Having snapped up seven companies in one go, GD Power Development Co., Ltd. recorded an 18% decline in net profit, and launched an "alternative acquisition spree" amid its slumping operating performance.

Insight Energy learned that on August 19, GD Power Development (600795.SH) released an announcement, stating that it plans to acquire the equity of 7 energy companies under its controlling shareholder China Energy Investment Corporation with its own funds. According to the announcement, the total operating controlled installed capacity of the targets is about 320,000 kilowatts, while the capacity under construction and to be built is as high as 13.54 million kilowatts.

What is the concept of 320,000 kilowatts? It is roughly equivalent to the volume of two medium-sized thermal power units. And 13.54 million kilowatts is almost one-tenth of GD Power's current total installed capacity of 130 million kilowatts.

This is a typical "buy the future" transaction. But the problem is that this company has just handed over a rather unsatisfactory performance report. GD Power recently disclosed its 2026 semi-annual report. During the reporting period, the company achieved operating revenue of 79.029 billion yuan, a year-on-year increase of 1.77%; total profit of 7.038 billion yuan, a year-on-year decrease of 19.88%; net profit attributable to shareholders of listed companies of 3.014 billion yuan, a year-on-year decrease of 18.25%; net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses of 2.885 billion yuan, a year-on-year decrease of 15.41%. Revenue rose but profit did not increase, volume increased while price fell, and fuel costs eroded earnings.

With performance under pressure on one side and cash acquisition on the other, what kind of game is GD Power playing?

Revenue up but profit down, what is this power giant going through

In fact, GD Power is not in an easy situation at the moment.

In the first half of the year, its generating capacity reached 218.91 billion kWh, a year-on-year increase of 6.25%. The installed capacity continued to expand, the power output rose, but the profit did not increase. The average on-grid electricity price was 393.31 yuan/MWh, down 16.40 yuan year-on-year. The "price discovery" function of the market-oriented reform of the power sector is taking effect — electricity prices are going down.

On the cost side, the comprehensive unit price of standard coal entering the furnace is 836.84 yuan per ton, up 5.36 yuan year-on-year. Although the company's long-term agreement coal accounts for as high as 99%, and the overall fluctuation of coal price is controllable, the rising fuel cost superimposed on the falling electricity price squeezes the profit margin from both ends.

By segment, the net profit attributable to shareholders of thermal power was 1.666 billion yuan, down 15.3% year-on-year; hydropower performed relatively well, hitting 1.081 billion yuan, up 22.4% year-on-year. However, the new energy sector can be described as a "collapse": the net profit of wind power was 397 million yuan, down 25% year-on-year; that of photovoltaic was 223 million yuan, plummeting 62% year-on-year. According to a research report from China International Capital Corporation, the wind power sector even recorded a net loss of 0.002 yuan per kWh in the second quarter.

The net cash flow from operating activities was 20.517 billion yuan, down 21.02% year-on-year.

It is against this background that GD Power announced the cash acquisition.

The "buy the future" logic behind the 320,000 kW operating capacity

The book figures of this transaction are not the focus of this deal.

The total assets of the target companies account for less than 5% of GD Power's total assets, and their combined operating revenue in 2025 accounts for less than 1% of the company's 2025 revenue. The short-term financial contribution is negligible.

The 13.54 million kW of capacity under construction and to be built is the real "core". Songzi pumped storage, Anqing Phase III, Tongling Phase II, Hengfeng Expansion, Xiaolongtan Phase IV, Delingha coal power, Benzilan hydropower, Xulong hydropower — 8 large-scale projects are included in the package. However, hydropower and pumped storage projects require large investment and long cycles, and it is difficult to get returns in less than 5 to 10 years.

GD Power is not the first time to take over assets from its parent company. In 2021, the company injected conventional energy power generation assets of China Energy Investment Corporation in Shandong, Jiangxi, Fujian, Guangdong, Hainan, Hunan and other regions. In 2022, it acquired 11% equity of Dadu River Company. This is the third time the same script has been staged.

But this time it's different. During the previous two acquisitions, GD Power's performance was still acceptable. This time, the company is in a downward profit channel. The announcement clearly states that "the acquisition funds are the own funds of the company and Dadu River Company", which means that the deal is fully funded by cash, no additional share issuance and no rights issue.

A company with an 18% year-on-year decline in net profit is spending a large amount of cash to buy a bunch of under-construction projects that will not make money in the short term. This is somewhat "counter-intuitive" in terms of business logic.

The "prescribed action" under the wave of central SOE restructuring

But if we look at the broader context of the reform of central and state-owned enterprises, this transaction becomes understandable.

