China state planner urges power, coal sector integration

[BEIJING] China will aim to integrate the power and coal sectors through mergers, long-term supply contracts and joint investment projects as it tries to bring together two "pillar industries" often at loggerheads, the state planning agency said on Tuesday.

The National Development and Reform Commission (NDRC) said in a document it would encourage struggling coal firms to invest in the more profitable power sector and would also establish a "long-term strategic cooperation mechanism" that allows both sides to "coordinate supply and demand", control prices and share risks.

The new plan is also designed to speed up structural reform in the energy sector and improve China's energy security, the NDRC said.

Last month, China asked state-owned power plants to enter into long-term supply deals with coal producers in order to stabilise the market and ease pressure on loss-making miners.

The Chinese government has been trying to figure out how to reduce the country's dependence on coal, a major source of smog and greenhouse gas, while at the same time improving the economic fortunes of a sector that employs more than 5 million people.

Coal miners are losing money as they struggle with severe overcapacity, declining demand and a collapse in prices, and some have complained that power plants have been playing coal suppliers off against one another in order to force prices down further.

The document published on Tuesday said China would also encourage the joint construction of "coal-by-wire" power plants located at the mouth of coal mines, which would help cut coal transportation costs as well as air pollution.

REUTERS