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Thursday, 22 December 22
COAL AND GAS PRICE CAPS MAY COMPOUND POLITICAL RISK FOR AUSTRALIAN CORPORATES - FITCH RATINGS
 Australia’s introduction of temporary price caps on domestic sales of gas and coal used for electricity generation will probably have limited direct near-term credit impact for energy-sector issuers rated by Fitch Ratings, according to the agency. However, the caps highlight that energy companies face mounting political risks that could influence investor perceptions of the sector and capex plans over the long term.
The caps have been proposed for 12 months, but even if they are extended, the direct impact should generally be limited if prices for coal and gas fall over the coming years, in line with Fitch’s base-case assumptions.
The near-term impact on Australian thermal coal miners’ financial profiles will be further mitigated, as typically around 80% of the thermal coal produced in the country is exported, and therefore is not subject to the cap.
The natural gas sector will be more exposed, as domestic demand accounts for a larger share of supply. Santos (BBB/Stable) and Woodside Energy Group (BBB+/Stable) are large suppliers of gas to the domestic market. Such sales account for more than 40% of Santos’s gas production, but we estimate that only around 15% of total production goes to the east coast markets that are exposed to the price cap.
Woodside’s domestic gas sales, including pipeline gas from the NWS Project, Pluto and Wheatstone, account for less than 6% of its gas production, with the rest exported as LNG. For both companies, most gas is already produced under long-term contracts, which will be unaffected by the caps, limiting the near-term impact. The proportion of output affected could nonetheless rise over time if the caps are extended beyond 12 months.
The prevalence of long-term supply contracts will also reduce the impact of the caps for most domestic electricity and gas retailers, including Origin Energy (BBB/Stable). If global energy prices remain high, it is possible that the caps could offer a competitive advantage to some retailers that rely more on short-term supply contracts. That said, the superior sourcing ability and flexibility in contracts should limit downside risks for large retailers. For electricity sales, the highest-cost power generator generally determines the wholesale energy market price, and we anticipate a neutral to marginally positive financial effect for entities like Origin that have flexibility in their generation portfolio.
The price caps will add to a perception that Australia’s mining sector faces mounting political risk, even though we do not believe they will have a major impact on Fitch-rated issuers in the near term. For example, the government has announced plans to implement a new system to protect sites important to Australia’s indigenous peoples. Firms in the sector, as in other parts of the world, also face political risks associated with official efforts to promote the transition to renewable energy sources.
Mounting political risk may influence investors’ perceptions of the sector, and therefore the terms on which companies are able to access finance. This could also have ramifications for M&A plans or long-term capex strategies. Nonetheless, it is likely to take time to assess the impact, which may also be offset by other market developments.
Australia’s parliament on 16 December passed legislation empowering the government to regulate gas prices, alongside an AUD1.5 billion relief package for firms and households. It remains unclear how the relief package will affect power and gas market dynamics, but we expect its impact to be temporary. The authorities plan to cap domestic gas prices at AUD12 per gigajoule. Domestic thermal coal sales prices in New South Wales and Queensland will also be capped at AUD125 per tonne.
Source: Fitch Ratings
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Wednesday, 29 June 22
LNG MARKET REMAINS TIGHT - INTERMODAL
LNG market remains tight currently, mainly driven by the US LNG outage from the recent fire in Freeport LNG terminal together with the recent fall ...
Wednesday, 29 June 22
CHINA'S NEW PLAN FOR RENEWABLE ENERGY DEVELOPMENT FOCUSES ON CONSUMPTION - FITCH RATINGS
China’s focus on consumption penetration for renewable energy development in its recently released 14th five-year plan – 2021 to 2025 & ...
Wednesday, 29 June 22
APAC CORPORATE SECTOR OUTLOOKS SHIFT AMID GLOBAL SHOCKS - FITCH RATINGS’
Fitch Ratings’ mid-2022 corporate sector outlook review revealed that the Asia-Pacific (APAC) region saw the largest number of sector outlook ...
Thursday, 16 June 22
MARKET INSIGHT - INTERMODAL
Picking up from my last insight in March, on the early days of the invasion, it's worth pointing out the way that the fast-paced working enviro ...
Saturday, 11 June 22
AIMTEK INTERNATIONAL CONFERENCE AND AWARDS
Press Release: The prestigious AIMTEK International Conference and Awards concluded successfully on June 7th, 2022 at Radisson Blu, Yas Island Abu ...
