TOKYO -- Tokyo Electric Power plans to build a state-of-the-art coal-fired power plant near the Japanese capital with Electric Power Development, sources familiar with the matter said Saturday.

Tepco and Electric Power Development, a Japanese electricity wholesaler better known as J-Power, plan to invest a total of around 200 billion yen ($1.91 billion) in the plant, which will be located in Yokosuka, Kanagawa Prefecture.

All of Japan's nuclear power plants, including those operated by Tepco, remain shut for safety inspections in the wake of the 2011 disaster at the utility's Fukushima Daiichi nuclear plant.

By building a coal-fired plant that is about 20% more energy-efficient than conventional ones, Tepco hopes to lower its high fuel costs.

The company also hopes the new facility will improve its profitability at a time when competition in the power industry is expected to intensify with the planned full liberalization of the Japanese retail electricity market in 2016.

The plant will have a capacity of about 1,000 megawatts, equal to that of a standard nuclear reactor. It will be constructed at the site of Tepco's Yokosuka thermal power plant, which has been taken offline because of its age.

Tepco aims to begin operating the plant by around 2020.

J-Power, which mainly generates electricity from coal-fired plants, will provide Tepco with know-how on using coal efficiently. The partners have yet to work out other details of the project, such as the cost-sharing arrangement.

The new facility will likely use so-called integrated coal gasification combined cycle (IGCC) technology, which generates electricity twice through a gas turbine and a steam turbine and is about 20% more energy-efficient than conventional coal-based methods.

Because it will use less coal, the plant's fuel costs will be lower. Also, it will emit about 30% less carbon dioxide than conventional coal-fired plants.

Tepco's annual fuel costs for electricity generation doubled to nearly 3 trillion yen in the fiscal year ended in March 2014 from pre-Fukushima disaster levels.

Tepco's fuel costs have been pushed sharply higher because of its increased reliance on thermal power generation and rising import costs of liquefied natural gas due to the yen's weakening.

Fuel costs for coal-fired plants are said to be less than half those for LNG-fired plants. By boosting coal-based power generation, the financially troubled Tepco hopes to curb its fuel costs as it seeks to turn itself around.

(Nikkei)