Regional Coal: KEPCO says to cut coal imports from China in 2005

State-controlled monopoly, Korea Electric Power Corp. (KEPCO), plans to cut sharply its reliance on China for coal imports next year in an effort to secure a more stable supply of the fuel, a company official said on Tuesday.

KEPCO, which supplies more than 95 percent of South Korea's electricity, aims to cut Chinese coal imports to 24 percent of total imports next year from 44 percent currently, the official said on condition of anonymity.

There have been some signs of easing in spot coal prices recently, but a rally in global coal prices this year, partly driven by coal shortages in China, remains a big headache for KEPCO. China is the world's largest coal producer.

The utility giant, which is the country's second-biggest stock by market capitalisation, is vulnerable to rises in fuel prices as it imports virtually all of its fuel needs, which account for more than a third of its operating expenses.

Coal takes up 37 percent of its fuel costs with oil, gas and nuclear power making up the rest.

"If our dependency on China is too high, we will end up with few options when prices are soaring," the official was quoted by Reuters as saying. "In this regard, we are aiming to cut the reliance (on China) to secure stable supply."

The power company would also increase the proportion of coal imports under term contracts to 80 percent in 2005 from 75 percent now, he added.

KEPCO was expected to import about 45 million tons of coal this year, up 8 percent from a year ago, he said.

KEPCO has said it intended to buy a foreign coal mine in an effort to cut its exposure to volatile coal prices. The official said the company was looking at mines in Australia, Indonesia, China and the Philippines. (*)