Headquarters of Shenhua Group in Beijing, China. Photo: AFP

Talks are underway to merge coal giant Shenhua Group Corp with power generator China Datang Corp, Bloomberg reports, citing people with knowledge of the situation.

Shenhua is China’s biggest coal producer making the deal especially sweet for Datang. “If the merger happens, Datang will basically take out coal price risks from operations,” said head of Asia oil and gas equities at Jeffries Group Laban Yu.

Sources noted that China’s state-owned enterprise regulator called for the merger talks, which they see fitting in with China’s supply-side reform policies.