Moscow (Platts)--16Jul2012/619 am EDT/1019 GMT

Ukraine's energy and coal industry ministry on Friday signed an agreement with China Development Bank securing a $3.656 billion credit line to help the country switch its power plants over to coal from gas, the ministry said.

As part of the agreement China will offer its technological expertise for the work to be carried out, the ministry said in a statement Friday.

"We are grateful to [our Chinese] colleagues, who...identified the most efficient [upgrade] projects to be implemented using Chinese technologies," Ukrainian energy minister Yuriy Boyko Boyko said in the statement.

As part of the program to fuel its power plants with coal, Ukraine will also build gasification facilities in Ukraine, it said.

In 2010, Ukraine's energy ministry and China Development Bank signed an MOU on coal cooperation, under which the bank agreed to consider investing $1.03 billion in the modernization of seven state-owned coal mines in Ukraine.

In June 2011, the bank agreed to provide an $85 million loan to modernize the Melnikov mine owned by Ukrainian state-owned coal producer Lisichanskugol, according to the ministry.

The first tranche of $16 million was made in June, the statement said.

Ukraine has been exploring ways of reducing its dependence on Russian gas, which it considers unjustifiably expensive.

Given the lack of progress in two-year-old talks with Russian gas producer and exporter Gazprom, Kiev recently approved a decision to cut Russian gas imports to 27 billion cu m in 2012 from about 40 Bcm in 2011.

However, Gazprom CEO Alexei Miller said in late June that it had not discussed such a cut with Ukraine.

In March, Gazprom suggested it was ready to cut the price of gas supplied to Ukraine by 10% provided it agreed to import at least 33 Bcm in 2012, but Ukraine rejected the proposal.

--Dina Khrennikova, dina_khrennikova@platts.com
--Edited by Jonathan Fox, jonathan_fox@platts.com

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