Xinhua Far East Assigns AA Issuer Credit Rating to China Shenhua Energy Company Limited

Xinhua Far East Assigns AA Issuer Credit Rating to China Shenhua Energy Company Limited

March 06, 2007

    HONG KONG, March 6 /Xinhua-PRNewswire/ -- Xinhua Far
East China Ratings ("Xinhua Far East") today
assigned an AA issuer credit rating to China Shenhua Energy
Company Limited ("Shenhua" or "the
Company", HK 1088).  The company's rating outlook is
stable.

    (Photo: http://www.xprn.com.cn/xprn/sa/200611140926.gif
)

    The AA rating reflects Shenhua's leading market
position in China's coal mining industry in terms of
reserves, scale, efficiency and the potential to benefit
from strengthening coal consumption in China.  Meanwhile,
Xinhua Far East notes that, by integrating coal-power
railways into its business model, Shenhua has been able to
strengthen its market position, boost its earnings and help
itself withstand business cycles.  The rating also reflects
the government's strong support in nurturing large-scale
coal groups and upgrading the industry as a whole.  At the
same time, the rating incorporates our concerns about both
rising capacity in the highly fragmented Chinese coal
mining sector and the impact of potential increases of
resource taxes on Shenhua's future profitability.

    Xinhua Far East believes China will continue to rely
heavily on coal as a major energy source.  Consumption of
large volumes of coal should persist as a result of overall
economic development and growing demand from the power,
steel and construction sectors.  This provides growth
opportunities for Shenhua, which not only leads China's
coal producing industry in terms of reserves and coal
output, but also is highly profitable and operationally
efficient.

    Of particular note is the core competitiveness of
Shenhua's coal-power railway integrated business model,
which has enhanced the market positions and earning
abilities of its coal and power segments, helping the
company to withstand economic cyclicality.  Owning and
managing dedicated railway lines and ports have been
especially valuable for the Company, given the persisting
coal transportation bottleneck which has plagued China's
coal industry for years.  We believe an expansion of
Shenhua's power business over the next few years will
further reinforce this advantage. 

    Shenhua's coal production, power generation, railway
lines and port construction levels are continuing to show
strong growth, meaning the company will incur large capital
expenditure over the next two to three years.  However, we
believe it will be able to generate sufficient cash flow to
meet its expenditure needs without having to resort to
external financing.  As a result, Shenhua has limited debt
pressures over the medium term, with its current gearing
ratio possibly even declining modestly in the future. 

    Despite the fact that Shenhua is one of the more
competitive coal enterprises in China, we have concerns
about the current state of industry fragmentation.  With
rapidly rising capacity and intensifying competition, the
coal market is becoming more volatile. This may exert
pressure on Shenhua's earnings moving forward.  However,
despite the inherent industry risks, the government's
efforts to consolidate the sector and its support of
leading companies like Shenhua should eventually benefit
large-scale producers.

    Even so, a rising awareness of the importance of
sustainable development of the economy is expected to
prompt policy-makers to substantially raise resource taxes
on coal in the near future.  This is another factor
constraining Shenhua's ability to achieve a higher rating.


    Established in November 2004, China Shenhua Energy Co
Ltd is the world's second and fourth largest coal
enterprise in terms of coal reserves and annual coal
production respectively.  In 2005, the thermal coal it
produced accounted for 12% of China's total output. 
Shenhua also operates ten power plants across China, with a
total installed generation capacity of 10,000 GW as of the
end of 2006.  As of June 30, 2006, Shenhua Group
Corporation Limited, Shenhua's parent company, held an
81.21% equity stake in the company.
  
    China Shenhua Energy Co Ltd is also a constituent of
the Xinhua/FTSE China 25.  As of market close March 5,
2007, its total H-share market capitalization and
investable capitalization were HK$329.2 billion and
HK$37.96 billion respectively. 

    For the rating report summary, please visit
http://www.xinhuafinance.com/creditrating .

    Note to Editors:

    About Xinhua/FTSE China 25 Index
    Xinhua/FTSE China 25 Index is a real-time tradable
index designed for use as the basis for both on-exchange
and OTC derivative products, mutual funds and ETFs.  The
index includes the largest 25 Chinese companies comprising
H shares and Red Chip shares, ranked by total market
capitalization.  The index is designed to meet fund
regulatory requirements worldwide, with constituent
weightings capped, in order to avoid over-concentration in
any one stock. For daily data and further information, see
http://www.xinhuaftse.com .

    About Xinhua Far East China Ratings
    Xinhua Far East China Ratings (Xinhua Far East) is a
pioneering venture in China that aims to rank credit risks
among corporations in China.  It is a strategic alliance
between Xinhua Finance (TSE Mothers: 9399), and Shanghai
Far East Credit Rating Co., Ltd. Shanghai Far East became a
Xinhua Finance partner company in 2003 and the first China
member of The Association of Credit Rating Agencies in Asia
in December 2003.

    Capitalizing on the synergy between Xinhua Finance and
Shanghai Far East, Xinhua Far East's rating methodology and
process blend unique local market knowledge with
international rating standards.  Xinhua Far East is
committed to provide investors with independent, objective,
timely and forward-looking credit opinions on Chinese
companies.  It aims to help investors differentiate the
credit risks among the corporations in China, thereby,
cultivating their awareness and promoting information
disclosures and transparency in China market.  For more
information, see http://www.xfn.com/creditrating .

    About Xinhua Finance Limited
    Xinhua Finance Limited is China's unchallenged leader
in financial information and media, and is listed on the
Mothers board of the Tokyo Stock Exchange (symbol: 9399)
(OTC ADRs: XHFNY).  Bridging China's financial markets and
the world, Xinhua Finance serves financial institutions,
corporations and re-distributors through four focused and
complementary service lines: Indices, Ratings, Financial
News and Investor Relations.  Founded in November 1999, the
Company is headquartered in Shanghai with 20 news bureaus
and offices in 19 locations across Asia, Australia, North
America and Europe.  For more information, please visit
http://www.xinhuafinance.com . 

    About Shanghai Far East Credit Rating Co., Ltd
    Shanghai Far East Credit Rating Co., Ltd. is the first
and leading professional credit rating company with
comprehensive business coverage in China.  It is an
independent agency established by the Shanghai Academy of
Social Sciences with the mission to develop internationally
accepted standards for capital market in China.  The company
is a pioneer in conducting bond-rating business in China. 
For years, it has been authorized by the Shanghai branch of
the PBOC to undertake loan certificate credit rating.

    Since establishment, it has rated over 1,000 corporate
long-term bonds and commercial papers, based on the
principles of objectivity, fairness and independence.  The
company has also maintained over 50% market share in the
loan certificate-rating sector in Shanghai for three
consecutive years.  With its strong local presence and
knowledge, it provides investors with unique and the most
insightful credit opinion.  For more information, see
http://www.fareast-cr.com .

    For more Information, please contact: 

    Hong Kong
     Joy Tsang
     Corporate & Investor Communications Director
     Xinhua Finance
     Tel:   [phone],
[phone]
     Email: [e-mail]
    
    US
     Taylor Rafferty (IR/PR Contact in US)
     Ms. Ishviene Arora
     Tel:   [phone]
     Email: [e-mail]


SOURCE  Xinhua Far East China Ratings