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China Shenhua Energy Co Ltd 601088

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Shenhua’s Q1 2021 in Line; Investment Toward Renewable Energy on the Way

Jennifer Song Equity Analyst

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.

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Company Profile

Business Description

With annual production of over 280 million metric tons and marketable coal reserves of 14.6 billion metric tons, China Shenhua is the largest coal producer in China. The company runs a balanced portfolio of assets compared with other coal producers, with integrated coal, coal-fired power generation, and coal transportation network that comprises railway, port and shipping businesses. As of 2020, the coal, power, and transportation segments accounted for 56%, 14%, and 28% of the company’s gross profit, respectively. Its 53%-owned Shuohuang Line is one of the most important coal rail-transport corridors, delivering coal from western China to the coast.

No. 22, Andingmen Xibinhe Road, Dongcheng District
Beijing, 100011, China, People's Republic of
T +86 1058133399
Sector Energy
Industry Thermal Coal
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 76,182