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July 22,Yancoal Energy issued an announcement on the public issuance of technology innovation renewable corporate bonds (second phase) to professional investors in 2024. The issuance scale of this bond will not exceed 2 billion yuan.

before this,Yancoal Energy disclosed that the company plans to acquire controlling stake in Australian listed company Highfield Resources Limited, whose main business is potash fertilizer project development, through asset injection and cash subscription.

It is reported that Yancoal Energy has been planning overseas potash resources for more than ten years, but has never carried out development and production.On July 22, a reporter from the International Financial News learned from the Securities Department of Yanzhou Coal Mining Energy that the company currently has plans to launch overseas potash mining projects, and Highland Resources may become a cooperative development target of its subsidiary.

The secondary market had a lukewarm response. As of the close of July 23, Yankuang Energy's A shares closed down 2.77% at 15.11 yuan per share, with a total market value of 151.7 billion yuan; its H shares closed down 0.3% at 9.99 Hong Kong dollars per share, with a total market value of 100.3 billion Hong Kong dollars.

Or start overseas potash projects

Specifically, this transaction is divided into two parts. In terms of stock exchange transactions, Yancoal Energy intends to transfer 100% of the equity of Yancoal Canada Resources Co., Ltd. to Highland Resources, with newly issued common shares as the transaction consideration; in terms of cash subscription transactions, Highland Resources intends to issue additional shares to strategic investors such as Yancoal Energy, planning to raise US$220 million. Among them, Yancoal Energy intends to invest no more than US$90 million to participate in the subscription. If the subscription amount of other strategic investors exceeds US$130 million, the subscription amount of Yancoal Energy can be reduced accordingly. Stock exchange transactions and cash subscription transactions must be delivered at the same time and are prerequisites for each other.

According to Yankuang Energy, Highland Resources is a company registered and listed in Australia. Its main business is the development of potash fertilizer projects. Its core project is a potash mine under construction in northern Spain, which has a potash resource of about 280 million tons. The project will start earthwork construction in 2022, with a designed production capacity of 500,000 tons/year in the first phase.

After the completion of the above transaction, Highland Resources will become the second company under Yancoal Energy to be listed on the Australian Stock Exchange, which will help the company obtain high-quality potash resources, accelerate resource development, and reduce the operational risks of Yancoal Canada.However, judging from the announcement, the two parties have only signed a non-legally binding "Letter of Intent for Cooperation", and it is still unknown whether they can reach a cooperation.

In fact, Yancoal Energy has been planning potash resources for more than a decade, but has made almost no progress.Public information shows that Yancoal Canada is a wholly-owned overseas subsidiary of Yancoal Energy established in 2011. It is a company engaged in potash exploration and development. It holds 100% of the equity in the Greenfield Potash Mine Project (Southey Project) and four other potash mining rights. Among them, the Greenfield Potash Mine Project has a potassium chloride resource of approximately 1.696 billion tons.

Faced with multiple doubts in the market.Yancoal Energy once responded on an investor interaction platform that the above-mentioned projects are progressing in an orderly manner, and the company will actively seek strategic investors or other partners to jointly develop potash projects.

July 22,A reporter from the International Financial News called the securities department of Yancoal Energy, and the relevant person in charge said that the company does have plans to launch overseas potash mining projects.Previously, due to factors such as the lack of overseas potash mine development experience, related projects have been pending. In the future, we may rely on the relevant project foundation of Highland Resources.

It is understood that potash refers to minerals containing potassium. Potash mines are mainly used to manufacture industrial potassium compounds and potash fertilizers. So far, the reserves of soluble potash resources that have been identified in my country are not large, and most of them rely on imports. Potash mines are also listed as one of the urgently needed mineral resources by the country.

CITIC Securities pointed out in a recent research report that the bottom range of global potash fertilizer prices is expected to be relatively clear in 2024, and there is room for further upward movement; according to announcements from various companies, the world's major potash fertilizer players are steadily advancing their expansion plans, and it is expected that 2024 to 2026 will be an important period for domestic companies to expand production. This means that if Yankuang Energy can start overseas potash mine projects, it may catch up with the best time for this wave of expansion.

The third acquisition in half a year

In fact, this is Yancoal Energy’s third acquisition this year.

On March 2, Yankuang Energy announced that it plans to acquire 52.66% of SMT Scharf AG's equity for 32.1695 million euros (equivalent to RMB 2.547 billion) to extend the company's mining equipment sector and accelerate the expansion and upgrading of the company's equipment manufacturing industry. On June 1, Yankuang Energy disclosed again that the company plans to invest RMB 1.555 billion to acquire 45% of Wubo Technology's equity to enhance the company's smart logistics industry competitiveness, development speed and overall digitalization level. It is worth noting that all three acquisitions were settled in cash, with a total amount of nearly RMB 5 billion.

