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China XD Group Co.’s listed unit gained on a report authorities are advancing plans to combine electricity transmission and distribution equipment makers to create a 110 billion yuan ($17 billion) behemoth.
Units of China XD and State Grid Corp. of China would be merged under the proposal to help drive faster growth in the sector, the state-backed Economic Information Daily reported. The subsidiaries will be spun off from parent firms by the end of the year to allow consolidation to take place, the state-run newspaper said.
Upgrading existing power grids and expanding electricity infrastructure will be vital to support China’s drive to add more renewable energy and curb greenhouse gas emissions. President Xi Jinping’s goal of carbon neutrality by 2060 will rely on the ability of grids to connect the ample hydropower, wind and solar resources in western regions with densely populated central and eastern areas.
State Grid didn’t immediately respond to a request for comment. China XD declined to comment on the report, although it said in December that talks were taking place on potential industry consolidation.
China XD’s listed unit advanced as much as 3.6% in Thursday trading, and was 1.7% higher as of 11:21 a.m. in Beijing.
State Grid, which operates power transmission across 88% of China’s territory, is planning a $350 billion upgrade of its system through 2025, including new ultra-high voltage power lines, pumped hydro storage plants and more electric vehicle charging stations.
The State Council and National Development and Reform Commission, China’s top economic planning body, previously backed a spin-off of the grid’s equipment making units to streamline the power giant, Caixin magazine reported in March.
