Aiming to alleviate tension between surging coal prices and distressed power generators, China Electricity Council is laying the groundwork for an industrial investment fund. The council wants to encourage the unifications of China’s coal and power industries, expand coal mine capacity, and advance technological innovation.

Caijing learned that the fund, which is expected to launch at the beginning, next year, hopes to raise 2 billion yuan in its first phase.

"About 10 percent of the major power plants are profitable, and the major reason is that they have unified the production of coal and power," said Li Rongrong, director of the State-Owned Assets Supervision and Administration Commission (SASAC), in a conference earlier this year. He and other experts see coordination between the two sectors as one of the best options for alleviating the current crisis.

Coal accounts for about 70 percent of China’s power production, which in turn uses about 60 percent of the country’s total coal supply. But with coal prices rising and power’s price kept staid by government controls, the tension between coal suppliers and energy producers is nearing a breaking point.

According to the National Statistics Bureau, China’s coal-fired power industry chalked up a loss of 21.6 billion yuan during the first eight months of this year. By the end of September, the figure had expanded to 25 billion yuan. Many major energy producers including Huaneng International and SDIC Huajing Power have reported huge third quarter losses.

Since China created the first industrial investment fund, the Bohai Fund, another 10 pilot industrial funds have been launched, involving a total of 140 billion yuan.

1 yuan = 14 U.S. cents