China Shenhua Energy Co, the nation's biggest coal producer, plans to raise spending 33 percent this year as it expands output to meet demand from power generators and steel makers.

Shenhua has budgeted for capital expenditure of 39.8 billion yuan (US$5.6 billion), compared with 30 billion yuan in 2007, Chairman Chen Biting said in Hong Kong yesterday. The investment will be used to boost production volumes, power generation and upgrade railroads and harbors, he said.

China's coal producers have added capacity to meet the increased energy needs of the world's fastest-growing economy. The nation burns coal to generate about 80 percent of its power. Shenhua aims to buy assets from its parent, as well as mines in Australia, Indonesia or Mongolia, Bloomberg News said.

"Longer term, we expect Shenhua to accelerate the acquisitions of the parent group's assets," Feng Zhang, a Hong Kong-based analyst at JPMorgan Chase & Co said in a research note yesterday. "Shenhua is considering buying coal assets abroad. This should all serve as positive catalysts going forward, on top of very strong coal prices."

Shenhua aims to boost commercial coal output 12 percent to 177 million metric tons this year, Chen said. Sales of coal may gain 7.2 percent to 224 million tons. Power generation may gain 27 percent to 97.8 million megawatt-hours.

(Shanghai Daily March 18, 2008)