Economic Observer reporter Wang Yajie

At the end of March 2026, the finance department of a state-owned power enterprise held a special meeting. There is only one topic: how to fill the capital gap for new energy investment in 2026 after the Ministry of Finance issued a document on March 24th to increase the profit contribution ratio of central power enterprises from 20% to 35%. According to the new ratio, this year's profit contribution alone will be several billion yuan more than last year's.

On March 24th, the profit contribution system of central enterprises underwent the largest structural adjustment in nearly two decades. The Ministry of Finance has issued a document to increase the proportion of after tax profits paid by core resource-based central enterprises such as electricity, petroleum and petrochemicals from 20% to the top 35%.

A representative from the State owned Assets Supervision and Administration Commission told the Economic Observer that this is an important measure taken since the restart of the profit payment system for central enterprises in 2007, based on the overall reform of state-owned assets and enterprises, to promote the optimization of state-owned capital layout and structural adjustment, aiming to guide enterprises to focus more on their main responsibilities and high-quality development.

In recent days, Economic Observer reporters have interviewed officials from state-owned enterprises in multiple industries such as oil, coal, and electricity, and found that after the implementation of the new policy, the focus of enterprises is highly concentrated on three key words: debt, investment, and mergers and acquisitions.

The Economic Observer has exclusively learned that in order to accurately balance the relationship between the collection of state-owned capital returns and the sustainable development of enterprises, relevant departments are studying and exploring differentiated and dynamic proportion adjustments and exemption supporting mechanisms for this adjustment, aiming to more accurately protect the transformation and upgrading of aviation enterprises from the top-level design level.

The Change in Investment Logic

Lao Zhou works in the investment management department of the above-mentioned energy central enterprises. He told the Economic Observer that the Ministry of Finance's direct inclusion of petroleum and petrochemicals in the top 35% quota has a direct impact on the investment logic of resource-based central enterprises like ours, prompting his company to re-examine the efficiency of every penny in the investment portfolio.

In 2025, the capital expenditure of the group where Lao Zhou works will be around 150 billion yuan, with the exploration and development sector accounting for nearly half of the share. According to the consolidated financial statements of the group, if the after tax profit is in the range of 30 billion to 40 billion yuan, and was previously paid at 20%, billions of yuan would need to be paid. Now, at a rate of 35%, the amount that needs to be overpaid in one year exceeds 5 billion yuan.

This money is not a decimal.

Taking a specific project as an example, a refining and chemical integration project located in the northwest region has a total investment scale of nearly 30 billion yuan, gradually invested over several years, with an average annual investment of several billion yuan. Another large-scale coal chemical upgrading demonstration project located in Inner Mongolia has a total investment of over 20 billion yuan, with an average annual investment of several billion yuan. The excess profit paid in one year due to the increase in the contribution ratio can roughly cover the annual investment amount of any of the major projects mentioned above.

The recent discussions within the company where Lao Zhou works have focused on three key issues: which projects must be guaranteed? What can slow down? Which ones need to be cut? Lao Zhou told reporters that the game between investment departments is the most intense. Some people believe that in managing domestic upstream projects, it is necessary to adhere to the principle that 'these projects in the northwest are related to national energy security and cannot be delayed. We need to find ways to finance them'; Some people believe that 'overseas projects have a long cycle, and even if you invest now, you won't see any returns. It's better to take a break first'; The finance department warned that "with the increase in the contribution ratio, there will be great pressure on the debt ratio, and large-scale borrowing and investment should no longer be allowed".

The final consensus reached within the company is "strategic priority, benefit orientation, and classified policy implementation".

Specifically, the mandatory projects include domestic oil and gas storage and production projects, green and low-carbon projects, and high-end new material projects. The deferred projects include overseas non core exploration projects and domestic non strategic finished oil expansion projects. The mandatory projects are those with investment return rates below a certain standard, long construction periods, and fierce market competition. For example, the company's original plan to build a new oil refining project in the East China region was directly halted due to an unsatisfactory expected return rate.

Lao Zhou said that the underlying logic of the operation and assessment of energy central enterprises has changed now. Previously, enterprises prioritized scale by building more refineries and expanding production capacity, relying on economies of scale to make money; Now it's about quality and efficiency, shifting from extensive investment to lean investment.

There are three specific changes. Lao Zhou gave an example, firstly, the reconstruction of investment priority. National strategic projects are prioritized over high return projects, high return projects are prioritized over low-risk projects, and low-risk projects are prioritized over scale expansion projects. Secondly, there is a dynamic adjustment of investment pace, no longer setting a fixed annual plan at the beginning of the year, but evaluating quarterly and semi annually, and flexibly adjusting according to profit contribution and market changes. There is also diversification of investment sources. Previously, enterprises relied on profit retention and bank loans, but now they need to introduce more social capital and industrial funds.