Correspondingly,The company's debt pressure continues to rise.Financial report data shows that Yancoal Energy's total liabilities increased from 124.297 billion yuan at the end of 2019 to 235.944 billion yuan at the end of 2023; the asset-liability ratio increased from 59.81% at the end of 2019 to 66.6% at the end of 2023, far exceeding the median of the coal mining industry (50.53%); the net cash flow generated by operating activities also decreased from 24.871 billion yuan at the end of 2019 to 16.168 billion yuan at the end of 2023, and 53.45 billion yuan in the same period of 2022.

In order to ease financial pressure, Yancoal Energy is still carrying out financing activities.Since the beginning of the year, Yankuang Energy has directly raised 12 billion yuan through various means such as corporate bonds and medium-term notes. On July 22, Yankuang Energy once again announced that it plans to issue no more than 2 billion yuan of corporate bonds. It is understood that the bonds are the second phase of the 2024 public issuance of technology innovation renewable corporate bonds to professional investors. The first phase was announced on June 14, and the total face value of all bonds issued is expected to be no more than 30 billion yuan.

Source: iFinD

In early June, Yankuang Energy also issued 285 million H shares at a placement price of HK$17.39 per share, with an estimated total fundraising of approximately HK$4.96 billion (approximately RMB 4.6 billion). The funds raised will be mainly used to repay the company's and its subsidiaries' debts and supplement general operating funds. Industry insiders pointed out that raising funds from the market will help reduce the company's debt pressure and carry out subsequent acquisitions, but there is also a risk that the management will use this opportunity to acquire inefficient assets.

The main business fluctuates frequently

The official website information shows thatYancoal Energy was established in 1997 and its early businesses included coal, coal chemical industry, electromechanical equipment manufacturing, electricity and thermal power.In July 2020, Yanzhou Coal Group, the original controlling shareholder of Yanzhou Coal Mining Energy, and the original Shandong Energy Group jointly reorganized to form the new Shandong Energy Group, with the State-owned Assets Supervision and Administration Commission of Shandong Province as the controlling shareholder and actual controller.

thus,Yancoal Energy has become the main listed company under Shandong Energy, with its leading industries expanding to mining, high-end chemical new materials, new energy, high-end equipment manufacturing, and smart logistics industries. It has also become the only large-scale energy company in China with four domestic and overseas listing platforms, including Shanghai, Hong Kong, New York, and Australia.As of March 31, 2024, Shandong Energy held 3.377 billion shares of Yancoal Energy, accounting for 45.39% of its total share capital.

Since the reorganization,Shandong Energy has injected multiple coal assets into Yankuang Energy.In 2023, Yankuang Energy completed the acquisition of equity in Shandong Energy's subsidiary companies Luxi Mining and Xinjiang Energy Chemical for RMB 26.431 billion. At that time, Yankuang Energy stated that the related transaction could effectively integrate coal resources, resolve competition among peers, and enhance the company's profitability.

However, due to factors such as coal price fluctuations,Yancoal Energy's performance has fluctuated frequently in recent years.From 2019 to 2023, the company achieved operating income of RMB 200.647 billion, RMB 214.992 billion, RMB 151.991 billion, RMB 200.829 billion and RMB 150.025 billion, respectively; net profit attributable to shareholders of the parent was RMB 8.668 billion, RMB 7.122 billion, RMB 16.259 billion, RMB 30.774 billion and RMB 20.14 billion, respectively.

In the first quarter of this year, the company achieved operating income of 39.633 billion yuan, a year-on-year decrease of 20.76%; and realized net profit attributable to shareholders of 3.757 billion yuan, a year-on-year decrease of 41.85%. In this regard, the company explained that the price of major products such as coal fell year-on-year, affecting the year-on-year decrease in net profit attributable to shareholders of listed companies.

Although its performance is not optimistic, Yancoal Energy still distributes "generous" dividends, especially since its reorganization.iFinD data shows that in the past three years, the company has distributed a total of 42.261 billion yuan in cash dividends, accounting for more than half of the total cash dividends since its listing. In the profit distribution policy from 2023 to 2025, Yankuang Energy also promised that the dividend ratio (after deducting statutory reserves) from 2023 to 2025 will not be less than 60%, and the cash dividend per share will not be less than 0.5 yuan.