On Monday, the presidents of POSCO and KEPCO announced that the companies signed a memorandum of understanding (MOU) for the development of the sector and boost sales channels of fuel cells in what the firms believe is a prominent market.

``The partnership with the KEPCO reflects POSCO's consistent efforts to find a new energy source for the future. We expect the MOU to contribute a great deal to boosting demand for new energy,'' POSCO President Lee Ku-taek said at a ceremony in central Seoul.

Under the deal, POSCO will additionally provide 2,400-kilowatt fuel cells to a KEPCO affiliate by next year. KEPCO is the dominant electricity provider in South Korea, responsible for 95 percent of total electricity supply in the nation.

Separately, the steel giant is scheduled to complete the construction of a new fuel cells plant that will produce 100 megawatts by 2010 with investment of some 225 billion won. The plant, if completed, will become the world's largest by production capacity.

Fuel cells are electrochemical power generators that produce electricity and heat without combustion and the pollutants coupled with burning fuel.

Market analysts, however, said it remains to be seen if the project turns profitable because POSCO has been seeking to make forays into the attractive energy sector over the past couple of years.

``The news itself is not surprising. But the announcement will probably reaffirm to investors that POSCO is being consistent in finding new energy sources,'' said Chung Ji-yun, a senior analyst from CJ Investment and Securities.

Last month, FuelCell Energy Inc., a manufacturer of clean power plants, said its distribution partner POSCO has sold 5.1 megawatts of new power plants, allowing electric utility consumers in South Korea to create clean energy.