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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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Wednesday, 22 March 23
MARKET INSIGHT - INTERMODAL
The crude tanker market continues to gather momentum as we head towards the end of 1Q2023, against a backdrop of strong U.S. exports paired with a ...
Wednesday, 22 March 23
WILL LOWER GAS PRICES SPARK SWITCHING IN EUROPE AND ASIA?
Record high prices devastated demand for gas and LNG across Asia and Europe last year. But with prices falling, companies are starting to re-evalua ...
Monday, 20 March 23
NTPC MULLS 5.4 MILLION TONNES COAL IMPORT IN FIRST HALF OF 2023-24: PTI
State-run power giant NTPC is planning to import around 5.4 million tonnes of coal to meet the supply shortage during the first half 2023-24 fiscal ...
Monday, 20 March 23
S. AFRICA’S EXXARO RESOURCES SAYS COAL PRICES COOLING OFF - REUTERS
South Africa’s Exxaro Resources on Thursday posted a 28% jump in 2022 profit after seeing average coal prices surge more than 150%, but warne ...
Saturday, 18 March 23
RUSSIAN LNG EXPORTS TO EUROPE REMAIN HIGH - VESSELS VALUE
Russian LNG exports to Europe remained at very high levels in February at 3.6 million CBM, following a 13 month high in January of 4.1 million CBM. ...
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- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- Energy Development Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Kumho Petrochemical, South Korea
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- San Jose City I Power Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- PowerSource Philippines DevCo
- Riau Bara Harum - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Bukit Baiduri Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Toyota Tsusho Corporation, Japan
- Vijayanagar Sugar Pvt Ltd - India
- McConnell Dowell - Australia
- Sojitz Corporation - Japan
- Electricity Authority, New Zealand
- Central Java Power - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Oldendorff Carriers - Singapore
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Banpu Public Company Limited - Thailand
- International Coal Ventures Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Indika Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- India Bulls Power Limited - India
- LBH Netherlands Bv - Netherlands
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Uttam Galva Steels Limited - India
- CNBM International Corporation - China
- Timah Investasi Mineral - Indoneisa
- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- Interocean Group of Companies - India
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Goldman Sachs - Singapore
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Planning Commission, India
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- OPG Power Generation Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Directorate Of Revenue Intelligence - India
- Indian Oil Corporation Limited
- Kepco SPC Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Larsen & Toubro Limited - India
- Sindya Power Generating Company Private Ltd
- Australian Coal Association
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Kobexindo Tractors - Indoneisa
- Medco Energi Mining Internasional
- Intertek Mineral Services - Indonesia
- Ministry of Mines - Canada
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement - Thailand
- SN Aboitiz Power Inc, Philippines
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- PTC India Limited - India
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- GAC Shipping (India) Pvt Ltd
- Savvy Resources Ltd - HongKong
- Manunggal Multi Energi - Indonesia
- Standard Chartered Bank - UAE
- Thai Mozambique Logistica
- Ministry of Finance - Indonesia
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vedanta Resources Plc - India
- Bahari Cakrawala Sebuku - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Eastern Coal Council - USA
- Iligan Light & Power Inc, Philippines
- Attock Cement Pakistan Limited
- Latin American Coal - Colombia
- The State Trading Corporation of India Ltd
- Energy Link Ltd, New Zealand
- Bulk Trading Sa - Switzerland
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Bharathi Cement Corporation - India
- Singapore Mercantile Exchange
- Parry Sugars Refinery, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- European Bulk Services B.V. - Netherlands
- Sical Logistics Limited - India
- Semirara Mining and Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Dalmia Cement Bharat India
- Altura Mining Limited, Indonesia
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- Bhatia International Limited - India
- TeaM Sual Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Bayan Resources Tbk. - Indonesia
- Kaltim Prima Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Coalindo Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Simpson Spence & Young - Indonesia
- Metalloyd Limited - United Kingdom
- Meenaskhi Energy Private Limited - India
- AsiaOL BioFuels Corp., Philippines
- SMC Global Power, Philippines
- Borneo Indobara - Indonesia
- Cement Manufacturers Association - India
- Gujarat Sidhee Cement - India
- Marubeni Corporation - India
- Bukit Asam (Persero) Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- Malabar Cements Ltd - India
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Eastern Energy - Thailand
- London Commodity Brokers - England
- Coal and Oil Company - UAE
- Sarangani Energy Corporation, Philippines
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- Tata Chemicals Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- The Treasury - Australian Government
- Rio Tinto Coal - Australia
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Africa Commodities Group - South Africa
- Star Paper Mills Limited - India
- Mercator Lines Limited - India
- Xindia Steels Limited - India
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Romanian Commodities Exchange
- GVK Power & Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Jaiprakash Power Ventures ltd
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Meralco Power Generation, Philippines
- Sakthi Sugars Limited - India
- Baramulti Group, Indonesia
- Posco Energy - South Korea
- South Luzon Thermal Energy Corporation
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- Makarim & Taira - Indonesia
- Renaissance Capital - South Africa
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Edison Trading Spa - Italy
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Orica Australia Pty. Ltd.
- Vizag Seaport Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Bangladesh Power Developement Board
- Port Waratah Coal Services - Australia
- Ministry of Transport, Egypt
- Chamber of Mines of South Africa
- Kideco Jaya Agung - Indonesia
- Economic Council, Georgia
- Aditya Birla Group - India
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Wilmar Investment Holdings
- VISA Power Limited - India
- PNOC Exploration Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
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