China Resources Power Holdings, the fourth-biggest Hong Kong-listed mainland power producer, plans to buy two coal mines in Shanxi province to help ease rising fuel costs and stabilise supply.
The purchases are expected to be finalised this year which would secure long-term and stable supply as well as 'favourable prices' for the group's power plants nearby, chief executive Wang Shuaiting said.
'Coal prices have stabilised, but at a high level,' Mr Wang said after the group's annual general meeting yesterday. 'When the coal mines start production, we will have significant cost savings.'
Average cost of coal jumped 21 per cent last year for generating units of CR Power's 14 power plants. Mr Wang said that in the first four months of this year, unit fuel cost fell 4 per cent after it secured contracts with longer and more favourable terms.
The Shanxi coal mines CR Power plans to buy were estimated to have annual output of about 30 million tonnes, Mr Wang said.
The company also entered a deal last November to develop two partly owned coal mines in Henan reportedly at a total cost of 800 million yuan.
CR Power would keep investing in mines to reduce supply risk even though coal shortages and sharp price rises were expected to ease this year, Mr Wang added.