Coal giant Shenhua is face of new Chinese state-owned enterprises
BEIJING: Ling Wen seems an unlikely coal baron. A longtime banker with a penchant for smartly tailored suits, he is a rising star among a new generation of Communist Party technocrats guiding China's industrial flagships.
Ling is also CEO of China's biggest — and the world's second-largest — coal company, Shenhua Energy Co., a sprawling energy empire of railways, ports and power plants.
In a country where carnage in the mines is commonplace, Shenhua's operations have a safety and efficiency record on a par with global industry leaders. Ling is also exploring ways to make coal — a chief culprit in global warming — a cleaner resource.
"We must do what we can do. We must try our best," said Ling, noting the company's efforts to save and recycle water, plant forests and grasslands and cut back on emissions from power plants.
Ling represents a new breed of managers who have been put in charge of waging a corporate revolution, turning China's lumbering state companies like Bank of China Ltd. and China National Petroleum Corp. into modern, profitable competitors.
Unlike their predecessors, Ling and the new corporate chieftains generally have more savvy in international business. They are making their companies more efficient, pursuing foreign alliances and shopping abroad for assets.
"Promotions are still determined by the party, not the company," said Bob Broadfoot of the Hong Kong-based Political and Economic Risk Consultancy. "They are still from the same mold. But they are getting more comfortable working internationally."
Ling, a Communist Party member with a crewcut and an open, affable manner, had already earned the title of national "model worker" as a senior executive at China's No. 1 lender Industrial and Commercial Bank of China when he was tapped to become Shenhua's chief financial officer in 2001.
He became Shenhua Energy's president in August 2006, 14 months after overseeing the company's June 2005 share listing on the Hong Kong Stock Exchange.
Ling believes Shenhua soon will overtake U.S.-based industry leader Peabody Energy, which sold 248 million tons of coal in 2006. He projects Shenhua Group's total coal sales for 2007 at 260-270 million tons, up from 240 million tons last year.
Still, that accounts for less than 10 percent of China's total coal output, which topped 2.3 billion tons last year.
Barring some huge acquisition by a competitor, Shenhua Group should be No. 1 in sales and output by the end of this year, Ling said in an interview in his spacious office inside a nondescript office tower in northern Beijing.
Ling is obsessed with turning Shenhua into a global leader. His attention to detail belies his mathematics and engineering training at Shanghai's prestigious Jiaotong University.
"I have a personal target to visit our coal mines at least 12 times a year. That means to go down inside the mine to the working face," he said. China has three seven-day public holidays a year; he plans to spent them visiting the company's facilities.
Shenhua's top productivity of 28,000 tons of coal per worker beats the U.S. industry average of about 10,000 tons per worker.
Ling's goal is in line with the government's objective to foster 30 to 50 internationally competitive state-owned enterprises.
And a key part of achieving that objective is improving management, Li Rongrong, chairman of the cabinet body in charge of state assets, said late last year.
Shenhua Energy's state-owned parent company, China Shenhua Group, was founded in 1996 in a consolidation of some of the country's richest coal reserves, in north China's remote Inner Mongolia. It owns China's biggest underground coal mine, Bulianta, as well as its biggest open-pit mine, Heidaigou.
Ling takes seriously his mission of transforming the often Dickensian working conditions in China's coal sector, where an average of 13 miners die in fires, floods, explosions and other accidents, every day.
Its ultramodern mines have a safety record of 0.027 fatalities per 1 million tons of coal, compared with China's industry average of 2.04 fatalities per 1 million tons.
Shenhua recognizes that making coal — China's No. 1 source of energy for electricity — cleaner is a must, Ling said. But he sees new technologies as prohibitively expensive.
"We must do what we can do," he said. "But we must have a correct way. Now there is no technology, there is no commercially successful way."
Shenhua has stakes in at least two power plants using highly efficient supercritical thermal coal technology, which involves burning coal to make steam at a much higher than usual temperature and pressure, which lowers emissions. A subsidiary is building China's biggest wind farm.
In China and elsewhere, a key focus is on integrated gasification combined-cycle, or IGCC, a technology that converts coal to a clean burning gas to power an electricity-generating turbine.
But even IGCC power plants emit significant amounts of carbon dioxide. The technology for capturing those emissions is still under development.
A visit to an IGCC plant in Tampa, Florida, last year, left Ling impressed but unconvinced. He grilled his hosts on how much the plant cost to build and operate, on rates paid for the electricity it generates and their profit level, but didn't get any answers because it is only an experimental plant.
"If in the United States, you can't have a successful commercial case, in China how can we do it?" he asks.
For now, Shenhua Energy is focused on growth.
The company is moving aggressively into coal liquefaction, hoping to parlay its massive reserves into pricier fuels and chemicals.
By 2010, the company expects to own all of the group's assets and is likely to have acquired some overseas mines as well, boosting its total sales to over 300 million tons a year, Ling said. The company also is considering possible tie ups with Peabody and AngloCoal, the coal mining unit of Anglo American PLC.
Shenhua is attracted by Australia's strong legal system, rich coal reserves and modern ports.
"The only issue is the price," Ling said. "To buy something in Australia means we will pay a higher price than in Indonesia or Vietnam."
Like other coal miners, Shenhua has seen its profitability squeezed by a fallback in coal prices. As the best coal seams are mined out, the company could find the going harder. An environmentalist backlash against coal-fired power likewise poses potential risks.
But Ling is upbeat.
"We are confident that if we adopt modern techniques, equipment, management, we can create high efficiency," he said. "Not just in good coal reserves but in bad coal reserves."
Copyright © 2007 the International Herald Tribune All rights reserved
