Beijing Datang Power Generation Co Ltd said yesterday it would buy supporting facilities in a power plant from its parent company to cut costs.

Beijing Datang will pay 155 million yuan (US$19.8 million) in cash to buy utilities such as water supplies and treatment facilities, coal transportation and railway lines, ash treatment facilities and office appliances in the Tangshan Power Generation Plant from its parent company China Datang Group Corp, it said in a statement.

Beijing Datang - one of the five independent power generators in China - would also assume the liability of the assets of 65.6 million yuan (US$7.9 million).

Beijing Datang holds 80 percent of Tangshan Power, where two 300-megawatt heat generators are being built.

The first generator is expected to commence operations in the first quarter of this year, and the second one in the fourth quarter.

Tangshan Construction Investment Company holds the remaining 20 per cent in the plant.

Beijing Datang Executive Director Yang Hongming said the asset transfer would improve the operational efficiency of the company's heat generators.

"The deal will help us reduce operation costs," Yang said on the sideline of an economic forum.

Yang said his company is looking at opportunities to buy generating assets from the parent company.

Shares in Beijing Datang rose 1.61 percent Wednesday to end at a 52-week high of HK$6.20 (79.4 US cents) on the Hong Kong Stock Exchange.

Talking about the current coal price hikes, Yang said his company had signed contracts with coal companies to supply 85 percent of its consumption. The coal price, which tends to accounts for half of the production cost of power plants, has risen by 12 yuan (US$1.50) per ton as compared with last year.

The company will buy another 15 percent of its coal consumption on the spot market.

Yang expected the price on the spot market to rise by up to 10 percent year-on-year in the first quarter.

But the overall price would be about 5 percent higher for the whole year, Yang said.

To offset the fuel cost hike, the government has allowed the generating companies to raise the on-grid electricity price by 0.007 yuan (0.08 US cents) per kilowatt- hour.

Beijing Datang last month said it generated electricity of 41.2 billion kilowatt-hours last year, rising by 28.4 percent year-on-year, as against the national average of 15.3 percent.

(China Daily February 18, 2004)