In a bid to address China's electric power shortages, China Power International Development Ltd. and China Coal Energy Co. Ltd. have announced a $784 million joint venture to build and operate coal-fired plants in the northern province of Shanxi.

State-owned China Power International Development Ltd. will control 80 per cent of China Power Shentou Power Generating Co. and China Coal Energy Co. Ltd. the rest. China Power International Development Ltd. is one of the country's five leading power generators, while China Coal Energy Co. Ltd. is the second-largest coal producer by revenue.

"For China Power, this cooperation can enhance a steady supply of coal and is good for the company because it can control its cost better," Conita Hung, head of equity research at Delta Asia Financial Group, told Reuters.

The venture will acquire two 600-megawatt super-critical coal-fired power generation units from China Power's Shentou 1 Power plant in Shanxi province, China Power International Development Ltd. said in a statement.

As China Coal Energy Co. Ltd. ensures the steady and sufficient supply of coal into the project, the deal comes as a source of more stable income, shielding the company against coal price fluctuation.

Shares of China Power International Development Ltd. closed 4.3 per cent down at HK$1.57 on Wednesday, while China Coal Energy Co. Ltd. rose 3.6 percent to HK$10.08.

China's economic growth over the past decade led the country to become the world's largest electricity consumer. However, its zooming growth has put increasing stress on the nation's electrical generation grid.

Since April, Chinese power plants have been battling electric power shortages due to increasing demand, higher coal prices and a drought in southern China diminishing hydroelectric electrical output. Since 2006 coal prices have doubled in China, going $130 a ton for coal with high heat content.

China is the world's largest coal producer and consumer, consuming 3.5 times as much coal as the United States. It is believed that China's coal-fired power generation will grow until at least 2020 while its installed capacity of coal-fired power generating units will remain at more than 70 per cent.

According to the Business Insider quoting figures from the China Electricity Council, the country's estimated total generation capacity may total about 1,050 gigawatts by the end of this year, a rise of about 8.8 per cent from 2010 levels. However, China may still face a total peak deficit of 30-40 gigawatts, raising the specter of rolling brownouts during the winter months.

Based on 2010 statistics from the China Electricity Council, electricity demand has grown 12 per cent.

Coal electrical power generation gave 73 per cent of China's total generating capacity, and produced 83 per cent of its total power generation in 2010.