China Huaneng Group (CHNG), the country's biggest electricity producer, is planning to buy stakes in coal mines of North China to secure its fuel supplies. This follows price disputes between coal suppliers and users.

Huaneng plans to secure 30 million tons of coal from its stakes in coal mines next year, and further increase that figure to 80 million tons by 2010.

The company last year used about 100 million tons of coal to fire its 75 power plants across 23 provinces and regions in China. A small proportion of that came from coal mines in which Huaneng has a stake.

"We will greatly increase investment into sectors like coal production, and port and rail construction to secure coal supplies," Li Xiaopeng, president of the Huaneng Group, yesterday told the company's annual conference in Beijing.

But he did not disclose the investment that would be involved.

Huaneng has planned a slew of joint-venture coal projects in North China's Shanxi and Shaanxi provinces, as well as in the Inner Mongolia Autonomous Region. These projects are expected to yield coal within a couple of years, company sources yesterday said.

At the annual coal ordering conference held at the start of this month, power firms failed to reach a consensus over coal supplies with mine companies for this year.

Coal suppliers were offering prices much more than the power firms said they could afford, as the government this year suspended its price limits for coal.

Li Qionghui, of the country's biggest grid company, the State Grid Corp of China, said it was wise for power firms to secure long-term coal supplies by acquiring stakes in collieries.

"It's a trend for power firms to buy stakes in coal sources, and the government has been encouraging partnerships between the two sectors (coal and power)," Li Qionghui said.

Huaneng's move to secure coal supplies by acquiring coal mines is in line with its ambitious target to increase its generation capacity within the next five years.

It plans to increase capacity to 80 GW (gigawatts) within the next five years, from last year's 43.2 GW.

The figure will account for more than 10 per cent of the country's total expected power generation capacity of 700-800 GW by 2010, according to industry statistics.

"It is a demanding task, but the huge market in China also promises enormous potential," Li Xiaopeng told reporters yesterday.

New power plants with an installed capacity of 9.46 GW will come on stream by the end of this year, and plants providing another 10 GW are expected to start construction, Huaneng said.

The Beijing-based electricity producer collected revenue of 73 billion yuan (US$9 billion) last year, by selling 256.4 billion kilowatt-hours of electricity. Its profits have increased by 12.3 per cent on an annual basis over the past five years.

Power shortages over the past few years will be substantially eased this year and next as new plants ordered by the big power firms are started, said Wang Yonggan, secretary-general of China Electricity Council, an industry consortium for power producers.