China Shenhua to Raise $8.9 Billion in Shanghai Sale (Update3)
By Ying Lou
Sept. 23 (Bloomberg) -- China Shenhua Energy Co., the nation's largest coal producer, plans to raise 66.6 billion yuan ($8.9 billion) to fund expansion in what would be the biggest share sale this year.
The company will sell as many as 1.8 billion yuan-denominated A-shares for between 34.99 yuan and 36.99 yuan each, Beijing-based Shenhua said in a statement to the Hong Kong stock exchange today.
Shenhua, listed in Hong Kong since 2005, will sell shares to mainland investors for the first time, tapping the world's best-performing market this year. The sale may exceed the $7.7 billion China Construction Bank Corp. raised from selling 9 billion shares this month.
It will use the proceeds to expand mines, power production, railroads and harbors, and to fund acquisitions including coal mines from parent Shenhua Group Corp.
``The pace of asset injections will increase following the A-share listing, which we see supporting the H-share price,'' Donovan Huang, a Hong Kong-based analyst at Nomura International Ltd., said Sept. 20. He has a ``buy'' rating on the stock.
The price will be at a discount to Shenhua's share price in Hong Kong. The stock closed at HK$43.30 on Sept. 21. Shares of the company have more than doubled this year, outpacing the 29 percent gain in the benchmark Hang Seng index.
Shenhua Group has four coal mines with 60 million metric tons of coal output that will be injected into Shenhua, Huang said. That represents about 39 percent of Shenhua's annual output.
Shenhua will use 16.7 billion yuan of the proceeds to invest in 19 coal, power and transportation projects, according to a prospectus published Sept. 13. It will allocate 16 billion yuan to supplement working capital and use the rest for other projects and to buy coal and power assets from its parent.
Shenhua will spend about 27 billion yuan by the end of 2009 to expand coal production, Chairman Chen Biting said last month. The company has a target of producing 200 million tons of coal a year by the end of the decade and aims to have power output capacity of 20,000 megawatts by then, he said.
First-half profit surged 20 percent to 10.3 billion yuan, Shenhua said Aug. 19, because of increased energy demand in the world's largest consumer of coal. China uses the fuel to produce almost 80 percent of its electricity.
Coal sales at Shenhua, which has reserves second only to Peabody Energy Corp., the world's biggest publicly traded coal producer, climbed 21 percent to 97.8 million tons in the first six months. Production rose 15 percent to 76.6 million tons while power generation jumped 56 percent to 36 million megawatt- hours, accounting for 29 percent of sales.
The sale would top that of VTB Group, Russia's second- biggest bank, which raised $8 billion in May in the world's largest initial public offering this year.
China International Capital Corp., which is 34 percent owned by Morgan Stanley, and China Galaxy Securities Co. are managing the sale.