China National Coal plans US$1 bln HK IPO
China National Coal Group Corp., the country's number two coal producer, is hiring banks to prepare a Hong Kong stock listing this year to raise about US$1 billion to expand output as China's coal shortage persists.
The firm invited a number of U.S. and European investment banks, including Dutch bank ABN Amro , to pitch for a mandate in a so-called beauty parade last week to underwrite the initial public offering (IPO), a source close to the situation said on Sunday.
"It is in the process of hiring banks to run the IPO, which is likely to raise US$1 billion or more," the source, who spoke on condition of anonymity, told Reuters. "It is not going to be launched in two days but the process will begin."
Officials at Beijing-based China National Coal could not be reached for comment.
The listing would follow that of Shenhua Group, China's largest coal mining firm, which is on track to launch a Hong Kong IPO in a few months' time to raise an estimated $1.5 billion, taking advantage of high coal prices.
The share price of China's largest listed coal producer, Yanzhou Coal Mining Co. Ltd. , has risen more than tenfold in Hong Kong since 2000.
China's strong economic growth of around 9 percent a year, along with worsening rail congestion, has turned the once dirt-cheap fuel that makes up nearly 70 percent of its energy mix into the new 'black gold'.
Analysts say coal prices could remain strong for years as coal production is still struggling to keep up with demand.
High prices in China, the world's second largest coal exporter, could threaten the profits of utilities and steel firms in China and in major coal importers Japan and South Korea.
China National Coal, a state-owned enterprise under the direct supervision of central government, plans to double its annual coal production capacity to 100 million tonnes by 2007, according to its Web site, www.chinacoal.com.
The company, which employs 97,000 people, had total assets of 41.5 billion yuan ($5.01 billion) at the end of 2003 and coal reserves of 11.9 billion tonnes, according to its Web site.
Coal demand in China, the world's biggest coal producer, could rise by 6 percent this year to 2.1 billion tonnes, state media have quoted the China Coal Industry Association as saying.
Beijing says the coal shortage will be the biggest challenge this year for the world's fastest growing major economy, threatening power supplies. Oil demand surged last year as most export companies bought diesel generators to avoid blackouts.
China's coal sector is fragmented and inefficient. It is one of the most dangerous in the world, with thousands of miners killed each year.
Shenhua Group produced 102 million tonnes of coal in 2003, or six percent of the country's total.
More Chinese coal producers are expected to tap the Hong Kong stock market in coming years.
Heilongjiang Longmei Mining ( Group) Co., Ltd., created in December through the merger of four large coal mines in the northeastern province of Heilongjiang, is considering an overseas listing, according to state media.
It needs funds to boost production, forecast to exceed 50 million tonnes this year. But much restructuring, involving job cuts and the stripping of non-core assets, has to be done at Longmei before any listing, state media say.