Oct. 16 (Bloomberg) -- Coal for delivery to Europe in 2008 advanced the most in more than a year on expectations mining companies will demand record prices in negotiations with utilities at a c7onference next week.

The futures rose to an all-time high today on speculation power companies bought the contract to lock in prices before talks at Coaltrans in Rome on Oct. 21-24. Representatives from Rio Tinto Group, the third-largest mining company, and Enel SpA, Italy's biggest power company, will attend the conference.

``There's a lot of nervousness in the market ahead of the Coaltrans conference,'' said Meindert Witteveen, a London-based director at Barclays Capital, in an interview. ``That results in utilities taking more paper coverage'' using futures, he said.

Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year rose $4.90, or 4.9 percent, to $105.90 a metric ton as of 2:49 p.m. in London, according to ICAP Plc prices. That's the biggest gain compared with closing levels since Sept. 29, 2006. Prices are up 55 percent this year.

The contract rose $2.80, or 2.7 percent, to $105.50 a ton, according to GFI Group Inc prices on Bloomberg. GFI and London- based ICAP each have about 30 percent of the coal derivatives- trading market.

Prices have risen as suppliers struggle to meet demand from Asia. China, the world's biggest coal producer, became a net importer this year, leading to bottlenecks at Australian ports. As a result, Indian and South Korean companies have switched to buying coal from Richards Bay, South Africa.

RWE Mothball

Npower, the U.K. unit of RWE AG, said today it may mothball some of its coal-fired plants because of record prices. European generators have to buy emissions permits when they burn coal under European rules aimed at controlling greenhouse gasses.

Some power plants, including RWE's Didcot A generator in the U.K., can switch from burning coal to natural gas, a cleaner fuel needing about half as many EU permits.

Generators use derivatives including futures contracts to protect against gains in the price of coal by locking in future supplies at a price set now. They are also used by investors to speculate on the outlook for prices.

A derivative's value is drawn from an underlying asset, including stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. Options and futures are the most common derivatives.

To contact the reporter on this story: Alistair Holloway in London at aholloway1@bloomberg.net

Last Updated: October 16, 2007 09:50 EDT