Xinjiang Guanghui Shifts to Coal Chemical Business       

Xinjiang Guanghui Industry Co., Ltd. (Xinjiang Guanghui, SH: 600256) was established on April 10th, 1999. It is located in Urumqi Economic and Technological Development Zone, Xinjiang of western China. The company got listed in Shanghai Stock Exchange on May 26th, 2000. It has now developed itself into a comprehensive company integrating new energies, modern logistics, stone materials and chemical construction materials. After the transition of "stone materials - real estate - LNG (liquefied natural gas)", the company has started to develop towards the coal chemical business. It has a remarkable resource advantage in the development of the coal chemical business. Xinjiang has rich coal reserves and the predicted reserves amount to 2 190 billion tons, accounting for around 40% of the total coal predicted reserves in China. Hami where the company is located is a major coal production region in Xinjiang and the predicted reserves amount to 570.8 billion tons, accounting for 31.4% of the total coal predicted reserves in Xinjiang.
    The major shareholder of Xinjiang Guanghui is Xinjiang Guanghui Industry Investment (Group) Co., Ltd. (Guanghui Group). Guanghui Group holds 45.08% equity in the company. Guanghui Group has 3 subsidiaries called Xinjiang Guanghui (energy and chemical), Xinjiang Guanghui Real Estate Co., Ltd. (real estate) and Guanghui Automobile Co., Ltd. (automobile).
    The oil price has increased considerably since 2000. With the support from Guanghui Group, Xinjiang Guanghui started to develop LNG business. Guanghui Group plans to put all its energy business mainly including the LNG business today and the coal chemical business in future under the charge of Xinjiang Guanghui. LNG business is one of the main profit-earning businesses in Xinjiang Guanghui today. It is expected that the net profit from the LNG business will hopefully reach RMB155 million-160 million in 2007 and RMB192 million - 200 million in 2008. The revenue from the LNG business accounted for more than 40% of the total revenue in the company in the first half of 2007.
    To further expand the energy chemical business, Xinjiang Guanghui and its major shareholder Guanghui Group have made a joint investment in the coal chemical business and established Guanghui Energy Co., Ltd. A project of 1.2 million t/a coal-based methanol, 800 000 t/a dimethyl ether, 550 million m3/a methane gas and 210 000 t/a byproducts (mainly including naphtha, tar, crude phenol, sulfuric acid and liquid ammonia) will be constructed in Hami, Xinjiang. Xinjiang Guanghui holds 51% equity and Guanghui Group holds 49% equity in the new company. According to estimates, after the coal chemical business reaches the design capacity the net profit to be generated for the company will be RMB1.326 billion a year.
   To raise funds for the project, the Board of Directors of Xinjiang Guanghui has agreed to issue no more than 300 million non-open shares to at most 10 targeted companies to raise no more than RMB2.5 billion. (CCR2007, No. 12) The plan is yet subject to the approval by China Securities Regulatory Commission.
   The company has already acquired the exclusive mining right to 4.8 billion tons of high-quality open-cast coal mines located in 8 tracts in Hami. The first phase of the project can produce 1.8 billion tons of coal. As they are all open-cast coal mines, the mining cost is very low, being RMB35 per ton according to estimates made today. It is expected that the entire coal chemical project will start production in March 2009.
   According to Board Chairman of Xinjiang Guanghui, owing to the rapid development of the clean energy sector in China the company will take LNG and coal-based alcohol and ether as its main development orientation. The coal-based alcohol and ether project as a leading industry in the company was already launched in July 2006. The project was started construction in Hami, Xinjiang in May 2007 and will be completed and put on stream in June 2009. After the project reached the design capacity, the sales revenue will be RMB3.83 billion a year. The capacity of LNG in the company is expected to reach 4.0 billion m3/a and the capacity of methanol and dimethyl ether will reach 6.0 million t/a and 4.2 million t/a or even higher in 2010.

Performance of Xinjiang Guanghui in 2006
Main business revenue (RMB billion)    1.86
Profit (RMB million)                215.80
Net profit (RMB million)            182.90
Source: CNCIC