At the coal face

It took Chen Xuefeng just one year at the helm of loss-making company Yongcheng Coal & Electricity Group Co Ltd to turn it around. He joined the firm in 2000 as president, and a year later he had hauled it into the black.

"In 2000 we made a loss of 120 million yuan, but in 2001 we began to make a profit. In 2006 we posted a profit of around 2.03 billion yuan," says Chen.

Based in Yongcheng, a small city in Central China's Henan Province, Yongcheng Coal & Electricity is now one of China's leading coal manufacturers.

Last year the company produced 13.21 million tons of coal equivalent, compared with 2.08 million tons in 2000. Its coal production has seen year-on-year growth of 36.08 percent.

But Henan's coal resources are no longer enough, and the company is looking to mines outside the province in Guizhou, Shanxi and Shaanxi provinces, and the Inner Mongolia and Xinjiang Uygur autonomous regions.

"We've bought coal mines in Guizhou with nearly 3 billion tons of capacity. Our projects in the province will be able to produce 15 million tons of coal a year," says Chen.

The company is also widening its business from coal manufacturing to the coal-to-chemical business, metals, power generation and machinery manufacture.

"This year we aim to increase our sales revenue to 30 billion yuan, with a profit of 3.5 billion yuan," says Chen.

The company's sales revenue has increased from 487 million yuan in 2000 to 21.8 billion yuan in 2006 - that's year-on-year growth of 87.32 percent.

"Innovation has played a pivotal role in the company's growth," he says.

The company's use of a coal equivalent standard is an example of this innovation. Chen says one ton of coal equivalent should be able to generate 5,500 kilocalories of heat.

"In the past we only cared about how many tons of coal we produced and neglected the quality of our coal product. By introducing the standard coal concept to our production, we have greatly improve the quality of our coal," says Chen.

"If a ton of coal produced cannot generate 5,000 kilocalories of heat, it will not be included in our coal production."

The improvement in quality means the company's coal can fetch a higher price. In 2006 alone, this has brought it 200 million yuan.

"Besides the coal equivalent standard, we have also improved our coal extraction machinery to increase production efficiency, and made our business strategies more market-oriented," says Chen.

For Chen, extending the business is crucial for the company to develop further. Yongcheng Coal & Electricity has forayed into many new areas like coal-to-chemicals, metals and power generation.

The company started its coal-to-chemical business in 2005 and is set to begin production this year.

"Our anthracite is a good raw material for coal-to-chemical products such as methanol and olefin. This project is one of seven coal-to-chemical bases in China," says Chen.

The company has begun phase II of the coal-to-chemical project, which will be able to produce 500,000 tons of methanol a year using technology from Royal Dutch Shell.

Yongcheng Coal & Electricity is also developing its power generation and metals businesses. It has cooperated with companies like China Resources to develop power plants and has begun manufacturing aluminum, molybdenum and vanadium.

"In 2006 our metals business made sales revenue of around 5 billion yuan," Chen says.

"We plan to have an installed power capacity of 4,000 megawatts in five years."

Chen says collaboration with other companies is another important means of developing the company. Yongcheng Coal & Electricity began working with other firms in 2003, when it struck a coal supply deal with China's largest steel company Baosteel.

The company signed an agreement with Baosteel in March 2003 to jointly set up two companies in Henan and Shanghai, covering coal manufacturing as well as trade.

"The deal to supply anthracite to Baosteel is a good promotion for our products and has brought business from many local steel companies such as Wuhan Iron and Steel Group Corp," he says.

And it's not just local collaboration. In 2004, the company signed a coal production agreement with Brazilian mining giant CVRD.

"The deal allows us to learn advanced business practices and technologies from CVRD," says Chen.

He says Yongcheng Coal & Electricity now has over 40 projects under way in partnership with other companies.

(China Daily 07/16/2007 page9)