The company signed an agreement yesterday to forge a long-term strategic alliance with the China Coal and Energy Group, one of the largest coal producers in China.

The two companies are also expected to sign a long-term coal supply contract to allow Huaneng's power plants to buy more coal from the coal company.

The two are also considering to jointly tap coal resources in Pinshuo Mining Area in North China's Shanxi Province, and build large power plants in the area to take the advantage of the massive coal resources, one of the largest in China.

China Coal and Energy, also known as the China National Coal Industry Import & Export Corp, is constructing to double its production capacity to 60 million tons by 2006.

The deal is the second in a week in which Huaneng linked up with coal companies. Last Wednesday, it also agreed with China Power Investment Group and Huainan Mining Group to jointly construct a multi-billion-yuan coal-power complex in Huainan in East China's Anhui Province. The complex plans to build large coal-fired generators and coal production bases in the area to deliver electricity to Shanghai.

Analysts said Huaneng is aiming to secure its coal supply to fuel its growth. The company aims to double its generating capacity to 60 million kilowatts by 2010.

Experts have been long calling for coal and power companies to form alliances to resolve difficult disputes between the two industries over coal supplies. The two industries often quarrel about the coal prices charged to generators. The rift between the two was highlighted earlier this year as the power companies refused to accept the coal price increase, and had to halt operations, resulting in blackouts in some areas.

Huaneng President Li Xiaopeng said yesterday: "The co-operation with coal companies not only ensures our coal supply, but also provides us with new investment opportunities."

Li said at the signing ceremony that Huaneng will continue to seek further co-operation with other coal companies.

Song Mi, vice-chairman of the State Electricity Regulatory Commission, said the government welcomes alliances between coal and power companies.

Under yesterday's agreement, the two companies will also build large coal supply bases in the economically booming coastal regions.

They will also co-operate in environmental protection and coal purification technology.

(China Daily June 19, 2003)