4 Min Read
* Coal producer's $1.62 bln listing biggest in China since Oct 2011
* Shaanxi Coal among 11 companies already approved for IPOs
* Deal comes after regulators end freeze on new listings (Adds IPO timeline, coal market outlook)
By Fayen Wong and Elzio Barreto
SHANGHAI/HONG KONG, Jan 8 (Reuters) - Shaanxi Coal Industry Co said on Tuesday it plans to raise 9.8 billion yuan ($1.62 billion) with a listing on the Shanghai Stock Exchange, setting the stage for a flood of deals in coming weeks with China's largest initial public offering since late 2011.
The deal is among 11 already approved by the China Securities Regulatory Commission (CSRC) since the regulator ended a freeze on IPOs that started in late 2012. Shaanxi Coal will begin book-building from Jan. 10-14 and wrap up subscriptions by Jan. 17.
More than 30 companies are already lined up to list in Shanghai and Shenzhen and Ernst & Young estimates that total fundraising this year could top 200 billion yuan, nearly twice the amount raised in 2012.
The size of the Shaanxi IPO, which will be the biggest since Sinohydro Group Ltd's 13.5 billion yuan listing in October 2011, was reduced by 43 percent from the company's original fund-raising target of 17.2 billion yuan, previously announced in 2011.
Shaanxi Coal, a state-owned giant based in China's coal-rich northern province of the same name, plans to issue up to 10 billion shares, or 10 percent of its expanded capital base after the IPO, according to the IPO prospectus.
The company said proceeds from the deal will be used to boost its coal reserves, increase production and for the construction of coal transport facilities. The firm will also use the funds to replenish its working capital.
"China's economic growth will continue to drive its growing need for energy. Even though the government is moving to eliminate small mines and outdated capacity, the country's coal demand growth will continue to stay robust," Shaanxi Coal said in the prospectus.
In the near term, however, Shaanxi Coal said domestic demand was still facing headwinds from slower economic growth and prices are unlikely to rebound soon.
China's two top coal miners, Shenhua Group and China Coal Group have begun to cut spot thermal coal prices for January bookings as demand has begun to wane, trade sources said.
The move by the country's leading suppliers to slash prices by as much as 70 yuan a tonne is a clear sign that the coal market in top consumer China remains well supplied. It also heralds the end to a three-month rally in domestic prices.
Amid a slump in domestic coal prices last year, Shaanxi Coal saw its net profit for the first-half of 2013 fall 35.2 percent from the previous year to 2.7 billion yuan.
The IPO resumption will be a boon to Citic Securities , Haitong Securities Co Ltd , China Merchants Securities Co Ltd and other mainland brokerages whose earnings were hit by a slump in investment banking revenue because of the freeze in listings since 2012.
It would also give applicants, many of which are not state-owned, badly needed access to the capital markets and boost the private sector as it struggles with slowing economic growth in China.
A number of Chinese companies, including city commercial lenders Huishang Bank Corp Ltd and Bank of Chongqing , decided to turn to the Hong Kong market for fundraising after getting impatient waiting for a mainland IPO.
China International Capital Corp, BOC International (China) Ltd and Citic Securities will be the IPO's lead underwriters, according to the prospectus.
Additional reporting by Lu Jianxin and Pete Sweeney in SHANGHAI; Editing by Joseph Radford and Matt Driskill