Southern Energy Inc. and Johnston Development Company LLC of the United States signed an Agreement on Principles with Shanxi Enhaua Energy Company Ltd. Monday in Beijing’s Great Hall of the People to develop a US $500 million power project in China.

The project will use domestic equipment, will be constructed as a mine-mouth plant to alleviate rail infrastructure bottlenecks, and is in line with China’s national policy of replacing small, inefficient power plants with large, modern ones – important criteria set by the Chinese government for encouraging foreign investment in the power sector.

The plant includes two 300-megawatt coal-fired power units, located 450 kilometers (280 miles) southwest of Beijing in Shanxi Province, the coal-mining capital of China. The project is to be developed with the Xishan Coal Electricity (Group) Company (a subsidiary of the Xishan Coal Mining Bureau) and the Shanxi Provincial Power Company, which has formed a joint venture company called Shanxi Enhua Energy Company Ltd. Site preparation near the city of Gujiao is scheduled to begin next year.

“This project is a model for similar projects Southern Energy is developing throughout the world that utilize the company’s expertise in providing efficient, competitively priced power-generating capacity while taking advantage of local resources,” said Raymond D. Hill, senior vice president of Southern Energy and chief executive officer of Consolidated Electric Power Asia (CEPA), Southern Energy’s Asian development arm.

The Gujiao power project is also one of the first large-scale power plants to be sponsored by the coal industry in China, making it a model for future joint efforts between the coal and electricity sectors and foreign investors.

Former Sen. J. Bennett Johnston, chairman of Johnston Development Company LLC, said, “The project illustrates the strong relationship between the United States and China in developing energy resources to benefit the Chinese people.”

Southern Energy and Johnston Development Company are developing the project through their joint venture, Johnston Southern Development Company LLC. Johnston Southern Development Company will own 49 percent of the project, while Shanxi Enhua will own 51 percent. Southern Energy expects its CEPA subsidiary to play an active role in the project based on CEPA’s experience and resources in Asia.

Shanxi Province, with a population of about 30 million people and 9,000 megawatts (MW) of installed electricity generating capacity, plans to add 5,000 MW of installed generating capacity by 2005.

In attendance at the June 29 signing ceremony in Beijing were F.D. (Rick) Kuester, CEPA’s commercial director; Sen. Johnston, chairman of Johnston Development Company; K. P. Lau, managing director of Johnston Development Company; Zhang Baoming, director of the State Coal Bureau; Du Fuxin, chief director of the Xishan Coal Electricity (Group) Company and chairman of Shanxi Enhua Energy Company; and other Shanxi officials.

Southern Energy Inc. is the international arm of Southern Company, the largest producer of electricity in the United States, supplying power throughout the Southeast and in 10 countries on four continents. In Asia, CEPA owns a total combined installed capacity of 1,801 MW. CEPA pioneered the use of the BOT (build-operate-transfer) structure and has power projects under development in major Asian markets.

Johnston Development Company is an infrastructure development firm specializing in electric power and energy projects. Its partners are led by Sen. Johnston, former chairman of the U.S. Senate Energy Committee.