Shaanxi Coal I.P.O. seeks 17b yuan

PUBLISHED : Saturday, 27 August, 2011, 12:00am
UPDATED : Saturday, 27 August, 2011, 12:00am


Shaanxi Coal Industry has applied to raise 17.3 billion yuan (HK$21.1 billion) in an initial public offering in Shanghai that could become one of the mainland's largest listings in a year.

The coal miner plans to sell up to two billion shares in the offering that will fund expansion and upgrading.

The application will be reviewed by authorities on Monday, according to statements posted on the website of the China Securities Regulatory Commission (CSRC) on Thursday.

Proceeds from the listing would be used to buy coal mines and boost working capital, said the company, which is 71 per cent controlled by the Shaanxi department of the State-owned Assets Supervision and Administration Commission.

Other shareholders include China Three Gorges Corp and Huaneng Power International.

The review committee of the regulator has never rejected an IPO by a major state-owned company but investors and analysts expect the CSRC to be cautious about approving new listings in a sagging market.

A green light for the leading coal miner would underscore the government's support for consolidation in the industry and ensure supply in the world's largest consumser of energy.

'One of the themes of the 12th five-year plan for the coal industry is to increase industry concentration and construct large coal mine groups,' said Liu Zhaoliang, an analyst with Qilu Securities. 'The industry restructuring has an important influence on companies. They could take the chance to securitise their assets.'

Since 2005, the central government has ordered the closure of 15,300 small coal mines across the nation, which is notorious for deadly accidents. Meanwhile, it has been encouraging big companies in main coal districts, including Inner Mongolia, Xinjiang, Shanxi and Shannxi, to satisfy part of the nation's estimated annual demand of four billion tonnes by 2013.

The mining company has 10.5 billion tonnes of recoverable coal resources, the third-largest among coal companies listed in China, according to its prospectus.

Total assets stood at 64 billion yuan at the end of June. Net profit surged by 149 per cent from 2.19 billion yuan in 2009 to 5.47 billion yuan last year. In the first half of this year, net profit was 4.49 billion yuan.

Sinohydro Group, China's biggest builder of dams, applied last month for an initial offering in Shanghai to raise 17.3 billion yuan. It was approved by the regulator on July 29.

China Everbright Bank's listing was the last domestic IPO that was larger. The lender raised 18.9 billion yuan in August last year. It exercised an over-allotment option in September, increasing the amount it raised to 21.1 billion yuan.

The benchmark Shanghai Composite Index has lost 7 per cent this year after a decline of 14.3 per cent last year. The A-share market has been dominated by small listings this year after it became the world's largest IPO market last year.