acquisitions such as coal and electricity has highlighted significant and far-reaching significance."

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