China Coal raises green fund outlay
China Coal Energy expects to increase spending on funds for environmental protection, sustainable mining and employee retraining by at least 914 million yuan this year, as it seeks to raise as much as 25.67 billion yuan from an initial public offering on the mainland.
The additional expenditure, to be collected under new rules issued last year by the provincial government of Shanxi, the nation's largest coal-producing region, is substantial compared with the firm's estimated 5.11 billion yuan net profit for last year.
Chief financial officer Peng Yi told potential investors on an online roadshow for its share offer that China Coal would pay 990 million yuan this year towards a sustainable development fund, 350 million yuan towards a fund for employee redeployment and retraining in case of mine closures, and 700 million yuan for environment protection.
The 2.04 billion yuan outlay would be 914 million yuan higher than last year's, assuming output this year would be the same as last year's 90.52 million tonnes, Mr Peng said.
'The company will take active measures to lower the impact on our profits,' he said.
China Coal expected last year's profit to be 87.9 per cent higher than in 2006.
Net profit for this year should surge 75.9 per cent to 8.99 billion yuan, according to the mean estimate of 22 analysts polled by Thomson Financial.
Chairman Jing Tianliang said the company planned to add at least 15 million tonnes of output annually in the 'next few years', focusing exploration efforts on Heilongjiang province and the Inner Mongolia and Xinjiang autonomous regions.
It expects to add 16.67 billion tonnes of geological reserves from four mining regions, he said.
China Coal's interim results showed 'total coal resources' of 9.39 billion tonnes at the end of June, of which 3.47 billion tonnes were proved and probable coal resources.
The firm has set a target price range of 16 yuan to 16.83 yuan for its A shares, or 36.78 to 38.68 times expected earnings last year.
The range is 10.67 per cent to 15 per cent lower than yesterday's H share closing price of HK$18.84 - up 3.7 per cent from a day earlier.
Chen Bin, deputy general manager of China International Capital Corp' investment banking arm, expects China Coal's A-share offer to be over 100 times subscribed. CICC is one of the deal underwriters.