China's Zhengzhou Coal to buy parent's assets

BEIJING, April 16 (Reuters) - China's Zhengzhou Coal Industry & Electric Power Co (600121.SS) will issue up to 400 million shares to its parent to buy coal mines and other assets worth about 3.5 billion yuan ($500 million), the company said on Wednesday.

The purchase comes as the listed firm's coal output is forecast to drop 15.5 percent to 4.3 million tonnes in 2008, while its power generation is expected to decline by 2.8 percent to 820 million kilowatt-hours.

"We still face very serious safety challenges. Any big safety accident could have a certain negative impact on our operation," the firm said, citing the risks to mining from cave-ins, gas, water and slurry.

The firm also cited coal price fluctuations as a reason for the output decline.

Zhengzhou Coal Industry (Group) Ltd will pay its listed arm 15.46 yuan for each of the new shares issued, the listed company said in a statement to the Shanghai stock exchange on Wednesday.

The listed firm will take over stakes in coal mines, chemical plants and a logistics firm, the statement said.

Its shares opened at 14.83 yuan on Wednesday morning, down their 10 percent limit from their last close at 16.48 before they were suspended from trade in February.

They later rose as high as 17.88 yuan in volatile trade before again sliding by the daily limit.

The price and the deal are still subject to regulatory approval, the company said. (Reporting by Langi Chiang; Editing by Lucy Hornby and Edmund Klamann) ($1=6.991 Yuan)