Talks between China's top five power generating groups and top coal producers over annual supply contracts are still in a deadlock though the power firms have offered a compromise, an official newspaper said on Thursday. They two camps had a week-long negotiation in December but failed to reach an agreement then.

The top five power firms insisted that prices for thermal coal should not be higher than last year's term prices while coal miners said prices should be raised, the Economic Information Daily said, citing the China Electricity Council (CEC), an industry association.

The prices implied the power firms had scaled back from their original line. State media reported in December that the big power generators were insisting on lowering thermal coal prices by 50 yuan ($7.3) from last year's term prices.

The cold war between the power firms and the coal miners is still carrying on, the official paper cited Wang Yonggan, chief secretary of CEC, as saying.

If the huge disagreement cannot be properly resolved, China might face fairly large-scale thermal power shortages and electricity outages when power consumption picks up as industrial production gradually recovers, Wang warned.

Wang forecast that China's power use will grow about 5 percent this year although the contraction in consumption seen late last year will extend into the first half.

Starting from the third quarter, power use across the country, especially in northeast, eastern and southern regions, will start to expand, Wang added. (Reporting by Eadie Chen, Editing by Jacqueline Wong) (;             +8610 6627 1268       ; Reuters Messaging:© Thomson Reuters 2009 All rights reserved