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- Aboitiz Power Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- Central Electricity Authority - India
- Timah Investasi Mineral - Indoneisa
- London Commodity Brokers - England
- Ambuja Cements Ltd - India
- Kobexindo Tractors - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Aditya Birla Group - India
- Deloitte Consulting - India
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Metalloyd Limited - United Kingdom
- Central Java Power - Indonesia
- PNOC Exploration Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Malabar Cements Ltd - India
- Siam City Cement PLC, Thailand
- Thiess Contractors Indonesia
- Intertek Mineral Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- SMG Consultants - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- Borneo Indobara - Indonesia
- Ministry of Mines - Canada
- Jindal Steel & Power Ltd - India
- Mercator Lines Limited - India
- Globalindo Alam Lestari - Indonesia
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indika Energy - Indonesia
- Orica Australia Pty. Ltd.
- Videocon Industries ltd - India
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Orica Mining Services - Indonesia
- Global Coal Blending Company Limited - Australia
- SN Aboitiz Power Inc, Philippines
- Riau Bara Harum - Indonesia
- The Treasury - Australian Government
- Australian Commodity Traders Exchange
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Attock Cement Pakistan Limited
- Indogreen Group - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Development Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- Siam City Cement - Thailand
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- Global Green Power PLC Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Larsen & Toubro Limited - India
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Maharashtra Electricity Regulatory Commission - India
- Port Waratah Coal Services - Australia
- Commonwealth Bank - Australia
- Indian Oil Corporation Limited
- Kalimantan Lumbung Energi - Indonesia
- Mercuria Energy - Indonesia
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Pendopo Energi Batubara - Indonesia
- Bangladesh Power Developement Board
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Economic Council, Georgia
- Minerals Council of Australia
- Banpu Public Company Limited - Thailand
- International Coal Ventures Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Savvy Resources Ltd - HongKong
- Vedanta Resources Plc - India
- Sree Jayajothi Cements Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- Bhoruka Overseas - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Cigading International Bulk Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Vizag Seaport Private Limited - India
- Salva Resources Pvt Ltd - India
- Tata Chemicals Ltd - India
- Bhatia International Limited - India
- Wood Mackenzie - Singapore
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Latin American Coal - Colombia
- Interocean Group of Companies - India
- Star Paper Mills Limited - India
- Independent Power Producers Association of India
- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- Indonesian Coal Mining Association
- MS Steel International - UAE
- Parliament of New Zealand
- CIMB Investment Bank - Malaysia
- Chamber of Mines of South Africa
- VISA Power Limited - India
- Trasteel International SA, Italy
- OPG Power Generation Pvt Ltd - India
- Madhucon Powers Ltd - India
- GMR Energy Limited - India
- White Energy Company Limited
- Ministry of Finance - Indonesia
- Meenaskhi Energy Private Limited - India
- CNBM International Corporation - China
- South Luzon Thermal Energy Corporation
- Singapore Mercantile Exchange
- Ceylon Electricity Board - Sri Lanka
- Merrill Lynch Commodities Europe
- Anglo American - United Kingdom
- Australian Coal Association
- San Jose City I Power Corp, Philippines
- Mintek Dendrill Indonesia
- Posco Energy - South Korea
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- Uttam Galva Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Global Business Power Corporation, Philippines
- Eastern Coal Council - USA
- ASAPP Information Group - India
- Eastern Energy - Thailand
- Bharathi Cement Corporation - India
- Directorate General of MIneral and Coal - Indonesia
- IHS Mccloskey Coal Group - USA
- TeaM Sual Corporation - Philippines
- Kumho Petrochemical, South Korea
- Agrawal Coal Company - India
- Makarim & Taira - Indonesia
- Bukit Makmur.PT - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Thai Mozambique Logistica
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- PTC India Limited - India
- Directorate Of Revenue Intelligence - India
- Goldman Sachs - Singapore
- Coal and Oil Company - UAE
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- Romanian Commodities Exchange
- Therma Luzon, Inc, Philippines
- Sical Logistics Limited - India
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Maheswari Brothers Coal Limited - India
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- Neyveli Lignite Corporation Ltd, - India
- Bhushan Steel Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- Electricity Generating Authority of Thailand
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Heidelberg Cement - Germany
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