Reorganization of power grids forms two major power construction giants

After eight years, the reform of the “main and auxiliary separation” of the power grid has finally taken new actions, and it is a foregone conclusion that the power grid auxiliary business has bid farewell to the grid protection.

Recently, the State-owned Assets Supervision and Administration Commission issued the “Separation Reform of Main Grid and Auxiliary Power Grid Enterprises and the Integration and Restructuring of Power Design and Construction Enterprises”, and the reform of the power system has been repeated. The senior officials of the National Energy Administration called it "the biggest breakthrough in the 8 years since the electricity reform."

In accordance with the “Separation of Main and Auxiliary Projects”, the subsidiary companies such as the State Grid Corporation of China, the provincial (regional) power grid companies, the survey and design, thermal power construction, and hydropower construction and repairing companies have been separated from the establishment system and restructured with the four central power design and construction companies. Formed two major power construction groups.

This round of reforms will be re-formed to form two major power construction giants, and power experts have said that this may create a new monopoly.

The idea of ​​“Electric Reform No. 5” (Guofa [2002] No. 5 “Electric Power System Reform Plan”) puts forward the following ideas: “Associated business units such as power design, construction, and construction must be decoupled from the power grid companies. "Corporate transformation, to enter the market," "The purpose of the power system reform is to break the monopoly, introduce competition, improve efficiency."

In addition, it is worth noting that power transmission companies and electrical equipment manufacturers (such as Xu Ji and Ping Gao) have not been separated from the power grid.

From the perspective of the reform agenda, this reform will be the end of the "main and auxiliary separation." Recently, the National Development and Reform Commission has proposed to “develop separate pilots for transmission and distribution and explore effective forms of separation of transmission and distribution”, and the electrical reform has turned to the next step.

In this reform, the legacy issues of the power auxiliary businesses were solved, but the assets of the power grid auxiliary business were not completely stripped, and the cost of the power grid was still difficult to determine.

The restructuring of the two major power construction giants, the SASAC, is the trader in this round of separation of main and auxiliary grid reforms, not the electricity regulatory commission, the Development and Reform Commission and other departments.

In September 2010, the National Development and Reform Commission, the Ministry of Finance, the State-owned Assets Supervision and Administration Commission, the State Electricity Regulatory Commission, the Electricity Regulatory Commission, and the electric power companies jointly developed the “Separation of Main and Auxiliary” program. In November of the same year, the plan was reported to the State Council. In early 2011, the State Council approved the reform plan and made it clear that it was organized and implemented by the SASAC.

The separation of main and auxiliary thinking is summarized as follows: The separation of assets in the auxiliary power grid and the consideration of the restructuring of the four central power companies for the design and construction of central enterprises. Therefore, the object of this round of reform is not only the State Grid, China Southern Power Grid, but also China Power Engineering Consulting Group, China Hydropower Engineering Consulting Group, China Water Conservancy and Hydropower Construction Group, China Gezhouba Group.

Specifically, the two power grid companies Hebei, Jilin, Shanghai, Fujian, Jiangxi, Shandong, Henan, Hubei, Hainan, Chongqing, Sichuan, Guizhou, Qinghai and Ningxia 14 provinces (autonomous regions and municipalities) subsidiary companies and China Hydropower Construction Group and China Hydropower Consultant Group were restructured to form China Power Construction Group (tentative name).

The two power grid companies Beijing, Tianjin, Shanxi, Liaoning, Heilongjiang, Jiangsu, Zhejiang, Anhui, Hunan, Guangdong, Guangxi, Yunnan, Shaanxi, Gansu and Xinjiang 15 provinces (autonomous regions, municipalities) subsidiary companies and Gezhouba Group, China Power Advisory Group reorganized and established China Energy Construction Group (tentative name).

The reorganization plan requires that the same network provinces and auxiliary units enter into the same power construction group. That is, the subsidiary companies, subsidiaries, and enterprises run by the subsidiary business unit are transferred together with the organizer; the personnel of the subsidiary business unit and the affiliated company (including on-the-job, internal retired, retired, retired) are transferred together; The creditor's rights and debts of the business unit are stripped from the company's assets as a whole.

According to the reporter’s understanding, at the beginning of the reorganization, the subsidiary units separated from the four major groups and the two networks temporarily retained their status as independent legal entities. The former temporarily manages subsidiaries, while the latter temporarily implements divisional management according to the nature of the business.

People from Qinghai Thermal Power Engineering Company, Gansu Thermal Power Engineering Company and Hunan Thermal Power Construction Company told the reporter that “The auxiliary industries such as thermal power construction leave the power grid is a foregone conclusion and a specific plan is being formulated.”

The SASAC estimated that the separation between the main and the auxiliary involved a total of 634,000 employees, including 381,000 employees and 253,000 retirees. The total assets of the China Electric Power Construction Group after the formation was 158.74 billion yuan, and the total assets of the China Energy Construction Group was 111.16 billion yuan.

The restructuring and integration of this round of design and construction companies and the establishment of state-owned enterprises with assets exceeding RMB 100 billion are in line with the SASAC's consistent “bigger and stronger” approach.

The grid monopoly structure is difficult to follow the current "main and auxiliary separation" program, the grid monopoly pattern has not been shaken.

An expert familiar with the electrical reform told the reporter: “The stripped design and construction companies are mostly subsidiaries of the power grid companies. There is no direct financial and asset relationship with the grid companies. The grid hopes to get rid of the burden and strip off this part of the assets.”

According to statistics, the grid-related auxiliary owner's business involves fire (water) power construction, power grid construction, transportation inspection and maintenance, and mechanical equipment. In the past, China's power construction industry was low in concentration and fiercely competitive, and its economic performance was always at a relatively low level. The above-mentioned auxiliary units are affiliated with the grid companies. One major advantage is that they can successfully win some of the grid construction projects.

"For the grid, these companies have low efficiency and are increasingly marginalized," said the above sources.

In contrast, power grid companies do not allow substations for transmission and distribution companies and equipment manufacturing companies. Its purpose is to speed up the expansion of transmission line construction and electrical equipment manufacturing, and further provide energy reserves for the construction of UHV lines.

After the snowstorm in 2008, power grid companies wrote a letter to the State Council, recommending that power transmission and transformation enterprises remain within the power grid system. At the same time, SASAC officials will also recommend to the State Council. “It seems that these proposals have affected the national decision-making.” The above person said.

Since 2009, State Grid has successively acquired electrical equipment manufacturers Pinggao and Xu Ji. The above two companies are the leaders of the national electrical equipment industry. The expansion of the grid companies’ power to expand upstream has once caused the “monopoly expansion” market dispute.

According to the definition of "main auxiliary" in "Electrical Reform No. 5", the equipment manufacturing business belongs to the auxiliary business scope of the power grid and should be stripped. The reform and reorganization plan of the separation of main and auxiliary companies did not include these enterprises.

In addition, according to the requirements of the SASAC reorganization plan, grid companies may no longer engage in separated power survey, design, thermal power construction, hydropower construction, and repair operations, or reinvest or control their businesses in the separated businesses.

A power expert predicts that grid companies will not easily give up power design. "As an example of the State Grid, it has set up design departments in local power bureaus. If it is not restricted, a new subsidiary group will be created after the resources are integrated."

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