BEIJING - Leading power generator China Guodian Corporation has signed a merger contract with China Energy Corporation to become the country's largest company in the coal and power sectors, according to company announcements filed to the Shanghai Stock Exchange.

The implementation of the merger will undergo necessary procedures and be submitted for approval, according to the announcements.

The move is the country's latest effort to cut overcapacity in the coal and power sectors by restructuring state-owned enterprises, which is expected to improve corporate profitability and efficiency.

As coal prices surged in recent years, coal companies have witnessed high profits while electricity companies saw falling profits.

Analysts said creation of energy conglomerates is expected to help coordinate the coal and electricity markets and improve resource allocation to increase profits.