China Shenhua Energy Co's shareholders on Friday approved a plan to raise as much as $7.2 billion by listing the company's shares on the Shanghai Stock Exchange this year.
The proposal to sell as many as 1.8 billion yuan-denominated A shares was agreed at a meeting in Hong Kong on Friday, president Ling Wen said. The sale would be the world's biggest by a coal mining company.
Shenhua will use the proceeds to open more mines, expand its power production, railroads and harbors and fund acquisitions. The move represents the first time the company, whose Hong Kong dollar H shares have traded since 2005, will sell stock to mainland investors.
"This is more than just about raising funds because the company has plenty of cash," said Yan Shi, a Shanghai-based coal analyst with Core Pacific-Yamaichi International Ltd. "It will boost the company's image as a leading energy company, and the premium that mainland stocks enjoy over those traded in Hong Kong could further boost the H shares."
The coal producer will price the shares at a level that fully reflects the company's "real value", chairman Chen Biting said on Thursday.
The company could not promise to market the stock at a low price to attract buyers, he added.
The company might pay a special dividend of 16.8 billion yuan if the domestic share sale goes through, Shenhua said on August 19. The company has hired China International Capital Corp and China Galaxy Securities Co to arrange the sale, Chen said on Thursday.
The offer would be the second largest in the world this year after an $8 billion sale by VTB Group, Russia's second-biggest bank, in May, according to data compiled by Bloomberg. It would eclipse the $6.1 billion sale of shares of Industrial and Commercial Bank of China Ltd, the country's largest, in Shanghai last year.
Shenhua will spend about 27 billion yuan by the end of 2009 to expand coal production, Chen said. The company has a target of producing 200 million metric tons of coal a year by the end of the decade and aims to have a power output capacity of 20,000 mW by then, he said.
First-half profit surged 20 percent to 10.3 billion yuan, Shenhua said on August 19 because of increased energy demand in the world's largest consumer of coal. China uses the fuel to produce almost 80 percent of its electricity.