A bulk carrier is docked at Qinhuangdao Port's coal terminal, the largest of its kind in the world, waiting bo be loaded with coal produced in northern and northeastern China. Xinhua

HONG KONG: China Qinfa Group, the leading non-State-owned coal producer on the mainland, is planning an initial public offering (IPO) in Hong Kong amid a general market uptrend and bright prospects for growth and earnings prospects for the sector.

China Qinfa will join a growing list of overseas energy and resources firms seeking to raise funds in the city via shares offerings.

The mainland coal producer hopes to raise up to $100 million from its IPO.

Market sources said China Qinfa might win the approval of the stock exchange's listing committee as early as tomorrow for its proposed shares sale. China Qinfa counts among its major clients large cement and power producers, including Huaneng Power. The two sectors that China Qinfa services are major beneficiaries of the central government's stimulus plan on infrastructure.

China Qinfa's diversified coal business involves purchase, filtering, blending, storage, transportation, sales and shipping of coal on the mainland. The volume of its coal trade in 2007 exceeded 8 million tonnes.

Currently, it is rolling out a port construction in Zhuhai, a fledgling city on the southern coast of Guangdong province and neighbor of Macao, in a bid to source coal in northern China to the province.

China Qinfa is the fourth coal-related group on the mainland preparing to list in Hong Kong after China Coal Energy Company, Yanzhou Coal Mining Co and China Shenhua Energy Coal.

Analysts said the IPOs here of mainland coal producers have all attracted keen interest from investors as coal accounts for about three-quarters of energy supply on the mainland.

"The three coal producers had good market performance when they listed and this will probably favor the proposed IPO of Qinfa Group," said Castor Pang, chief strategist at Sun Hung Kai Financial Group.

"Hong Kong investors have always been keen on stocks related to coal and electricity," said Pang, adding that the recent rally on energy stocks and central government support on the energy industry would work in favor for Qinfa's offering.

Meanwhile, the central government is expanding the country's energy supply capacity as demand for power increases, which would lead to a rebound for downstream enterprises in the energy sector, such as China Qinfa.

"Recently, coal prices continue to fall while other energy prices are picking up," said Anna Yu, energy specialist at Taifook Securities.

Other analysts, however, noted that coal prices might change and rise soon as summer approaches.

They said that as summer is the peak season for electricity usage, this could result in a surge in demand for coal.

"The market environment is favorable and this will facilitate the resumption of IPOs in the energy sector," Yu added, citing that two Canada-based energy companies are seeking listings on the Hong Kong bourse.

The two Canadian firms include Husky Energy which is controlled by the family of tycoon Li Ka-shing.

Yu also noted that some of the planned IPOs were opportunistic. "There might be some adjustments in the market in the long run and it is therefore critical for some companies to grab the opportunity and get listed as soon as possible," she said.

(HK Edition 06/03/2009 page16)