The country's power generators, after 10 days of arduous negotiations, have finally agreed to contract thermal coal deals involving a total volume of 812 million tons this year.

But disagreements still exist between the two sides, coal suppliers and power companies, on the range of coal price hike, after the government announced to suspend control over the prices of coal for power generation.

Sources from the China Coal Transport and Distribution Association (CCTD) disclosed the information yesterday, but said buyers and sellers have not reached a consensus on the coal prices to be delivered this year.

They only secured the volume in order to get sufficient transport facilities from the government to move the coal from the inland production sites to power plants condensed along the eastern coast, they said.

"Further talks will be picked up by both sides afterwards over the prices," said Fang Xiu'an, a manager for international co-operation with the coal transport-distribution association.

Of the total volume of thermal coal secured for this year, 563 million tons are allocated to key contracts, to which the government has promised priority in transportation, and the remaining 249 million tons will be secondary, said Fang.

"The talks did not proceed smoothly, and we could not afford the (coal) price increase offered by the sellers of over 20 yuan (US$2.5) a ton," said Xie Juchen, general manger of Zhognneng Power Industry Fuel Co, which helped arrange coal supplies for China's top five power producers including Datang and Huaneng.

Thousands of people from related industries including coal production, power generation and transportation, gathered in Jinan, East China's Shandong Province, to fix coal supplies for the fast-growing economy. The conference, an annual event organized by the government to settle disputes between coal companies and power producers, lasted from January 1 - 10.

The National Development and Reform Commission (NDRC) on the first day of the coal ordering conference said it decided to call off its previous intervention of the coal prices and make the thermal coal prices negotiable between power firms and coal sellers.

The move ignited coal companies' hopes of increasing the price of coal, which fuels 70 per cent of the country's power generators.

But power generators, blaming the government's tight control over electricity tariff, said it is not the right time now to cancel the control over coal prices.

Wang Yonggan, secretary-general of China Electricity Council, a consortium representing the company's power producers, last week said the government should maintain its controls over the prices of coal.

"Otherwise power companies could not pass the higher cost on to end-users," Wang said.

"We haven't made major deals about the coal conference," Bai Fugui, a manger for fuel supplies at Datang International Power Generation Co Ltd, yesterday said. He declined to comment further.

Zhang Shaopeng, a Datang spokesman, said higher coal prices are now biting into about 60 per cent of the company's production cost.

Datang's profit increased by only 0.55 per cent in the first half of last year, while its electricity generation grew by 39.3 per cent to 32.8 billion kilowatt-hours.

Another power company official, who did not want to be identified, said the government should take more responsibility in the negotiation impasse between coal suppliers and power firms.

"The government should come up with more effective and consistent pricing mechanisms to streamline the energy sector," the official said.

The NDRC last May adopted a policy to peg the electricity prices with those of coal. If the coal prices keep rising by as much as 5 per cent in six months, the government will accordingly raise the electricity tariff, in order to alleviate the pressure for power firms.

"But the coal price hike has obviously shot up beyond that margin for the period, but the government is not honouring is promise," said the unnamed official.

Thermal coal prices in the first half of last year increased by more than 10 per cent from the second half of 2004.

"The situation, if it keeps occurring, will greatly dampen the confidence of our investors," the company official said.