UPDATE 2-KEPCO picks Germany's RWE for new trading JV

* JV to be set up in H1 2012, likely in Singapore -sources

* To start trading of coal, later uranium and gas-sources

* To hedge volatility, ensure stable procurement -sources (Adds details and quotes)

By Cho Mee-young

SEOUL, Dec 26 (Reuters) - Korea Electric Power Corp has chosen Germany's RWE AG as the preferred bidder for its first overseas trading joint venture mainly to procure raw materials, sources at KEPCO and other utilities said on Monday.

KEPCO aims to set up the joint venture in Asia, likely Singapore, within the first half of next year, the sources, who declined to be identified as they were not authorised to talk to media, told Reuters by phone.

A KEPCO spokesperson, who was reached by Reuters, confirmed the report later in the day.

South Korea, Asia's fourth-largest economy that is heavily dependent on energy imports, has been seeking ways to efficiently secure commodities and energy as global prices soar. It imports almost all its feedstock for power generation.

"The joint venture is to ensure stable supplies of fuel for power generation as we import most resources. We plan to start with coal, and later uranium, and possibly expand to trade gas in the long-term," one source at the state-run utility in the world's No.3 coal buyer said.

"We want to import resources at competitive prices via direct procurement from mines, while hedging against any price volatility," the source said, noting for instance the unstable coal supply and price volatility triggered by Australia's flood early this year.

KEPCO and industry sources said in February that the utility would set up its first coal trading firm overseas by the end of 2012, a move that could boost the spot market trading in Asia in the face of surging prices.

KEPCO and another state-run utility Korea Gas Corp (KOGAS) have been struggling to be compensated for billions of dollars of losses incurred by costlier power generation.

Shares of KEPCO closed down 1.14 percent at 26,100 Korean won ($22.69) on Monday, underperforming versus the broader index .

TO HEDGE PROCUREMENT

South Korea's five thermal coal power generating utilities -- Korea Midland Power Co Ltd (KOMIPO), Korea Western Power Co Ltd (WP), Korea East-West Power Co Ltd (EWP), Korea South-East Power Co Ltd (KOSEP) and Korea Southern Power Co Ltd (KOSPO), which are fully owned by KEPCO -- will also hold minor stakes in the joint venture, sources said.

They declined to elaborate on the planned capital of the venture or individual partners' stakes, saying details would be discussed with RWE from January.

One source quoting industry data noted the five utilities import almost 80 million tonnes of coal per year for power generation.

South Korea like other regional peers have been actively investing to ensure overseas resource procurement due to inflation risks led by costlier energy.

Over 50 state-run and private firms in the world's fifth-largest crude oil importer and second-largest liquefied natural gas buyer plan to invest a record-high combined $11.8 billion next year to develop oil and gas resources, the ministry of knowledge economy said earlier this month. ($1 = 1150.2000 Korean won) (Reporting by Cho Mee-young; Editing by Jonathan Hopfner and Himani Sarkar)