At present, the company where Lao Zhou works has suspended several non strategic projects and postponed several major projects. At the same time, priority was given to safeguarding strategic projects and additional investments were made.

Lao Zhou said, "Our goal is very clear: to ensure energy and supply in the short term, focus on green and low-carbon development in the medium term, and focus on high-end manufacturing in the long term. Although there is a lot of pressure, as long as we spend money wisely and survive these two years, the investment quality of the enterprise will be higher

Investment contraction and lean management are just one side of the coin. When disposable profits decrease, the overseas mergers and acquisitions and industrial chain integration strategies of enterprises will inevitably be reshaped.

Changes in the Logic of Mergers and Acquisitions

Similar to the pressure faced by energy state-owned enterprises mentioned above, the secretary of a coal state-owned enterprise has recently been embroiled in a debate about whether to buy or not.

The policy document issued by the Ministry of Finance on March 24th directly included coal state-owned enterprises in the top 35% quota for submission, which prompted the entire group of coal state-owned enterprises to adopt a more cautious and prudent strategy when examining their overseas layout and industrial chain integration.

The net profit attributable to the parent company of the group where the secretary of the board is located in 2025 is approximately tens of billions of yuan. Previously, 20% of the profits were paid in, leaving a large margin for retained profits. Now calculated at 35%, disposable profits will directly decrease by billions of yuan.

Do you know what this money means to us? "He asked reporters

Before the new deal, the Secretary summarized the logic of overseas M&A of this coal central enterprise as "three axes": overseas resources "give priority to neighboring countries, seek bottom quality, and focus on holding", and select places along the "the Belt and Road" and close to China, such as Indonesia, Mongolia, and Mozambique, to "seek bottom" at the bottom of the cycle, either 100% acquisition or more than 51% holding; Integrate the industrial chain into a closed loop of "coal electricity transportation", acquire high-quality coal mines within the group or local state-owned enterprises, build railways, ports, and fleets, and downstream acquire power plants and invest in coal chemical industry; A typical case is a large-scale project in Indonesia, which is a joint venture company. Our side holds the majority of the investment and control, with significant proven reserves and an internal rate of return exceeding 10%. The expected return after production is good.

The feasibility study and due diligence of the project have been completed, and we are waiting for the approval of the board of directors. However, the new policy has arrived, and we are hesitant

On March 24th, after the release of the aforementioned policy document, there were some disagreements among the investment department, finance department, overseas company, and board of directors of this coal state-owned enterprise.

For example, the "radicals" come from the investment department and overseas companies, believing that energy security is the top priority of the country, coal is the ballast stone, and high-quality overseas resources cannot be stopped. The solution is to increase leverage, increase loans, or introduce social security and pension funds for strategic investment.

The 'conservative faction' comes from the finance department and the board of directors, believing that cash flow safety comes first and the debt ratio red line cannot be broken. The plan is to suspend or postpone all non essential overseas mergers and acquisitions, and use the money to repay debts and reduce leverage.

The 'compromise faction' comes from the Strategy Department and the Secretary General's Office, believing that it is not acceptable to not go out at all, nor to spend money recklessly. We need to strategically shrink, focus on the core, and take small steps forward. The solution is to give up controlling large projects and turn to investing in high-quality projects, technology output, and operational management.

In the view of the board secretary, the feasible path for the future group is to shrink its comprehensive strategy, shift overseas mergers and acquisitions from offensive to defensive, and shift industrial chain integration from external expansion to internal deep cultivation.

The secretary of the board has already felt the change in the logic of the merger and acquisition from the project decision.

The first one is a joint venture coal mine project in Indonesia, which the group originally planned to sign in the near future with a total investment of over 10 billion yuan, and the group will bear most of the capital. After the new policy was introduced, the Minister of Investment slammed the table and said, 'This is a rare and good project.' The Chief Financial Officer believed that the group had lost billions of yuan in disposable profits in a year, and the financial pressure was enormous. Loans would push the debt ratio near the warning line. Who would bear the risk?

The secretary of the board said that the chairman's final directive was "not a national strategic necessity, temporarily postponed". The group has attempted to communicate with the Indonesian side in a tactful manner.

In the opinion of the board secretary, the underlying logic of making any investment decision now is different from before. Previously, it was about maximizing resource reserves and buying coal whenever there was, the bigger the better. Now it's about maximizing the return on capital, and projects with an internal rate of return below a certain threshold need to be carefully managed. In the past, holding was the king, and you must make your own the final say. Now, cash flow is the king. Participation, cooperation, and technology export are all good as long as you can make money and do not occupy the principal.

