China's first large coal-electricity joint project, Huaneng Yimin Coal Electricity Corp aims to increase its annual coal output to 20 million tons this year.

The company, a subsidiary located in Hunlunbuir, Inner Mongolia autonomous region under China's leading power generator Huaneng Group, now has an installed capacity of 2,200 mW. It currently can produce 15 million tons of coal each year.

"Using coal all produced by ourselves, we have reduced our cost a lot," said Yin Long, general manager of Huaneng Yimin.

The company also sells some amount of coal to other power companies. It is also planning for its own coal-to-gas and coal-to-chemical projects to further diversify its business portfolio, said Yin.

Rising coal prices have always been a headache for China's power generators. Last year because of the sharp rise in coal prices major power companies all incurred losses in their power generation business.

Coal-fired power accounts for over 70 percent of China's total power generation. The country's main power companies have all accelerated their development of coal mine projects.

For instance, Datang International Power Generation Co, the listed arm of China Datang Corp, earlier said it aims to get 50 percent of its profit from sources other than electricity in the next decade, including fuel production.

Projects such as coal and coal-to-chemicals production may account for half of the company's profit by 2015, Cao Jingshan, president of the country's second-largest power producer, told reporters earlier this month.

Some analysts believe that development of more coal-power joint projects is an inevitable trend in the industry. "With a foothold in coal production, the upstream of power generation business, companies can reduce their risks," said Li Chaolin, coal analyst.

"With more coal mine assets in hand, power companies can have a stronger say when they bargain with coal producers for prices," he said.

China's five major power companies have all quickened their pace in taking coal mine assets in northwestern China, especially in Inner Mongolia and Xinjiang Uygur autonomous regions, he added.

However, some analysts said this could lead to an overcapacity in the power industry.

"In some areas there has already been an overcapacity in power generation. I am worried more such projects will make the situation worse," said an industry insider who declined to be named.

China's power consumption in July rose 6 percent to 342 billion kWh over the same month of last year, said China's National Energy Administration (NEA). The figure was 10.9 percent more than that of June, NEA said.

China's coal production continued to ease in the first half of this year on flat domestic demand amid the economic slowdown.

Crude coal output increased 8.7 percent year-on-year to 1.36 billion tons in the first six months, but 6.1 percentage points lower than the same period a year ago, data released by the National Development and Reform Commission has shown.

(China Daily August 21, 2009)