By Xinhua,
Beijing : Foreign financial companies are eager to play a role in China’s coal industry as the country looks to diversified sources to finance the fast-expanding industry.
As the world’s fastest growing economy, China’s energy need is huge and most of it comes from coal.
“The central bank would continue to encourage coal companies to seek multiple channels to raise funds, including securitisation, direct financing and energy fund,” said Ma Delun, vice governor of the People’s Bank of China, at the recently held International Coal and Energy Industry Expo 2008 in the industrial city of Taiyuan in east China.
“Although China’s coal industry has good returns, it is still weak in funding the industry development by itself, notably in the areas of coal-to-liquid (CTL), coal-bed gas exploration, and coal gasification, which are challenged by huge investment risks,” said Mao Jinmin, director of the People’s Bank of China’s Taiyuan branch.
“China needs diversified investment sources and professional financial services to nurture the coal industry,” he said during the exposition.
In Shanxi, which produces one third of China’s coal output, private capital is commonly used to finance traditional coal mining, which is environmentally-risky.
Many overseas financial institutions have suggested China utilize international capital market to fund its industry. The world’s leading mining firms such as Rio Tinto, Anglo American Xstrata and China’s Shenhua are all good examples, they said.
“Many energy companies including Sinopec and PetroChina gained in market value after getting listed in Hong Kong bourse,” said Huang Xingling, deputy representative of Hong Kong Exchange’s Beijing office at the forum.
She added that overseas listing would not only raise funds but also help improve the corporate management and enhance the company’s international reputation.
“Since bank loans, the main source of capital for China’s coal firms, were no longer easy to get as a result of the nation’s tight monetary policy, we advise that company make good use of listing, corporate bonds, private fund and mergers and acquisition to raise money,” said Wang Zhonghe, managing director of Deutsche Bank China.
Deutsche Bank has helped many Chinese energy enterprises raise funds in overseas markets in recent years. In 2005, as the main underwriter for $3-billion initial public offer (IPO) for Shenhua Group, Deutsche Bank helped secure the subscription of many institutional investors despite the big fluctuation in global capital market.
Ede I jjass, deputy director of the World Bank sustainable development department, said that the bank has invested in many coal processing projects in China and is in talks with Shanxi on a plan to finance a coal-bed gas development project.
“Supporting the development of clean and renewable energy is our goal,” he said.
Shanxi provincial administration is considering large-scale listing of the coal enterprises in the province to take advantage of the global capital market.
Insiders said that government should beef up policy support, including lowering the entrance threshold of foreign capital and encouraging the participation of private funds.