SHANGHAI (Reuters) - The China National Nuclear Corp (CNNC) has signed an agreement with the Shenhua Group, China’s biggest coal producer, to promote the development of advanced “traveling wave” reactor technology, the state nuclear giant said.

A logo of the Shenhua Group is seen atop of Shenhua Tower in Beijing March 21, 2013. China Shenhua Energy Co Ltd, the country's largest coal producer, posted a 6.6 percent rise in 2012 net profit, roughly in line with forecasts, despite stagnating coal demand as the firm leveraged its integrated business model. Picture taken March 21, 2013. To match story SHENHUA/RESULT REUTERS/Iris Zhao (CHINA - Tags: BUSINESS LOGO) - GM1E93O0WAW01

At a ceremony on Tuesday, the two sides signed an investment agreement to promote fourth-generation traveling wave reactors (TWR), CNNC said in a notice posted on its website. The deal also involved the Zhejiang Energy Group and the Hebei Construction and Investment Group.

TWR, one of several new “fourth-generation” reactor designs, uses depleted uranium and is more fuel-efficient and cheaper to run than conventional nuclear reactors.

Leading developers of TWR include the Bill Gates-backed Terrapower, which is working on large scale projects aimed at providing base-load electricity. CNNC said its chairman, Wang Shoujun, met with Gates in July to discuss cooperation.

CNNC said the technology uses 30 percent to 40 percent of the isotopes in natural uranium, compared with just 0.7 percent in conventional models, and reactors could run for decades without requiring additional fuel.

China, which aims to build hundreds of reactors at home and dominate the global nuclear power sector, has been promoting its own-brand “third-generation” designs, including the Hualong One.

But wary of the risks of depending on one type of large-scale reactor, the government has urged developers to be more flexible and offer different options to potential customers.

CNNC and its rival China General Nuclear are both developing small modular reactors that can be deployed in remote regions as well as mobile ship-mounted units that can be used to supply power to offshore drilling platforms or small islands.

CNNC’s listed unit, China National Nuclear Power, earlier this month established a new subsidiary in Hebei province with Shenhua and other partners to promote TWR technology.

Shenhua, which is in the middle of a merger with state power giant Guodian, is seeking to diversify away from coal and coal-fired power, and it has already been in talks with CNNC and CGN to invest in nuclear projects.