6.1.5 Coal Companies Are Folding,
Merging or Being Sold
Coal companies are going bankrupt. Others are
merging or being sold. The rapid replacement of
coal by clean energy, the global economic
recession after the global financial crisis of 2008,
and China’s declining coal demand since 2014
have led to oversupply in the international coal
market. In the USA, Patriot Coal, Walter Energy,
Alpha Natural and Arch Coal filed for bankruptcy in 2012, 2015, 2015 and 2016 respectively. Peabody Energy, the largest coal company
in the world and engaged in coal exploitation for
100 years, joined the list of insolvent coal companies in April 2015. For coal companies that
had not filed for bankruptcy, the situation is
frustrating: most of them have been brought to
the verge of bankruptcy due to long-term losses.
For example, Murray Energy in the USA
announced a mass layoff programme in 2016 to
reduce its losses, and the net loss of New World
Resources, the largest private coal company in
eastern Europe, was around €233.6 million in
2015. In 2015, more than 80% of Chinese coal
companies made a loss. The Chinese economy
improved in 2017. Output of domestic raw coal
picked up. Output from January to September
increased by 5.7% over the previous year, which
is 16.2% points higher than in 2016. But low
efficiency, debt, state-owned enterprise reform
and other structural problems in China’s coal
industries remain. Merging and restructuring
large coal companies is on the agenda again, and
a new trend of vertical integration has emerged.
Shenhua Group, the largest coal company in
China, and China Guodian Corporation merged
to form China Energy Investment Corporation
Limited in 2017. Some local state-owned coal
companies are also exploring horizontal and
vertical integration, aiming to sharpen their
competitive edge through resource optimisation
and reorganisation.
International consortia have divested their
coal businesses. Total of France, the fifth largest
energy company in the world, ended its coal
production and sales activities in 2015. The total
value of the coal assets divested by the
Anglo-Australian coal mining giant Rio Tinto
since 2013 is more than $4.7 billion, and it sold
40% of its holding in Australia’s Bengalla coal
mine for more than $600 million. In addition to
divesting 60% of its assets in 2016, global mining company Anglo American sold 51% of its
holding in Dawson coal mine and 70% of its
interest in Foxleigh coal mine, both in Queensland, Australia. Vattenfall, wholly owned by the
Swedish government and the third largest energy
supplier in Germany, announced in 2016 that it
would gradually retreat from the German coal
market. In the same year, the largest sovereign
wealth fund in the world, the Norwegian Oil
Fund, sold its shares in 52 coal-related
companies.
Some coal companies have seized the opportunity to expand their business. Exxaro Resources of South Africa acquired coal assets from
Total of France for $472 million in 2014, $45
million lower than their value the previous year.
Indonesia’s state-owned coal company Bukit
Asam entered Australia’s coal market in 2016 by
acquiring one of Rio Tinto’s largest coal mines in
Australia.
Bankruptcy and merger and acquisition are
commercial activities, as well as means of government gaining control. Asset restructuring of
international coal companies, an unavoidable
result of the industry’s descent, is changing the
structure of the global coal industry.
6.2 Progress, Status and Assessment
of China’s Energy System
Reform
6.2.1 Reform Has Progressed Despite
the Industry’s Downturn
The years 2010–16 were a transitional period for
China’s coal industry, with industrial growth
dropping from high to medium and institutional
reform deepening. The golden decade for China’s coal industry was 2002–12, when annual
coal output increased on average by almost 10%.
The growth rate of the Chinese economy slowed
down in 2012, leading to overcapacity in the coal
industry. Shortage was rapidly replaced by
oversupply. The growth rate of coal output
476
S. Yaodong and A. Gillespie
Merging or Being Sold
Coal companies are going bankrupt. Others are
merging or being sold. The rapid replacement of
coal by clean energy, the global economic
recession after the global financial crisis of 2008,
and China’s declining coal demand since 2014
have led to oversupply in the international coal
market. In the USA, Patriot Coal, Walter Energy,
Alpha Natural and Arch Coal filed for bankruptcy in 2012, 2015, 2015 and 2016 respectively. Peabody Energy, the largest coal company
in the world and engaged in coal exploitation for
100 years, joined the list of insolvent coal companies in April 2015. For coal companies that
had not filed for bankruptcy, the situation is
frustrating: most of them have been brought to
the verge of bankruptcy due to long-term losses.
For example, Murray Energy in the USA
announced a mass layoff programme in 2016 to
reduce its losses, and the net loss of New World
Resources, the largest private coal company in
eastern Europe, was around €233.6 million in
2015. In 2015, more than 80% of Chinese coal
companies made a loss. The Chinese economy
improved in 2017. Output of domestic raw coal
picked up. Output from January to September
increased by 5.7% over the previous year, which
is 16.2% points higher than in 2016. But low
efficiency, debt, state-owned enterprise reform
and other structural problems in China’s coal
industries remain. Merging and restructuring
large coal companies is on the agenda again, and
a new trend of vertical integration has emerged.
Shenhua Group, the largest coal company in
China, and China Guodian Corporation merged
to form China Energy Investment Corporation
Limited in 2017. Some local state-owned coal
companies are also exploring horizontal and
vertical integration, aiming to sharpen their
competitive edge through resource optimisation
and reorganisation.
International consortia have divested their
coal businesses. Total of France, the fifth largest
energy company in the world, ended its coal
production and sales activities in 2015. The total
value of the coal assets divested by the
Anglo-Australian coal mining giant Rio Tinto
since 2013 is more than $4.7 billion, and it sold
40% of its holding in Australia’s Bengalla coal
mine for more than $600 million. In addition to
divesting 60% of its assets in 2016, global mining company Anglo American sold 51% of its
holding in Dawson coal mine and 70% of its
interest in Foxleigh coal mine, both in Queensland, Australia. Vattenfall, wholly owned by the
Swedish government and the third largest energy
supplier in Germany, announced in 2016 that it
would gradually retreat from the German coal
market. In the same year, the largest sovereign
wealth fund in the world, the Norwegian Oil
Fund, sold its shares in 52 coal-related
companies.
Some coal companies have seized the opportunity to expand their business. Exxaro Resources of South Africa acquired coal assets from
Total of France for $472 million in 2014, $45
million lower than their value the previous year.
Indonesia’s state-owned coal company Bukit
Asam entered Australia’s coal market in 2016 by
acquiring one of Rio Tinto’s largest coal mines in
Australia.
Bankruptcy and merger and acquisition are
commercial activities, as well as means of government gaining control. Asset restructuring of
international coal companies, an unavoidable
result of the industry’s descent, is changing the
structure of the global coal industry.
6.2 Progress, Status and Assessment
of China’s Energy System
Reform
6.2.1 Reform Has Progressed Despite
the Industry’s Downturn
The years 2010–16 were a transitional period for
China’s coal industry, with industrial growth
dropping from high to medium and institutional
reform deepening. The golden decade for China’s coal industry was 2002–12, when annual
coal output increased on average by almost 10%.
The growth rate of the Chinese economy slowed
down in 2012, leading to overcapacity in the coal
industry. Shortage was rapidly replaced by
oversupply. The growth rate of coal output
476
S. Yaodong and A. Gillespie