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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, 13 September 12
PANAMAX: THE NEGATIVE TREND, POOR SENTIMENT CONTINUES - FEARNLEYS AS
Handy
Lack of cargoes and a growing list of available ships is causing rates to slip for all Atlantic trades.
The only trade keeping somewhat s ...
Thursday, 13 September 12
FUEL EFFICIENT SHIPS MAY BE MORE EXPENSIVE, BUT THEY MAKE FINANCIAL SENSE SAYS ANALYSIS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The latest trend in shipbuilding is the so called "Eco" ship, i.e. ships which offer much better fuel consumption and are more cost-effect ...
Wednesday, 12 September 12
INDIAS COALGATE: TIME FOR A ROOT CANAL
A recent report from India’s Comptroller and Auditor General (CAG) pertaining to the allocation of coal blocks has created a political storm i ...
Tuesday, 11 September 12
CLOUDY AND POLICY RISK INDONESIAN COAL INDUSTRY
COALspot.com - Bahana Securities in its latest coal outlook, commented on the Indonesian coal market, with economic slowdown in the four largest coa ...
Tuesday, 11 September 12
SHIP OWNERS KEEN ON SECOND HAND VESSEL PURCHASES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With most ship owners back from their summer rest, things are starting to pick up again in the second hand vessel market, with more and more deals b ...
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- OPG Power Generation Pvt Ltd - India
- Wood Mackenzie - Singapore
- Parliament of New Zealand
- SMC Global Power, Philippines
- Port Waratah Coal Services - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Sindya Power Generating Company Private Ltd
- Manunggal Multi Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Mercator Lines Limited - India
- Borneo Indobara - Indonesia
- Salva Resources Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Jaiprakash Power Ventures ltd
- Cement Manufacturers Association - India
- ASAPP Information Group - India
- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- Uttam Galva Steels Limited - India
- Tamil Nadu electricity Board
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- LBH Netherlands Bv - Netherlands
- Chettinad Cement Corporation Ltd - India
- Sojitz Corporation - Japan
- Australian Commodity Traders Exchange
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- IEA Clean Coal Centre - UK
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Directorate Of Revenue Intelligence - India
- New Zealand Coal & Carbon
- Trasteel International SA, Italy
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- Antam Resourcindo - Indonesia
- Indika Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- International Coal Ventures Pvt Ltd - India
- Lanco Infratech Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Singapore Mercantile Exchange
- Kartika Selabumi Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Australian Coal Association
- IHS Mccloskey Coal Group - USA
- Eastern Energy - Thailand
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Central Java Power - Indonesia
- Global Green Power PLC Corporation, Philippines
- San Jose City I Power Corp, Philippines
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Merrill Lynch Commodities Europe
- Baramulti Group, Indonesia
- Maheswari Brothers Coal Limited - India
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- Kalimantan Lumbung Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Coal Council - USA
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- Ministry of Mines - Canada
- The Treasury - Australian Government
- Thiess Contractors Indonesia
- Kideco Jaya Agung - Indonesia
- MS Steel International - UAE
- Kumho Petrochemical, South Korea
- White Energy Company Limited
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Commonwealth Bank - Australia
- Toyota Tsusho Corporation, Japan
- Independent Power Producers Association of India
- Metalloyd Limited - United Kingdom
- Anglo American - United Kingdom
- Mercuria Energy - Indonesia
- Essar Steel Hazira Ltd - India
- London Commodity Brokers - England
- Energy Development Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Power Finance Corporation Ltd., India
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- India Bulls Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Carbofer General Trading SA - India
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Heidelberg Cement - Germany
- Bukit Makmur.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Goldman Sachs - Singapore
- Medco Energi Mining Internasional
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ministry of Finance - Indonesia
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- PTC India Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement PLC, Thailand
- Sical Logistics Limited - India
- The University of Queensland
- Kobexindo Tractors - Indoneisa
- Planning Commission, India
- Intertek Mineral Services - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Global Coal Blending Company Limited - Australia
- Central Electricity Authority - India
- Bulk Trading Sa - Switzerland
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Malabar Cements Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Riau Bara Harum - Indonesia
- Therma Luzon, Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Banpu Public Company Limited - Thailand
- Barasentosa Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- SMG Consultants - Indonesia
- Karaikal Port Pvt Ltd - India
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- European Bulk Services B.V. - Netherlands
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- Thai Mozambique Logistica
- Bhoruka Overseas - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- AsiaOL BioFuels Corp., Philippines
- Alfred C Toepfer International GmbH - Germany
- Gujarat Sidhee Cement - India
- Vedanta Resources Plc - India
- GN Power Mariveles Coal Plant, Philippines
- Tata Chemicals Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Energy Link Ltd, New Zealand
- Attock Cement Pakistan Limited
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- Kaltim Prima Coal - Indonesia
- CNBM International Corporation - China
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Aditya Birla Group - India
- Indian Energy Exchange, India
- Semirara Mining Corp, Philippines
- Rio Tinto Coal - Australia
- Renaissance Capital - South Africa
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Simpson Spence & Young - Indonesia
- CIMB Investment Bank - Malaysia
- Oldendorff Carriers - Singapore
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Bukit Baiduri Energy - Indonesia
- Bhatia International Limited - India
- Sakthi Sugars Limited - India
- Altura Mining Limited, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vizag Seaport Private Limited - India
- Grasim Industreis Ltd - India
- Samtan Co., Ltd - South Korea
- Binh Thuan Hamico - Vietnam
- Star Paper Mills Limited - India
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