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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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Sunday, 08 January 23
ELEVATED COAL PRICE A DRAG ON MARGINS OF DOMESTIC BASE METAL PLAYERS: ICRA
The increased price of coal continue to be a drag on the margin of domestic base metal players with no immediate relief in sight, rating agency ICR ...
Monday, 02 January 23
CHINA’S COAL CONSUMPTION TO PEAK BY 2035: REPORT - REUTERS
China’s primary energy consumption is likely to peak at nearly 6.03 billion tonnes of standard coal between 2030 and 2035, refining giant Chi ...
Thursday, 29 December 22
INDIA'S COAL DEMAND LIKELY TO PEAK BETWEEN 2030-2035: MINISTER - ANI
The demand for coal in India will continue and is likely to peak between 2030-2035, Union Minister of Coal, Mines, and Parliamentary Affairs Pralha ...
Thursday, 29 December 22
RIO TINTO AND PARTNERS COULD RECEIVE AS MUCH AS $450M IN GOVERNMENT COMPENSATION FOR COAL PRICE CAP - THE GUARDIAN
Compensation payments for the Gladstone power plant remain the sticking point in the federal government’s coal price cap compensation negotia ...
Wednesday, 28 December 22
MARKET INSIGHT - INTERMODAL
The United Nations Conference on Trade and Development (UNCTAD) published a Global Trade Update on December 13th highlighting that global trade wou ...
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- White Energy Company Limited
- McConnell Dowell - Australia
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- Deloitte Consulting - India
- Therma Luzon, Inc, Philippines
- The Treasury - Australian Government
- Indian Oil Corporation Limited
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- Kaltim Prima Coal - Indonesia
- Aditya Birla Group - India
- Siam City Cement - Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Bangladesh Power Developement Board
- Mercuria Energy - Indonesia
- Eastern Coal Council - USA
- Sarangani Energy Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Tamil Nadu electricity Board
- Straits Asia Resources Limited - Singapore
- Bukit Baiduri Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- ASAPP Information Group - India
- PowerSource Philippines DevCo
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- Maharashtra Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Coal and Oil Company - UAE
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Leighton Contractors Pty Ltd - Australia
- Malabar Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining and Power Corporation, Philippines
- Wilmar Investment Holdings
- Pendopo Energi Batubara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- Madhucon Powers Ltd - India
- Bhatia International Limited - India
- Latin American Coal - Colombia
- Carbofer General Trading SA - India
- Marubeni Corporation - India
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bharathi Cement Corporation - India
- Meenaskhi Energy Private Limited - India
- European Bulk Services B.V. - Netherlands
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Jindal Steel & Power Ltd - India
- Chamber of Mines of South Africa
- TNB Fuel Sdn Bhd - Malaysia
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Manunggal Multi Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Sical Logistics Limited - India
- CIMB Investment Bank - Malaysia
- Attock Cement Pakistan Limited
- Mercator Lines Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vedanta Resources Plc - India
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Neyveli Lignite Corporation Ltd, - India
- Bhoruka Overseas - Indonesia
- Global Business Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Dalmia Cement Bharat India
- London Commodity Brokers - England
- Siam City Cement PLC, Thailand
- Indonesian Coal Mining Association
- Goldman Sachs - Singapore
- Indo Tambangraya Megah - Indonesia
- Uttam Galva Steels Limited - India
- Kalimantan Lumbung Energi - Indonesia
- CNBM International Corporation - China
- Parliament of New Zealand
- Cement Manufacturers Association - India
- Kepco SPC Power Corporation, Philippines
- GMR Energy Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- Africa Commodities Group - South Africa
- Merrill Lynch Commodities Europe
- ICICI Bank Limited - India
- Ministry of Mines - Canada
- Planning Commission, India
- IEA Clean Coal Centre - UK
- Petrochimia International Co. Ltd.- Taiwan
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Georgia Ports Authority, United States
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- South Luzon Thermal Energy Corporation
- Thiess Contractors Indonesia
- Australian Commodity Traders Exchange
- Bulk Trading Sa - Switzerland
- Directorate Of Revenue Intelligence - India
- Romanian Commodities Exchange
- Posco Energy - South Korea
- The University of Queensland
- Kartika Selabumi Mining - Indonesia
- Kumho Petrochemical, South Korea
- AsiaOL BioFuels Corp., Philippines
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- Larsen & Toubro Limited - India
- Grasim Industreis Ltd - India
- GAC Shipping (India) Pvt Ltd
- Independent Power Producers Association of India
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Sree Jayajothi Cements Limited - India
- Binh Thuan Hamico - Vietnam
- Videocon Industries ltd - India
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- Thai Mozambique Logistica
- Kohat Cement Company Ltd. - Pakistan
- Renaissance Capital - South Africa
- Parry Sugars Refinery, India
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- Globalindo Alam Lestari - Indonesia
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Indogreen Group - Indonesia
- Electricity Authority, New Zealand
- SMC Global Power, Philippines
- Ind-Barath Power Infra Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining Corp, Philippines
- Toyota Tsusho Corporation, Japan
- TeaM Sual Corporation - Philippines
- Minerals Council of Australia
- Maheswari Brothers Coal Limited - India
- Metalloyd Limited - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Commonwealth Bank - Australia
- Interocean Group of Companies - India
- Edison Trading Spa - Italy
- Karbindo Abesyapradhi - Indoneisa
- Port Waratah Coal Services - Australia
- SMG Consultants - Indonesia
- Riau Bara Harum - Indonesia
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Heidelberg Cement - Germany
- Standard Chartered Bank - UAE
- Trasteel International SA, Italy
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Medco Energi Mining Internasional
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- Energy Link Ltd, New Zealand
- Makarim & Taira - Indonesia
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- Banpu Public Company Limited - Thailand
- Wood Mackenzie - Singapore
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- San Jose City I Power Corp, Philippines
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