UPDATE 1-Xstrata sells Oct-Sept coal to Tepco at $97.75/tonne

* Xstrata agrees on Oct-Sept coal price with TEPCO

* Settlement $5 lower than contracts set in July

By Rebekah Kebede and Osamu Tsukimori

PERTH/TOKYO, Sept 16 (Reuters) - Xstrata Coal (XTA.L: Quote) has agreed to sell Australian thermal coal to major buyer Tokyo Electric Power (9501.T: Quote) at $97.75 a tonne for October 2010 to September 2011, Japanese utility and Australian coal industry sources said.

The price marks about a $5 a tonne decline from prices agreed in July, but is on par with the main April price agreement.

The majority of the coal imported by Japan is based on contracts that begin on April 1, the start of the Japanese financial year. Some contracts, typically smaller volumes, are signed in July and October.

An Xstrata spokesman said the firm does not comment on pricing arrangements with customers, while TEPCO could not be reached for comment.

Tohoku Electric Power Co (9506.T: Quote) was still in negotiations with Xstrata, a source familiar with the matter said.

Japanese utilities use about 50 million tonnes of thermal coal annually, with Australia supplying about 60 percent of the imports. (Editing by Michael Urquhart)