March 16 (Bloomberg) -- China Shenhua Energy Co., the nation's biggest coal producer, said 2007 profit climbed 17 percent after it increased output to meet rising demand from power generators and steelmakers.

   Net income rose to 20.6 billion yuan ($2.9 billion), or 1.11 yuan a share, from a revised 17.6 billion yuan, or 0.975 yuan, a year earlier, the Beijing-based company said in a statement today. The median estimate in a Bloomberg survey of nine analysts was for a profit of 21.55 billion yuan. Sales rose to 82.1 billion yuan from 65.2 billion yuan.

   Shenhua has benefited from rising demand in China, the largest producer and consumer of coal. The economy expanded 11.4 percent in 2007, spurring consumption of the fuel, used to generate about 80 percent of China's power. Shenhua has reserves second only to Peabody Energy Corp., the world's biggest publicly traded coal producer.

  ``The selling price of the company's coal rose steadily'' due to increasing demand caused by economic growth in Asia, Chairman Chen Biting said in the statement.

  Shenhua shares fell 2.2 percent to HK$36.15 in Hong Kong on March 14 before the earnings were announced. The stock has surged 81 percent in the past year, outstripping the 17 percent increase in the benchmark Hang Seng Index.

  The company's coal sales last year climbed 22 percent to 209 million metric tons, and production rose 16 percent to 158 million tons, Shenhua said Jan. 16. China's government estimates energy demand will rise about 4 percent annually to the equivalent of 2.7 billion tons of coal by 2010.

Exports

  Shenhua will maintain exports at about 24 million tons, about 15 percent of production, this year, the company said in December.

  Thermal coal prices at Newcastle rose to as record $139.16 a ton on Feb. 15, according to the global coal NEWC index as rains cut deliveries in Australia's Queensland and added to supply disruption in China because of snowstorms. JPMorgan Chase & Co. raised its forecast for global thermal coal to $120 a ton from $80 a ton, Hong Kong-based analyst Feng Zhang wrote in a research note March 12.

  China's five biggest state power producers paid as much as 45 yuan, or 14 percent more, for each ton of coal this year, the China Securities Journal reported Feb. 25, citing Wang Yonggan, the secretary general of the China Electricity Council.

  Shenhua, operator of 10 power plants, said in January that its electricity output rose 40 percent to 77.2 million megawatt- hours last year.

  The company raised 66.6 billion yuan in September selling shares in Shanghai to fund acquisitions and increase output.