The Change in Debt Logic

A manager from the finance department of a state-owned power enterprise stated that according to the regulatory requirements of the State owned Assets Supervision and Administration Commission on the asset liability ratio of industrial state-owned enterprises, their company must pay more attention to optimizing asset structure and controlling debt boundaries in its development.

The management personnel calculated that electricity is a trillion level heavy asset, with an annual capital expenditure of 100 billion to 150 billion yuan. According to industry practice, the capital of the project is 20% to 25%, and the debt is 75% to 80%. Previously, it retained 16.8 billion yuan annually, which could serve as at least 10 billion yuan of capital and leverage projects worth 40 billion to 50 billion yuan; Now there is only 13.65 billion yuan left for self retention, which can be used as a capital of only 7 billion yuan, reducing the need to leverage projects worth 15 billion yuan to 20 billion yuan.

He said, "The next step is either to invest less or to borrow more

There is also the issue of refined management of financial costs.

The power state-owned enterprise originally planned to make large-scale investments in the field of new energy in 2026, with corresponding capital and loan needs. After the new policy, the retained profits of enterprises have decreased, and there is a certain gap in the capital required for investment.

The above-mentioned management personnel have proposed two paths. The first path is to optimize the investment structure, appropriately slow down the pace of some non urgent new energy projects, and ensure investment quality; The second approach is to moderately increase some debt financing while maintaining overall risk control.

According to the calculations of his finance department, if the original investment plan is maintained, there will be a certain degree of fluctuation in the company's debt ratio.

If the financial expenses of the enterprise form pressure, the debt ratio rises, the rating is under pressure, and the financing interest rate will also change accordingly.

The power company currently has a large scale of interest bearing liabilities, and any slight changes in financing interest rates will have a significant impact on annual financial expenses.

Therefore, the management believes that the current core issue is how to maintain a healthy asset liability structure while ensuring investment intensity.

Three specific sentences: Debt ratio is a hard ceiling, with one vote veto. For any project, the "whether the debt ratio is within the safe zone after the investment is completed" will be calculated first, and the financial director has direct veto power with a pen; Hard constraint on internal rate of return, no investment below industry benchmarks, only high return projects can quickly generate profits, supplement capital, and optimize debt ratios; The investment amount is determined by the amount of revenue and expenditure paid. The finance department first calculates the annual profit and then deducts the rigid interest and rigid operation and maintenance, which equals the upper limit of the investable principal. The business department competes for projects in this plate, and if it exceeds the limit, it will be cut off.

Change in regulatory perspective

The above-mentioned officials from the State owned Assets Supervision and Administration Commission believe that from the perspective of state-owned asset supervision, the core of this adjustment is based on the overall reform of state-owned assets and enterprises, taking into account the development quality of central enterprises, the preservation and appreciation of state-owned capital, and the implementation of national strategies.

In this adjustment, the above-mentioned officials from the State owned Assets Supervision and Administration Commission stated that the core demand of the regulatory authorities is to force central enterprises to focus on their main responsibilities and businesses, cut down inefficient and ineffective assets, and optimize investment structures through structural adjustments of profit contribution. In the past, many central enterprises retained a large amount of profits, leading to blind expansion and cross-border investment, resulting in scattered resources and a lack of prominent main businesses. The inclusion of core resource-based central enterprises such as petroleum, petrochemicals, and electricity in the top 35% quota this time aims to guide enterprises towards a higher quality and more sustainable path of connotative development.

Next, the State owned Assets Supervision and Administration Commission will pay more attention to "risk prevention and control", while the Ministry of Finance will focus more on "standardization of revenue collection".

The above-mentioned person from the State owned Assets Supervision and Administration Commission stated that as the first person responsible for risk prevention and control of central enterprises, the State owned Assets Supervision and Administration Commission must uphold the bottom line of 'no systemic debt risk'.

The Economic Observer has exclusively learned that in response to the "one size fits all" pressure exposed by the adjustment of the profit contribution ratio of central enterprises, relevant departments are studying and promoting multiple differentiated supporting measures, focusing on the transition period arrangement of high debt enterprises, financial hedging of strategic investments, and closed-loop management of contribution and return.

The above-mentioned officials from the State owned Assets Supervision and Administration Commission suggested that for enterprises with high debt ratios and investment pressures such as electricity and coal, the next step could be to explore the establishment of a differentiated payment mechanism with a dual dimension of "industry+enterprise".