(Yicai Global) March 8 -- Shares in Baofeng Energy Group surged as much as 9 percent today after the coal chemical producer announced that it will invest CNY67.3 billion (USD10.3 billion) in a giant olefins factory, a substance used in the production of plastics, in the coal-rich Inner Mongolia Autonomous Region.

The firm’s stock price [SHA:600989] gained 1.43 percent today to close at CNY15.61 (USD2.40). Earlier in the day it had reached CNY16.83.

The Ordos-based plant, which should be up and running by late 2023, will have four olefin production lines, each with an annual output of one million tons, and five methanol production lines, with an output of 2.2 million tons a year each, the company said yesterday. It will use clean and efficient coal utilization technology developed by the Dalian Institute of Chemical Physics under the Chinese Academy of Sciences.

The Yinchuan, Ningxia Hui Autonomous Region-based firm will stump up 30 percent of the funds and the rest will come from bank loans, it said. Bank of Communications has already committed to lending CNY20 billion and Industrial and Commercial Bank of China’s Inner Mongolia branch will contribute CNY30 billion.

Baofeng Energy is in good financial health and had an asset-to-liability ratio of 32 percent at the end of last year, it added. The company has sufficient cash flow to finance the project, which has already obtained central and local government approval.

The firm has an annual output of around 5.1 million tons of coal, 1.7 million tons of methanol, 300,000 tons of polyethylene and 300,000 tons of polypropylene. It is planning to double its polyethylene and polypropylene production capacity in the near future, according to the company website.

Editor: Kim Taylor