China Huaneng Group, the country's largest independent power producer, has signed a strategic co-operation framework agreement to buy coal from Australian mining giant BHP Billiton. The move is part of the central government's drive to push state firms to tap foreign resources, and comes as Chinese power firms face tight coal supplies and possible price rises next year. The two companies signed an agreement late last month after negotiations that began in August, according to state-backed China Power News Network. Under the agreement, China Huaneng will buy coal from BHP Billiton 'under mutually beneficial terms that are more competitive than other coal sources'. They will also join forces to develop transport facilities, mining projects and power-plant construction in China and Australia. Working groups on both sides will be set up to negotiate the concrete terms of potential projects. The news came on the same day China Huaneng Group, the ultimate parent of H share Huaneng Power International, reportedly won a bid to buy a controlling stake in a new coal-fired power plant in the northeast Australian state of Queensland. The acquisition will allow the Chinese power giant to study the operations of Australia's competitive power market to better prepare for competition at home. China is slated to introduce competition to its planned-economy power market next year. It will also enhance its bargaining power in coal purchasing by striking a strategic partnership with a major foreign coal supplier. China Huaneng outbid Malaysian conglomerate Sime Darby, Australia's Origin Energy and Stanwell to buy United States-based global energy firm InterGen's 54 per cent stake in the A$1.5 billion (HK$6.63 billion), 840 mega-watt (MW) Millmerran power plant, The Australian newspaper reported. China Huaneng will pay about A$300 million for the stake, as well as half of InterGen's 50 per cent stake in the 840 MW Callide C power plant. Both power plants use 'supercritical' boiler technology, which reduces coal usage. In addition to seeking foreign partnerships, China Huaneng has struck a few tie-ups with domestic power firms. It signed an agreement in July with the Inner Mongolian government on power-plant construction and coal-mine development, followed by a deal last month with Inner Mongolia Power Group, coal and power firm Shenhua Group and conglomerate Citic Pacific to develop power projects in Inner Mongolia. It has also struck a framework agreement with the nation's largest coal trader, China Coal Group, to co-invest in power-plant construction and coal production. Despite deregulating domestic coal prices in 2000, the government has favoured power producers by forcing coal suppliers to accept lower price rises this year. As power shortages worsen with the onset of winter, Beijing has ordered coal suppliers to give domestic buyers priority.