CHINA Shenhua Energy Co plans to issue shares in Shanghai in an initial public offering that could raise up to US$6.7 billion for expansion.

The country's largest coal producer, listed in Hong Kong, said yesterday it plans to sell up to 1.8 billion A shares denominated in yuan on the Shanghai Stock Exchange.

After the news, Shenhua's H shares jumped 6.59 percent to HK$29.10 (US$3.70), a record high close.

The net proceeds from the proposed share issue will be used to invest in coal, power and transport, acquire assets in China and overseas as well as boost working capital, it said.

Shenhua didn't give a price range for the Shanghai sale, which is subject to regulatory and shareholder approval.

But based on yesterday's settlement, the proposed Shanghai sale could be worth US$6.7 billion, becoming one of the world's largest IPOs this year. It said a shareholders' meeting will be held soon to vote on the plan.

In a separate statement, Shenhua said it would buy 100 percent of Shendong Coal and Shendong Power from its parent for 3.33 billion yuan (US$438 million).

BOC International analyst Tang Qian said the acquisition could boost Shenhua's merchantable coal reserves by six percent and installed power generating capacity by 11 percent.

"The proposed A share issue, plus the acquisition, will benefit its H shares," Tang said. China turned into a net coal importer early this year on growing demand and rising domestic prices.

Major Hong Kong-listed Chinese firms are encouraged to list on the mainland as the government wants to boost the quality of shares on domestic exchanges. In June, China Construction Bank Corp and PetroChina Co revealed their Shanghai IPO plans.