CORRECTED-UPDATE 1-China Shenhua Energy says room for coal prices to rebound in H2

(Corrects spelling of chairman's name)

HONG KONG Aug 27 (Reuters) - China Shenhua Energy , the country's largest coal producer that also owns power plants, railways and ports, said on Monday that coal prices have room to rebound in the second half of the year as inventories fall.

Less demand from thousands of power plants due to China's cooling economy, which is growing at its slowest pace in three years, had sent coal stockpiles soaring to record levels in June. Poor demand sent global and domestic coal prices tumbling, which then sparked many defaults on supply contracts.

As the market stabilises, Shenhua said it was confident to achieve or even exceed its full-year output and sales targets this year.

Coal inventories at China's seven major ports have fallen to 18.5 million tonnes from a high of 24 million tonnes at the end of June, which was up around a quarter from start of the year, said Wang Jinli, vice president of Shenhua, while stocks at power plants have dropped to 85 million tonnes from 97 million.

"Coal prices have stabilised and are showing signs of recovery," Wang said at a press briefing. "With the implementation of China's measures to maintain economic growth, we are confident that we will complete this year's targets."

Wang was speaking after the company posted a 17 percent rise in net profit for the first half of 2012, beating forecasts, on higher sales despite a weakening coal market.

Its profit was also boosted by growth in its highly-profitable railway business as well as preferential taxes granted to its subsidiaries in key production areas.

Separately, Shenhua's chairman, Zhang Xiwu, said the company plans to spend tens of billion yuan to build railways to transport coal in the future. Zhang told reporters. It will also continue to buy coal mining, power generation and other assets from its parent.

China is the world's top producer and importer of coal, which accounts for 75 percent of the fuel it uses to generate electricity.

After three months of steady decline, weekly benchmark thermal coal prices in China steadied for the third week at 626 yuan ($98.51) a tonne FOB on Thursday,

"While Shenhua's coal business is under some cost pressure due to an increase in coal trading, the increase in volume is beneficial to its high-margin railway business," the brokerage UOB Kay Hian said in a research note on Monday.

UOB Kay Hian raised its earnings forecasts for Shenhua by 17.7 percent for 2012, 15.4 percent for 2013 and 11.1 percent for 2014 "in view that Shenhua has achieved more than half of its operational target in 2012 and also had better cost control, especially in 2Q12," UOB Kay Hian said.

($1 = 6.3545 Chinese yuan) (Reporting By Charlie Zhu and Alison Lui; Writing by Fayen Wong; Editing by Matt Driskill)