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Wednesday, 02 May 12
CHINA BLACKOUTS HIGHLIGHT PRICING POLICY WEAKNESS - FITCH
 Fitch reported that, the likelihood of further electricity blackouts in China this summer underlines Fitch's view of the basic problem facing thermal electricity generators - that the tariff framework is not sustainable in the long term.
The problem centres on China's thermal or coal-fired plants, which in 2011 represented 72.5% of total electricity production of 4,692.8TWh, and are likely to remain the backbone of electricity generation for the foreseeable future. The problem is not with China's national electricity grid, which is well developed, but rather with the non-viability of the pricing mechanism for the coal-fired generators.
The Chinese thermal generators are unwilling to produce excess electricity in peak periods when their marginal generation costs are above the tariffs the government will allow them to charge the grid companies. Tariff adjustments have not been timely or sufficient despite the rising cost of coal, as the government has prioritised the management of inflation - thereby constraining profitability. The weak economics have also discouraged private-sector investment, while the state-linked thermal generators - Huaneng International ('BB+'/Stable), Datang International ('BB'/Stable), China Power International Development ('BB'/Stable), and Huadian International ('BB-'/Stable) - are now struggling with substantially weakened balance sheets.
Coal input prices for the thermal generators have increased dramatically over the past three years to end-2011, rising by an average of 16% pa. Meanwhile, the Chinese government has only allowed nationwide electricity tariffs to rise once in the last two years, by around 5% for non-residential customers in December 2011. Some tariff increases also occurred in selective provinces in April 2011, but the impact on generators' profitability was limited.
A 5% cap on annual coal price increases was introduced along with the December 2011 electricity tariff revision, but this applied only to contracted coal prices. These capped prices only represent around 30%-40% of the total needs of most thermal generators. Accordingly, large amounts of coal have to be bought on the spot market at substantially higher prices, making excess electricity production an uneconomic proposition. The substantial premium - typically 30% - on spot market prices against the capped contract coal price results in coal producers seeking ways to reduce their contracted sales in favour of spot sales, which is steadily eroding any benefit from the coal price caps.
A longer-term problem, and a potential cause of an eventual structural shortfall in generation capacity, is that limited profit - or losses - from thermal operations have since 2008 led to new capex in the industry being diverted away from thermal and into wind, hydro and vertical integration via coal mine acquisitions. A National Energy Administration (NEA) report dated 30 January 30 2012 confirmed that China's investment in thermal power assets fell again in 2011, by 26%, to CNY105.4bn. This trend, which cannot be reversed quickly due to the typical minimum two-year lead time to build new thermal capacity, is a serious concern given China's continued dependence on coal for its power generation.
The Chinese thermal generators are likely to face sustained weak operating cash flows and negative free cash generation under this heavily regulated environment, a situation which Fitch believes to be unsustainable in light of the continued growth in the Chinese economy. The agency believes that China is looking to introduce price reforms across the energy industries, but achieving a truly cost-reflective tariff regime is likely to take several more years, and will require a favourable inflationary climate. In the meantime, demand will continue to outstrip supply, even if - theoretically - the capacity exists within the generation system.
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Thursday, 09 November 23
GREEK AND CHINESE COMPANIES OWN 34% OF THE GLOBAL FLEET’S CARGO CAPACITY - BIMCO
“The global fleet of cargo carrying ships consists of around 61,000 ships with a deadweight capacity of about 2,200 million tonnes. The ships ...
Monday, 23 October 23
CHINA SEPT COAL OUTPUT HITS SIX-MONTH HIGH ON RISING POWER DEMAND - REUTERS
China’s September coal output rose 0.4% from August to the highest level since March, official data showed on Wednesday, on rising power dema ...
Monday, 23 October 23
INDIA COAL INVENTORIES DROP AT FASTEST PACE IN TWO YEARS, BOOSTING IMPORTS - REUTERS
Coal inventories at Indian power plants in the first half of October fell at their fastest rate in two years, an analysis of government data showed ...
Tuesday, 19 September 23
LNG SHIPPING STOCKS: THE ASIAN GROWTH UP-INDICES
Last week, the UP World LNG Shipping Index (UPI) gained 3.81 points or 2.51%, closing at 155.85 points. This index tracks the performance of LNG sh ...
