Analyst Note| Jennifer Song |
Thirteen years after being granted exploration rights in the Watermark mine field in Australia, Shenhua has decided to terminate its mining exploration and withdraw its equity investment, with a shift toward clean energy being a key reason. We think this might be a stop-loss instruction given Shenhua’s continuous impairment on this project, difficult business environment, and its need to find ways to reduce carbon emissions to meet China’s carbon-neutral target. Shenhua will receive a payment of AUD 100 million (CNY 504 million) after ceding its rights. While the overall financial impact is minor, we think this implies that Shenhua will need to address assets that are not performing or are less viable in a greener environment. As released in its fourth five-year plan, Shenhua aims to add 660 MW renewable energy capacity in the next five years and reduce carbon emissions from 2025.