In 2026, a new round of state-owned assets and SOE reform was fully launched. The State-owned Assets Supervision and Administration Commission (SASAC) has set quantitative hard constraints: 88% of the revenue of central SOEs should be attributed to no more than 3 core main businesses; non-main business investment is strictly controlled within 5%. In other words, China Energy Investment Corporation must divest non-core conventional energy power generation assets.

GD Power happens to be the only listed platform for conventional energy power generation business under the group. So the question arises: where to place the assets? The answer is: it can only be here.

The central SOE restructuring in 2026 is far more than this single deal. In February, China Shenhua acquired the equity of 12 core enterprises under China Energy Investment Corporation for 133.598 billion yuan, setting a new record for the largest share issuance to purchase assets in the history of A-shares. It took less than two weeks from acceptance to registration and approval. In July, Sinopec completed the restructuring of China National Aviation Fuel, making China National Aviation Fuel its second-tier wholly-owned subsidiary. The signal previously released by SASAC is that 10 to 15 groups of strategic restructuring of central SOEs are expected to be completed in 2026.

GD Power's acquisition is just a small chapter in this grand narrative. It is not a purely business decision, but a promotion of the reform.

The "sweet burden" of 13.54 million kW

But reform is always accompanied by costs.

In the first half of 2026, the net cash flow from financing activities of GD Power plummeted by 433.80% year-on-year. The company launched a 200 billion yuan corporate bond issuance plan in May 2026, and the purpose of the raised funds clearly includes "paying the cash consideration for asset mergers and acquisitions". This means that the acquisition will push up the debt ratio and increase financial expenses.

What is more tricky is the 13.54 million kW of under-construction projects. Hydropower and pumped storage projects often require tens of billions of yuan in investment and a 10-year cycle, during which there is only capital outflow and no income inflow. Such projects are affected by multiple factors such as geological conditions, ecological environment, resettlement of residents, so construction delay and over-investment are very common.

GD Power also acknowledged in the announcement: "This acquisition is still in the early stage, and the company still needs to conduct due diligence, audit, evaluation and other work on the target companies, and the transaction is uncertain."

This is not alarmist talk. In 2024, GD Power just transferred 50% equity of Guodian Construction Investment to China Energy West Energy Co., Ltd. for 6.739 billion yuan, precisely because the Chahasu Coal Mine was temporarily suspended, and the company wanted to "reduce the impact of uncertainty". Selling assets to reduce risks, buying assets to take over risks, GD Power's role in the parent company's system is somewhat helpless.

Thermal power, hydropower, pumped storage, photovoltaic — the 7 target companies cover almost all conventional energy categories. GD Power is becoming a bigger and bigger "basket" where the parent company puts whatever it has.

Whose "integration platform", whose "risk container"

The positioning of "conventional energy power generation business integration platform" is written in the articles of association of GD Power, but what does it mean exactly?

Integration means undertaking. Undertaking means that assets, liabilities, projects and personnel are all packaged in. When the parent company needs to divest non-core assets to meet the SASAC assessment requirements, GD Power is the "taker".

For China Shenhua's 133.5 billion yuan restructuring, at least the mature operating coal and power assets it bought can immediately contribute profits. GD Power's transaction bought 320,000 kW of operating capacity and 13.54 million kW of under-construction capacity — the contribution of the former is almost negligible, and the latter will continue to "burn money" for many years.

These are not transactions of the same magnitude, but they expose the same logic: the listed platform of central SOEs is first an execution tool for the group's strategy, and then a business entity.

GD Power's total assets reached 524.448 billion yuan in the first half of 2026. The 7 target companies have 13.54 million kW of installed capacity under construction. Estimated based on the average industry investment cost, the subsequent capital expenditure will reach tens of billions or even hundreds of billions of yuan. Where will this money come from? Most likely through bond issuance and loans — which will eventually be reflected in GD Power's balance sheet.

A company with declining net profit is turning itself into a bigger and bigger "asset container". The parent company has completed its reform task, but the listed company's financial pressure has just begun.

The accounts of this acquisition cannot be settled now. On the day when all 13.54 million kW of projects are put into operation, the situation may be completely different. But before that, GD Power has to survive the long construction cycle, withstand the continuous consumption of cash flow by capital expenditure, and pray that every project can be advanced as scheduled, connected to the grid on time, and sold at a good price.

The 320,000 kW operating scale is the current reality, and the 13.54 million kW under-construction scale is a bet on the future. GD Power is betting that on the way to becoming the parent company's "integration platform", it can hold on until the dawn arrives.