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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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Saturday, 18 March 23
HEDGE TO OFFSET LNG VOLATILITY, TRADERS TOLD - BALTIC EXCHANGE
A shift in imports from Asia to Europe led to significant volatility in liquefied natural gas shipping last year, prompting industry experts to urg ...
Friday, 17 March 23
INDONESIAN COAL PRICE REFERENCE UP AROUND 2.17% IN MARCH 2023
COALspot.com: Indonesian Coal Price Reference up around 2.17% in March 2023.
According to the new HBA regulation No. 41.K/MB.0 ...
Saturday, 11 March 23
MARKET INSIGHT - INTERMODAL
Uncertainty over the recovery of Chinese demand, demand destruction in Europe, as well as weather conditions will pivot the LNG market this summer. ...
Wednesday, 08 March 23
INDONESIAN COAL REFERENCE PRICE FORMULA HAS OFFICIALLY CHANGED
Indonesian Minister of Energy and Mineral Resources has officially changed the guideline for determining the benchmark price for the sale of coal c ...
Thursday, 02 March 23
INDIA'S SEABORNE CRUDE OIL IMPORTS IN 2022 INCREASED BY 11.5% YOY - BANCHERO COSTA
2022 has turned out to be a very positive year for crude oil trade, despite the surging oil prices and risks of economic recession, Banchero Costa ...
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- Gujarat Sidhee Cement - India
- Coalindo Energy - Indonesia
- Planning Commission, India
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- LBH Netherlands Bv - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Energy Link Ltd, New Zealand
- Bhatia International Limited - India
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Maharashtra Electricity Regulatory Commission - India
- IHS Mccloskey Coal Group - USA
- Meenaskhi Energy Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- SN Aboitiz Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- South Luzon Thermal Energy Corporation
- The State Trading Corporation of India Ltd
- PTC India Limited - India
- MS Steel International - UAE
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- Miang Besar Coal Terminal - Indonesia
- Wilmar Investment Holdings
- Salva Resources Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Borneo Indobara - Indonesia
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Australian Coal Association
- Oldendorff Carriers - Singapore
- Gujarat Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- Makarim & Taira - Indonesia
- Edison Trading Spa - Italy
- Karaikal Port Pvt Ltd - India
- The Treasury - Australian Government
- Renaissance Capital - South Africa
- Medco Energi Mining Internasional
- Indian Energy Exchange, India
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- VISA Power Limited - India
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Minerals Council of Australia
- CNBM International Corporation - China
- Kumho Petrochemical, South Korea
- Krishnapatnam Port Company Ltd. - India
- Therma Luzon, Inc, Philippines
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- ICICI Bank Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Altura Mining Limited, Indonesia
- Cement Manufacturers Association - India
- Kartika Selabumi Mining - Indonesia
- Mintek Dendrill Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Semirara Mining and Power Corporation, Philippines
- Coal and Oil Company - UAE
- SMG Consultants - Indonesia
- Tata Chemicals Ltd - India
- Pendopo Energi Batubara - Indonesia
- Posco Energy - South Korea
- GAC Shipping (India) Pvt Ltd
- Baramulti Group, Indonesia
- Thai Mozambique Logistica
- Aditya Birla Group - India
- Karbindo Abesyapradhi - Indoneisa
- Indian Oil Corporation Limited
- Sarangani Energy Corporation, Philippines
- Ambuja Cements Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Independent Power Producers Association of India
- Latin American Coal - Colombia
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement - Thailand
- Jindal Steel & Power Ltd - India
- Deloitte Consulting - India
- New Zealand Coal & Carbon
- Bank of Tokyo Mitsubishi UFJ Ltd
- PowerSource Philippines DevCo
- Interocean Group of Companies - India
- Ceylon Electricity Board - Sri Lanka
- GVK Power & Infra Limited - India
- SMC Global Power, Philippines
- IEA Clean Coal Centre - UK
- Jaiprakash Power Ventures ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- London Commodity Brokers - England
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bangladesh Power Developement Board
- Eastern Energy - Thailand
- Globalindo Alam Lestari - Indonesia
- Agrawal Coal Company - India
- Jorong Barutama Greston.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Vizag Seaport Private Limited - India
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- Essar Steel Hazira Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Xindia Steels Limited - India
- Attock Cement Pakistan Limited
- Alfred C Toepfer International GmbH - Germany
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Asmin Koalindo Tuhup - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Rio Tinto Coal - Australia
- Petron Corporation, Philippines
- Vedanta Resources Plc - India
- Videocon Industries ltd - India
- Standard Chartered Bank - UAE
- Thiess Contractors Indonesia
- Marubeni Corporation - India
- Toyota Tsusho Corporation, Japan
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- The University of Queensland
- Coastal Gujarat Power Limited - India
- Singapore Mercantile Exchange
- Orica Mining Services - Indonesia
- Merrill Lynch Commodities Europe
- Trasteel International SA, Italy
- Mercator Lines Limited - India
- Economic Council, Georgia
- Star Paper Mills Limited - India
- TeaM Sual Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Larsen & Toubro Limited - India
- Timah Investasi Mineral - Indoneisa
- Iligan Light & Power Inc, Philippines
- Africa Commodities Group - South Africa
- Mercuria Energy - Indonesia
- Semirara Mining Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- Romanian Commodities Exchange
- Parliament of New Zealand
- Mjunction Services Limited - India
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Kepco SPC Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Bayan Resources Tbk. - Indonesia
- Siam City Cement PLC, Thailand
- Indika Energy - Indonesia
- Uttam Galva Steels Limited - India
- Heidelberg Cement - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- Madhucon Powers Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Lanco Infratech Ltd - India
- International Coal Ventures Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- Leighton Contractors Pty Ltd - Australia
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Kohat Cement Company Ltd. - Pakistan
- San Jose City I Power Corp, Philippines
- Carbofer General Trading SA - India
- Kalimantan Lumbung Energi - Indonesia
- Goldman Sachs - Singapore
- India Bulls Power Limited - India
- Anglo American - United Kingdom
- Antam Resourcindo - Indonesia
- Electricity Generating Authority of Thailand
- Malabar Cements Ltd - India
- Bukit Baiduri Energy - Indonesia
- Sakthi Sugars Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- OPG Power Generation Pvt Ltd - India
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