Top China coal miner eyes US$3 bln IPO in May

[HenryTo]

Top China coal miner eyes $3 bln IPO in May-sources
HONG KONG, April 7 (Reuters) - China Shenhua Energy Co., the country's largest coal miner, aims to launch its US$3 billion IPO in May, people close to the deal said on Thursday.
"Shenhua aims to offer shares in Hong Kong and Shanghai simultaneously, but if the mainland market is unfavourable, the firm may just go ahead with its overseas listing," one source familiar with the matter said.

The overseas portion of the deal alone will be worth about US$3 billion, sources said. The firm has yet to obtain approval from the Hong Kong bourse.

The IPO would be China's largest since China Life's US$3 billion IPO in late 2003. Shenhua obtained approval from the China Securities Regulatory Commission (CSRC) to sell 18 percent of its capital or about 3.6 billion shares to overseas and Hong Kong investors, and another 7 percent to domestic investors.

China's key stock index has shed 3.2 percent since the start of 2005 after having dived 15 percent in 2004 to become the world's worst-performing major index, hurt by Beijing's economic-cooling steps, corporate scandals and a bulging pipeline of stock offers.

Sources familiar with Shenhua said the firm generated earnings of about 9 billion yuan (US$1.09 billion) in 2004, three times that of rival Yanzhou Coal , which analysts estimate earned about 3 billion yuan.

The listing company will include mines in Shaanxi province and Inner Mongolia, a west-to-east coal railway of 1,300 kilometres (800 miles), the Huanghua port in the eastern province of Hebei and power generation capacity of about 5,000 megawatts.

China International Capital Corp., Deutsche Bank AG and Merrill Lynch are handling the share sale.

China's strong economy has nearly doubled the country's coal demand over the past three years to 1.9 billion tonnes in 2004.

Many fund managers said they prefer investing in Shenhua rather than Bank of Communications [BOC.UL], which also filed applications for a US$2 billion stock listing in Hong Kong and Shanghai.

Coal prices have increased by an average 8 percent to 10 percent to 350 yuan to 450 yuan per tonne since September 2004, according to research group China Coal Market Network.

Investment bank Credit Suisse First Boston expects demand to reach 2 billion tonnes in 2005 and 2.1 billion tonnes in 2006.

But the country's coal industry is highly fragmented, with the top 10 coal mining groups making up only 15 percent of the country's total production capacity.

More Chinese coal producers are expected to tap the Hong Kong stock market to strength their financial positions as Beijing plans to form six to eight large coal mining groups to improve the industry's dismal safety record.

China National Coal Group Corp., the country's second-largest coal producer is expected to raise US$1 billion by end of this year. Heilongjiang Longmei Mining (Group) Co. Ltd., formed in December by merging four large coal mines in the northeastern province of Heilongjiang, also plans for an overseas IPO, according to state media. (US$1=8.28 yuan)