China Shenhua Energy Co. rose the most in more than two years in Hong Kong trading after the nation's largest coal producer said first-half profit gained 20 percent.

Shenhua jumped as much as 14 percent to HK$28.45, the biggest advance since June 2005, and traded at HK$27.75 at 11:48 a.m. The city's benchmark Hang Seng index was 3.7 percent higher. Net income climbed to 10.3 billion yuan ($1.36 billion), the company said yesterday, better than the median estimate of 10.16 billion yuan in a Bloomberg News survey of six analysts.

Coal producers in China are increasing capacity to meet rising demand for the fuel in the world's fastest-growing major economy. The biggest energy consumer after the U.S. uses coal to produce 78 percent of its electricity. Shenhua gained from rising power use, the source of 29 percent of its sales in the period.

``The earnings growth is mainly from coal volume growth, power output dispatch increases and power tariff increases,'' Feng Zhang, Hong Kong-based analyst at JPMorgan Chase & Co., said in a research note today. ``We expect similar earnings in the second half.''

Coal sales at Beijing-based Shenhua, which has reserves second only to Peabody Energy Corp., the world's biggest publicly traded coal producer, climbed 21 percent to 97.8 million metric tons in the first six months, the company said July 16. Production of the fuel rose 15 percent to 76.6 million tons.

Power Generation

The company's power generation rose 56 percent to 36 million megawatt-hours in the first half, it said.

Unit coal costs at Shenhua were 163.6 yuan a metric ton in the first half of this year, compared with 149.8 yuan last year. The average sales price gained 1.4 percent to 315.6 yuan a ton.

China's coal output rose 11 percent to 1.08 billion tons in the first half of this year and power output surged 16 percent to 1.485 billion megawatt-hours, China's statistics bureau said last month. The country turned a net importer of coal for the first time in January.

Coal imports surged 50 percent to 30.96 million tons in the first seven months of this year while exports fell 21 percent to 28.86 million tons, the customs administration said Aug. 15.

Coal producers and power generators in China agreed to an increase in contract prices of as much as 10 percent in January. Prices are 25 yuan to 30 yuan a ton higher than a year earlier, Xie Juchen, president of China Zhongneng Power Industry Fuel Co., said Jan. 16.

Shenhua is planning to sell as many as 1.8 billion yuan- denominated shares in China, raising as much as $6.7 billion to expand spending on coal, power and transport operations and on domestic and overseas acquisitions, the company said last month.

Shenhua may distribute a special dividend of 16.8 billion yuan if the domestic share sale proceeds, the company said in yesterday's statement.

The coal producer has hired China International Capital Corp. and China Galaxy Securities Co. to arrange the sale, people familiar with the matter said early this month. Shareholders of Shenhua will meet Aug. 24 to approve the sale.