China's state energy giant State Power Investment Corporation (SPIC) has indicated a potential merger with China Huaneng Group, another state power company.
The SPIC and China Huaneng are "both thinking about forming a union," but all related processes are still ongoing, according to Wang Binghua, chairman of SPIC.
SPIC and China Huaneng are among the nine power companies in China, which are all SOEs operating in similar ways. This is "obviously inappropriate" as it disrupts resource-distribution, efficiency and benefits of the sector, Wang said.
To make SOEs leaner and healthier, the Chinese government is planning to reduce the number of central SOEs to under 100 this year, with coal power, steel, and heavy equipment manufacturing industries in the spotlight.
The highlights of mergers and restructuring in the power sector is yet to come, Wang said.
In June, the listed arms of Shenhua Group, the country's largest coal producer, and China Guodian Corporation, a major electricity generator in China, suspended trading of their stocks on the same day, a move widely considered to signal a merger.
Analysts and industry insiders expect that possible mergers and restructuring between central SOEs will help reduce overlapping investments and ease overcapacity in the coal and power sectors.
In the first five months of this year, combined profits of SOEs were more than 1 trillion yuan (about 150 billion U.S. dollars), up 25.5 percent year on year, dwarfing the 1.7-percent increase for the whole of 2016, according to the Ministry of Finance.