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UPDATE 2-Shenhua to invest $40 bln, expand coal capacity
September 1, 2009 / 4:35 AM / 8 years ago

UPDATE 2-Shenhua to invest $40 bln, expand coal capacity

* Plans to invest 270 billion yuan through 2013

* Still interested in Mongolia’s Tavan Tolgoi project

* To build strategic coal reserves of 30 mln tonnes (Adds comments from executives, details)

By Sui-Lee Wee and Joanne Chiu

HONG KONG, Sept 1 (Reuters) - China Shenhua Energy Co Ltd (1088.HK), the world’s most valuable coal producer, plans to invest $39.5 billion through 2013 to expand production capacity as it races to supply the world’s top coal consumer.

Shenhua, which also has power, rail and port divisions, will earmark about 30-50 percent of the total investment for capital expenditure, Chairman Zhang Xiwu told a news conference on Tuesday, without giving further details.

“This investment should help the company fund its plan to more than double its annual capacity to 500 million tonnes in five years,” said Kathryn Ding, an analyst at BNP Paribas.

Ding expects the money will be used to buy assets from Shenhua’s parent, fund the development of two new 100 million tonne-per-year coal bases and for overseas acquisitions.

China’s top coal miner last week posted record quarterly profits of 8.98 billion yuan ($1.3 billion) on higher sales and output. [ID:nLS101230]

The results are in stark contrast to other Chinese coal miners, such as Yanzhou Coal (1171.HK) (600188.SS) which reported a 48 percent fall in first-half profit on lower selling prices.

Shenhua plans to build strategic coal reserves of 30 million tonnes in the eastern, southern and central parts of China, Zhang said, but gave no details on the project’s scale or timeframe.

“In line with national strategy, building coal reservation bases not only secures national energy safety, but facilitates our integrated operations,” Zhang said.

Shenhua’s parent plans to build coal strategic reserves, deep-water berths and power generation projects in the southeastern city of Fuzhou, the city’s official paper reported. [ID:nSHA370761]

KEEN ON MONGOLIA

Shenhua, which has invested in coal mines in Indonesia and Australia, is still interested in Mongolia’s Tavan Tolgoi, President Ling Wen said.

Shenhua is one of 10 bidders keen for a stake in what is known as the world’s biggest untapped coking coal deposit, with a coal reserve of 6.5 billion tonnes in the Gobi desert.

Other bidders include U.S. coal producer Peabody (BTU.N) and mining giant BHP Billiton (BHP.AX) (BLT.L).

Ling said Mongolia’s parliament was in the final decision making stages on Tavan Tolgoi - a process that has dragged on for years.

Shenhua expects to maintain its weighted average price for coal at the first-half’s level for the rest of the year, Zhang said.

In the first half, Shenhua’s weighted average price for coal rose 10 percent to 389.2 yuan per tonne from a year earlier. ($1=6.830 Yuan) (Additional reporting by Alison Leung, Editing by Jonathan Hopfner and Ian Geoghegan)

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