China Shenhua Energy, the listed flagship of the mainland's largest coal-mining firm, is in talks to buy mines in Indonesia and Australia as part of the country's strategy to tap overseas energy resources to sustain high economic growth. Chairman Chen Biting said yesterday the possible purchase was part of Shenhua Energy's plan to become a global player. 'Our negotiations involve both large and small mines,' he said, adding timing of any deal would depend on the sincerity of all parties involved. Beijing has been encouraging mainland resources firms to develop and invest in domestic and overseas markets to ensure stable energy and raw materials supplies. However, unlike oil and gas and metals firms, mainland coal firms have made only a handful of overseas acquisitions as China is largely self-sufficient in coal. Yanzhou Coal Mining is the only Hong Kong-listed coal-mining firm that has invested in overseas mines in Queensland in Australia. However, analysts expect the mainland will become a net importer because of tightened domestic supply and shrinking overseas sales, following the imposition of an export tax last year. Shenhua Energy also aims to expand locally, with analysts expecting it to buy its parent's Huangyuchuan mine in Inner Mongolia this year. The mine, yet to start production, has about 800 million tonnes of coal reserves. The mine is one of the four, with combined reserves of 2.62 billion tonnes on an equity basis, which Shenhua Energy plans to buy from its parent by 2010, according to a JP Morgan research report. Meanwhile, president Ling Wen said the company had concluded this year's talks on the export of 24 million tonnes of coal, with contracts to Japan, South Korea and Taiwan priced at more than US$60 a tonne. Mr Ling also said usage of the company's power plants fell slightly in the first four months, although it remained substantially higher than the industry average. Shenhua Energy's power plant saw usage fall 3.53 per cent to 6,302 hours last year, compared to the 3.7 per cent decline in industry average to 5,221 hours. Lower usage hours squeeze profit margins, as more fixed costs - such as depreciation and maintenance - have to be borne by the same amount of power sales. However, in the case of most mainland power producers, the impact has been cushioned by higher power sales. UBS head of Asia utilities research, Stephen Oldfield, said industry plant usage rates may fall to 50 per cent this year from 52 per cent last year, as this year's new power generation capacity supply is forecast to grow 15.3 per cent, outstripping demand growth of just over 13 per cent. He expected new supply will match demand growth next year. Branching out Shenhua is one of the few coal firms to make overseas acquisitions Coal reserves, in billion tonnes, of mines Shenhua plans to buy from its parent 2.62
