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Rapid growth in the three core businesses According to the information disclosed by China Coal Energy, the company will issue no more than 1.525 billion A shares, accounting for 11.51% of the total share capital after the issuance. The funds raised from this public offering will be primarily used to build super-large coal and coal chemical projects. Increase the weight of the coal sector Recently, the coal sector has been favored by the market. According to Wind data, the coal sector saw a gain of 10.77% last week. Among its components, Jinniu Energy (000937) led with a rise of 24.22%, while Shanghai Energy (600508), which is controlled by China National Coal Group, saw an increase of 14.88% overall. China Coal Energy is the second-largest coal company in China, and its return will increase the weight of the coal sector in the A-share market. China Coal Energy was established on August 22, 2006, as a wholly-owned subsidiary of China National Coal Group, and was listed on the **Stock Exchange on December 19 of the same year. According to statistics, as of December 31, 2007, the total market value of China Coal Energy was 287.5 billion Hong Kong dollars, representing a 505% increase compared to the total market value calculated based on the H-share issue price – a figure that far exceeded the growth rate of the **Hang Seng China Enterprises Index during the same period. The stable and high growth of China Coal Energy has provided a solid foundation for the improvement of its performance. According to the company’s publicly disclosed information, from 2004 to 2006, the annual compound growth rate of China Coal Energy’s own coal production was as high as 29.37%, far exceeding the 9.30% growth rate of China’s total coal production during the same period. The company has abundant reserves of raw coal; as of June 30, 2007, its recoverable and provable coal reserves amounted to 3.471 billion tons, ranking it second in the country. Based on the company’s domestic coal production in 2006, its recoverable and provable coal reserves will be sufficient to ensure stable production for the next 52 years. Raising funds to expand coal chemical operations By raising capital through this initial public offering of A shares, China Coal Energy will further expand its activities in the coal chemical sector. It is reported that the funds raised from this public offering will be primarily used to develop super-large-scale coal and coal chemical projects, including an ore mining plant in Ordos with an annual production capacity of 25 million tons, a methanol production plant with an annual capacity of 4.2 million tons, a dimethyl ether production plant with an annual capacity of 3 million tons, as well as related supporting projects ； Heilongjiang’s coal mine with an annual production capacity of 10 million tons, a methanol plant with an annual output of 1.8 million tons, an olefins plant with an annual production capacity of 600,000 tons, along with related infrastructure projects. The total estimated investment for these two projects is 56.7 billion yuan, which will enable an increase in coal production by 35 million tons and in methanol production by 6 million tons per year. Currently, China Coal Group Longhua, which is controlled by China Coal Group, is also engaged in the methanol business. To avoid potential competition in the methanol business, China Coal Group has committed to transferring all of its shares in China Coal Group Longhua to China Coal Energy at an appropriate time; once this is done, China Coal Energy’s methanol production capacity will increase again. Industry experts believe that China Coal Energy’s investment in coal chemical projects expands its downstream coal industry chain. Developing coal chemicals using its own resources at low costs will create new sources of profit growth for the company. In early 2008, international oil prices exceeded $100 per barrel, with an increase that was much higher than that of coal prices. The substitution effect of coal for other energy sources such as crude oil became increasingly evident. Given China’s natural endowment of abundant coal and limited oil reserves, developing the coal chemical industry and reducing dependence on crude oil imports is increasingly becoming a strategic choice for the country. Under high oil prices, coal chemical projects will have greater profit margins, and the substitution effect of coal chemical products will also be more fully utilized. There are market rumors that the National Development and Reform Commission will issue a plan for the coal chemical industry in the near future to encourage its development. Industry experts say that following the initial regulation of the coal chemical industry boom, subsequent support policies will be more conducive to the development of large enterprises. Rapid growth in the three core businesses When China Coal Energy was established in 2006, its major shareholder, China Coal Group, transferred the vast majority of its coal-related operations, coking business, and coal mine machinery manufacturing activities to the listed company. In recent years, the three main business areas of China Coal Energy have all shown a trend of rapid development. In 2006 and the first half of 2007, the company’s coal business generated revenues of 21.81 billion yuan and 12.131 billion yuan respectively, with domestic coal production amountsing to 66.49 million tons and 39.05 million tons respectively. As international demand for coal continues to rise, China Coal Energy’s advantages in coal export trade are gradually becoming apparent. Compared to domestic competitors, China Coal Energy has a more solid customer base and sales channels for coal exports ； Compared to overseas competitors, the company has the advantage of shorter transportation distances and lower costs. Due to China’s current laws and regulations, the right to export coal cannot be transferred. China Coal Energy has entrusted China National Coal Group as its non-exclusive agent for coal export and sales, which is responsible for exporting coal primarily to countries and regions such as Japan, South Korea, and Taiwan Province. In 2006, the company exported a total of 27.07 million tons of coal, accounting for 42.8% of the country’s total coal exports. China Coal Energy is also actively exploring other businesses related to coal production, such as the production and sales of coal chemical products like coke. According to statistics, from the first half of 2006 to the first half of 2007, the company’s total coke production increased by 58.2% on a year-on-year basis, while coke sales rose by 75%, and sales of domestically produced coke increased by 90.1% – all reaching record levels. At the same time, in mid-2007, the domestic sales price and export price of the company’s coke increased by 17.2% and 13.1% respectively compared to 2006. China Coal Energy’s business and service offerings related to coal production, such as coal mining machinery manufacturing, coal mine design, and mine construction consulting, have also seen rapid development. The company is the largest manufacturer of coal mining equipment in the country. In mid-2007, the company’s production and sales volumes of coal mining machinery increased by 19.8% and 47.9% respectively on a year-on-year basis. In the first half of 2007, the company’s heavy-duty scraper conveyors, which are part of its coal mining equipment portfolio, held a 41% market share in the domestic market ； The domestic market share of high-end hydraulic supports reaches 28%. By acquiring the key assets and technologies of the British Parsons Chain Company, the firm became the world’s largest manufacturer of heavy-duty mining chains.