China Resources Power sells new shares to buy coal mine

Updated: 2007-10-05 14:55

China Resources Power Holdings Co raised 4.86 billion Hong Kong dollars (US$626.2 million) by selling new shares to fund its first coal-mine purchase, people familiar with the situation said Thursday.

The company is seeking to source coal from its own mines to curb the impact of the rising cost of coal, the biggest source of power in China, analysts said.

China Resources sold 200 million new shares at HK$24.30 (US$3.13) each -- in the middle of an indicative range of HK$23.80 to HK$24.80, one of the people said.

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The sale price represents a discount of 8 percent to the company's share price before the stock was suspended from trading Wednesday afternoon pending a statement on a share sale. Morgan Stanley is the sole bookrunner of the deal, according to a term sheet.

An analyst from a US investment bank said the company's move toward production "makes a lot of sense," saying "coal prices are likely to keep rising in the near future."

The company's average unit fuel cost in the first half was 167.4 yuan (US$22.30) a megawatt hour, down 0.6 percent from a year earlier. At the beginning of the year, the company targeted a rise in unit fuel cost this year of no more than 7 percent from last year's 166 yuan a megawatt hour. But by August, Chief Executive Wang Shuaiting said it was aiming to keep the cost unchanged.

The company in late August raised its 2007 capital-spending budget to HK$10 billion from HK$7 billion, to include partial payment for the stakes in three power plants it bought earlier in the year. By late August, the company had spent HK$3.35 billion of its total budget for this year.

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