China's Shenhua Energy Co Ltd, the world's top coal producer by market value, lagged forecasts by posting a 16.6 percent rise in 2007 earnings after it cranked out 16 percent more of the hydrocarbon.
Analysts are upbeat on its outlook for 2008 as strong demand for coal from China, the world's top consumer of it, and a shortage of supply push prices higher.

Shenhua said in a statement on Sunday that it expects supply and demand for coal in China will be balanced this year, with volume and prices fluctuating at high level.

There could be seasonal tight supply in the Asia Pacific market so that spot coal prices will fluctuate at high levels and contract coal price is expected to increase, it added.

The company, which launched domestic A-share issue last year, is now in a prime position to invest in power and transportation, and buy mines in China or overseas as growing demand for electricity pushes Asian coal prices to record highs.

Shenhua posted net profit of 20.58 billion yuan ($2.90 billion) last year, up from 17.64 billion yuan in 2006.

That lagged an average forecast for 22.1 billion yuan from 22 analysts polled by Reuters Estimates.

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Armed with $8.9 billion cash from its IPO, Shenhua has said it is in talks to buy coal mines in Indonesia and Australia, two of the world's largest coal shippers.

A subsidiary of Shenhua, Guohua Electric Power Corp, has received approval from Chinese regulators to develop a coal and power generating project in South Sumatra in Indonesia, a government Web site said this month.

The company has earmarked 39.78 billion yuan capital expenditure for 2008, up a third from 30.05 billion yuan in 2007.

Shenhua has agreed with U.S. coal miner Peabody Energy Corp for support and technical exchange in the United States and China.

Shenhua's coal production rose 15.7 percent to 158 million tonnes in 2007, while its total power output rose 39.5 percent to 72.13 billion kilowatt/hours.

Shenhua has said it plans to expand its coal production by at least 15 million tonnes each year. The company expects its annual output to reach 200 million tonnes by 2010.

Shares in Shenhua jumped 149 percent last year, outpacing a 56 percent gain in the index of Chinese companies listed in Hong Kong .