Musa Aman, Sabah chief minister, said coal would not be used as a source of energy in the state as it could hurt the environment and damage its key tourism industry.

"Sabah needs to increase its power supply but the state cannot put its natural environment at risk," he was quoted as saying by the Star newspaper.

"The environment is the biggest tourism draw," he said, adding the state would look at natural gas as an alternative.

Environmentalists and the government's Department of Environment had objected to the scheme, which would have seen the construction of a 300-megawatt plant in Lahad Datu, in Sabah state.

Sabah, along with Sarawak, makes up Malaysia's half of Borneo island, which borders the Coral Triangle, one of the world's most biodiverse marine environments.

The vast region, which spans the seas around East Timor, Indonesia, Malaysia, Papua New Guinea, the Philippines and the Solomon Islands, is home to 75 percent of all known coral species.

Opposition to the power station was led by Green Surf, a coalition of groups including the Malaysian Nature Society, which said the plant would displace villagers and threaten endangered species, including orangutans and Bornean rhinos.

The shelving of the plant plan will be counted as a welcome victory for campaigners angered by similar energy projects in Boreno.

The vast Bakun dam in neighbouring Sarawak drew intense criticism after large swathes of rainforest were cleared and thousands of indigenous people displaced.

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