China Coal Shanghai IPO may raise $3.6 billion

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SHANGHAI, Jan 24 (Reuters) - China Coal Energy Co (1898.HK), the country's second-biggest coal miner, said on Thursday it could raise as much as 25.67 billion yuan ($3.6 billion) in its initial public offer of shares in Shanghai.

That is down from the more than 30 billion yuan for which the company was aiming earlier this month, reflecting the plunge of the Chinese and Hong Kong stock markets over the past week, but would still make it one of China's 10 biggest domestic IPOs.

The company set an indicative price range of 16.00 to 16.83 yuan for its offer of up to 1.525 billion new A shares, or 11.51 percent of its expanded share capital.

That represents a discount of between zero and 4.9 percent to the HK$18.16 last close of its Hong Kong-listed H shares -- a smaller discount than those for most other A-share IPOs of Chinese firms, which typically have discounts of over 5 percent.

But analysts said demand for the offer was likely to be strong because of China Coal's major role in the industry. The company has said it will use the money to develop two coal projects in Inner Mongolia and Heilongjiang.

Subscriptions for the offer were to be taken on Thursday and Friday, with a quarter of the shares earmarked for institutions and the remainder for retail investors. The ratio may be shifted further in favour of the retail tranche if demand is strong.

In the short term, China coal may be affected by the government's efforts to cap energy prices as part of its fight against inflation.

Authorities this month warned coal producers to stop raising prices, saying spot coal prices should stay at around the same level as at the end of last year and early this year. The government banned all shipments other than those to power plants.

But the IPO price range appears to give China Coal shares ample room to rise on listing.

China Coal, which expects to list in Shanghai on Feb. 1, said the range valued it between 41.56 and 43.71 times 2007 earnings, under Chinese accounting standards and diluted by the offer.

Shenhua Energy (601088.SS)(1088.HK), China's biggest coal producer, has been trading at about 54 times estimated 2007 earnings. Its A shares are at a 54 percent premium to its H shares. (HK$1 = 0.92652 yuan) ($1 = 7.23 yuan) (Reporting by Andrew Torchia, editing by Ken Wills)