Sunday, 10 September 23
GOLDMAN SACHS PREDICTS OIL PRICE TO HIT $100 ON OPEC CUTS - YAHOO FINANCE
Oil supply cuts by Saudi Arabia and Russia could lead to Brent crude jumping as high as $107 a barrel in 2024, Goldman Sachs Commodities Research h ...
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- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- Jaiprakash Power Ventures ltd
- Kideco Jaya Agung - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bhoruka Overseas - Indonesia
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- Orica Australia Pty. Ltd.
- The Treasury - Australian Government
- Jindal Steel & Power Ltd - India
- Mercuria Energy - Indonesia
- Australian Coal Association
- Aboitiz Power Corporation - Philippines
- Riau Bara Harum - Indonesia
- Thai Mozambique Logistica
- Sindya Power Generating Company Private Ltd
- Mintek Dendrill Indonesia
- Wilmar Investment Holdings
- Commonwealth Bank - Australia
- Antam Resourcindo - Indonesia
- Straits Asia Resources Limited - Singapore
- Tata Chemicals Ltd - India
- Meenaskhi Energy Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- Metalloyd Limited - United Kingdom
- Formosa Plastics Group - Taiwan
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Coastal Gujarat Power Limited - India
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- Vedanta Resources Plc - India
- White Energy Company Limited
- Maharashtra Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- Parliament of New Zealand
- Sical Logistics Limited - India
- Independent Power Producers Association of India
- Interocean Group of Companies - India
- Parry Sugars Refinery, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indian Oil Corporation Limited
- International Coal Ventures Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Intertek Mineral Services - Indonesia
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- Banpu Public Company Limited - Thailand
- Edison Trading Spa - Italy
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Madhucon Powers Ltd - India
- Ind-Barath Power Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Sidhee Cement - India
- Economic Council, Georgia
- New Zealand Coal & Carbon
- Barasentosa Lestari - Indonesia
- Uttam Galva Steels Limited - India
- Kartika Selabumi Mining - Indonesia
- Bangladesh Power Developement Board
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- PTC India Limited - India
- Indika Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Lanco Infratech Ltd - India
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- Pendopo Energi Batubara - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Oldendorff Carriers - Singapore
- Salva Resources Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Sarangani Energy Corporation, Philippines
- Deloitte Consulting - India
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- TeaM Sual Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Indogreen Group - Indonesia
- Standard Chartered Bank - UAE
- Grasim Industreis Ltd - India
- Bharathi Cement Corporation - India
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Romanian Commodities Exchange
- Thiess Contractors Indonesia
- Heidelberg Cement - Germany
- Renaissance Capital - South Africa
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- SMG Consultants - Indonesia
- Iligan Light & Power Inc, Philippines
- Siam City Cement PLC, Thailand
- ICICI Bank Limited - India
- Global Green Power PLC Corporation, Philippines
- India Bulls Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Sojitz Corporation - Japan
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Central Java Power - Indonesia
- European Bulk Services B.V. - Netherlands
- Ministry of Mines - Canada
- Ceylon Electricity Board - Sri Lanka
- Coal and Oil Company - UAE
- Indian Energy Exchange, India
- Ambuja Cements Ltd - India
- The University of Queensland
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- Energy Link Ltd, New Zealand
- Xindia Steels Limited - India
- Petron Corporation, Philippines
- Cement Manufacturers Association - India
- Marubeni Corporation - India
- Singapore Mercantile Exchange
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- Kaltim Prima Coal - Indonesia
- Videocon Industries ltd - India
- Star Paper Mills Limited - India
- Malabar Cements Ltd - India
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- ASAPP Information Group - India
- Aditya Birla Group - India
- Kalimantan Lumbung Energi - Indonesia
- Eastern Coal Council - USA
- Goldman Sachs - Singapore
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Central Electricity Authority - India
- Karaikal Port Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Anglo American - United Kingdom
- Bukit Asam (Persero) Tbk - Indonesia
- Planning Commission, India
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- The State Trading Corporation of India Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Agrawal Coal Company - India
- Essar Steel Hazira Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Billiton Holdings Pty Ltd - Australia
- Kepco SPC Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Minerals Council of Australia
- Wood Mackenzie - Singapore
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- Bhushan Steel Limited - India
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- AsiaOL BioFuels Corp., Philippines
- SN Aboitiz Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Bayan Resources Tbk. - Indonesia
- GMR Energy Limited - India
- Electricity Generating Authority of Thailand
- Posco Energy - South Korea
- Jorong Barutama Greston.PT - Indonesia
- Coalindo Energy - Indonesia
- Latin American Coal - Colombia
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