Datang International Power Generation Co plans to build a nine billion yuan (US$1.2 billion) plant in Northeast China's Liaoning Province that will produce electricity and turn coal into methanol, enabling the company to gain from demand for auto fuels.

The second-largest of China mainland's Hong Kong-listed power producers wants to build a plant with 400 megawatts of power capacity and able to make 600,000 metric tons of methanol from coal annually, project director Wang Xuanbang said yesterday.

Oil prices that are more than double their levels five years ago are spurring the mainland to invest in converting some of its coal reserves, the world's third largest, into auto fuels and raw materials for making plastics. Datang Power agreed in July to build a five-billion-yuan plant to make fuels and chemical from coal in East China's Fujian Province.

"We have finished the initial feasibility study on the project and are waiting for state approval," Wang said in an interview at the 2007 China Coal to Liquids and Chemical Forum in Shanghai. "We will use our own coal and focus on the local market," he said.

The coal-to-methanol technology for the project at Fuxin in Liaoning Province will come from a foreign partner, he said, declining to identify the company. The project will be financed through bank loans and investment from domestic partners, he added.

"It will be a clean project as we will use the city's waste water and discharge low pollutant to the local environment," Wang said.

Methanol, produced mainly from coal, is used as a fuel. China mainland blends methanol with gasoline to produce fuel for vehicles.

Datang Power plans to produce diesel and polypropylene from coal in the city of Ningde in Fujian, the local government said on its Website on July 3.