Tag Archives: Yanzhou Coal

Cash-Rich China Eyes More Global Energy Assets　　财大气粗的中国企业着眼更多全球资源并购

By newsdoug on December 20, 2011

China energy firms hungry for global M&A There are a few interesting items out today on the energy sector, spotlighting two recent trends that have seen China become a major player on the global M&A stage, while its energy majors also suffer from growing exposure to liability industrial from accidents. In the first category, Yanzhou Coal (HKEx: 1171; Shanghai: 600188; NYSE: YZC) and Sinopec (HKEx: 386; NYSE: SNP) are reportedly exploring major new deals in Australia and Spain; while in the second category oil producer CNOOC (HKEx: 883; NYSE: CEO), already embroiled in an environmental mess off the northeast China coast, is reporting more similar woes at one of its southern China operations. Let’s look at the latest M&A deals first, which are seeing Yanzhou make a $2 billion bid for Gloucester Coal (Sydney: GCLAX) (English article), while Sinopec is reportedly eyeing a 2.7 billion euro bid for 10 percent of Spanish oil major Respol, part of a bigger stake held by indebted Spanish developer Sacyr Vallehermoso. (English article) What both of these deals have in common is that the assets are being sold by owners under financial pressure to raise funds, a factor that will play to the advantage of Chinese firms that are not only cash rich, but also have easy access to credit due to Beijing’s desire to become more energy self sufficient. That combination of tight credit outside China and Beijing’s desire buy global assets should help to make 2012 a big year for Chinese acquisitions of global resource assets, especially as cash-strapped global companies look to sell such assets to raise quick funds. (previous post) Meantime, CNOOC has issued a press release saying one of its gas units in the southern city of Zhuhai near Macau has discovered a leak in one of its nearby offshore subsea gas pipelines. (company announcement) Following the discovery, CNOOC was forced to shutdown production of some wells, and, equally important, is incurring extra costs from emergency measures it is taking to avoid pollution, explosions and other accidents. This latest setback comes as the company faces billions of dollars in liability related to oil leaks at an oil field it is developing off the northeast China coast with ConocoPhillips (NYSE: COP). The accidents spotlight the growing risk that CNOOC, Sinopec and other energy firms are facing as they expand both inside and outside China, and as Beijing puts growing importance on workplace safety and environmental protection.

Bottom line: New developments indicate 2012 will be a big year for global M&A by China energy firms, which will also face growing risk from industrial accidents.

News Digest: December 20, 2011

By newsdoug on December 19, 2011

The following press releases and media reports about Chinese companies were carried on December 20. To view a full article or story, click on the link next to the headline.

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◙ Yanzhou Coal (HKEx: 1171) Is Said to Plan $2 Billion Purchase of Australia’s Gloucester (English article)

◙ Beijing to Extend Real Name Beyond Microblogs – Source (English article)

◙ CNOOC (HKEx: 883) Unit Finds A Leakage In Zhuhai Terminal’s Subsea Pipeline (PRNewswire)

◙ China Unicom (HKEx: 762) Announces Operational Statistics for November (HK Stock Exchange)

◙ Saab Automobile Submits Filing for Bankruptcy (English article)

2012: The Year of China Resource M&A? 2012：中国企业的资源并购年？

By newsdoug on December 12, 2011

China to power global resource M&A in 2012 The latest buzz surrounding an overseas China energy deal, in this case involving Sinopec’s (HKEx: 386; NYSE: SNP) bid for a South American asset, casts a spotlight on a range of market factors that could come together to make 2012 a big year for overseas resource M&A by Chinese firms. According to foreign media reports, Sinopec, China’s largest refiner which would also like to become a major crude oil producer, is the leading candidate to buy some of Brazil’s most promising offshore oil assets from Britain’s BG Group (London: BG) (English article) This deal would be the latest in a recent string of overseas M&A deals by China’s energy majors, with oil companies CNOOC (HKEx: 883; NYSE: CEO) and Sinopec, as well as coal miners Shenhua (HKEx: 1088; Shanghai: 601088) and Yanzhou Coal (Shanghai: 600188; HKEx: 1171; NYSE: YZC), all bidding for global assets or announcing big deals in the last 6 months. This latest Sinopec deal throws a spotlight on why China could well become the dominant force in bidding for global M&A natural resource assets next year for a number of reasons. From an experience standpoint, China’s resource majors are becoming much better at such M&A following their latest successful acquisitions, after many of their earlier deals failed due to lack of experience. From a financing standpoint, all the resource firms are also in good position as Beijing has stated on many occasions it wants to make the country less dependent on foreign suppliers for key resources like oil, coal and iron ore, meaning Beijing is likely to approve and even provide low-cost financing for these kinds of deals. Lastly there’s the ongoing European debt crisis, which is being felt to a lesser extent in the US, and will restrict the ability of big Western resource companies to assemble the financing necessary for such deals. Since many emerging market players also depend on these credit markets to raise financing for big deals, they will also be affected by the pinch, unlike Chinese firms whose financing usually comes from cash-rich Chinese banks that lend based on Beijing’s latest policy directives. The risk for the Chinese companies, of course, is that they are likely to overpay for these assets in their effort to execute Beijing’s wishes, which could hurt the bottom lines of their listed units. But considering the weak position of many rival bidders, the Chinese firms may actually be able to pick up some of these assets at reasonable prices.

Bottom line: Front-runner status of Sinopec in the race to buy a prime Brazilian oil asset spotlights weakness in global rivals that will make China the leading buyer of global resource assets in 2012.

Caterpillar Places Mining Bet With New Buy 卡特彼勒收购中资矿山机械企业押注中国矿业未来

By newsdoug on November 11, 2011

Caterpillar (NYSE: CAT), the US maker of heavy construction equipment used to build everything from office towers to roads, is no dummy when it comes to knowing where the future growth is, as reflected by its latest plan to buy a Chinese mining equipment company. (English article) The company announced it wants to buy ERA Mining Machinery (HKEx: 8043) for HK$0.88 per share, or a 33 percent premium over its last closing price. From my perspective, this looks like a very smart move by Caterpillar to boost its presence in an area that China has clearly earmarked for development, namely the mining sector as Beijing aims to reduce its reliance on imported iron ore and coal to feed its hungry economy. As it seeks to achieve that goal, the country’s miners, such as Shenhua (HKEx: 1088) and Yanzhou Coal (Shanghai: 600188; HKEx: 1171), as well as iron ore producers, are likely to need new equipment to develop resources not only at home, but also abroad. The move is also a smart hedge against the more traditional users of heavy construction equipment, namely the infrastructure and real estate industries, which are both overheated and look set for major slowdowns in the next 2 years. Despite the real estate industry’s cloudy outlook, Soufun (NYSE: SFUN), a leading provider of online real estate services, has just surprised the market with very strong earnings, with revenue nearly doubling in the third quarter and profit growing by an even stronger amount. (company announcement) Soufun shares plunged nearly 9 percent on Thursday before the results came out, and only bounced back slightly in after hours trading after the upbeat announcement. I expect we may see some bigger gains on Friday on this upbeat report. Still, this positive result is probably more a sign that a long-awaited correction in China’s real estate market is finally beginning rather than any improvement in the market. That’s because Soufun makes its money on transaction volumes that are finally starting to grow after months of stagnation, as many cash-needy real estate owners waiting for the market to improve finally start selling their properties at reduced prices.

Bottom line: Caterpillar’s purchase of a mining equipment maker looks like a smart move, drawing on China’s goal of boosting its self-reliance in the important energy and steel sectors.

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