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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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Tuesday, 04 September 12
SHIP OWNERS' COMPETITION LEADS TO TANKER FIXTURES BELOW OPERATING COSTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Ship owners operating in the VLCC tanker markets are increasingly finding it difficult to obtain even breakeven rates for their vessels, as competit ...
Tuesday, 04 September 12
ORPHEUS SECURES ADDITIONAL SIGNIFICANT KINTAP COAL PROJECT IN SOUTH KALIMANTAN
COALspot.com - Indonesian coal producer, Orpheus Energy (ASX:OEG) has announced that it has secured a 50% equity ownership in an additional tenement ...
Monday, 03 September 12
SHIPOWNERS TO WAIT FOR FURTHER PRICE REDUCTIONS IN THE SECOND HAND VESSEL MARKETS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With September now upon us, shipbrokers are looking towards an interesting winter season, as ship owners are looking to capitalize on more second ha ...
Sunday, 02 September 12
ADAROS COAL ROYALTIES TO THE GOVERNMENT INCREASED BY 10.5 PERCENT Y-O-Y TO US$196.8 MILLION
COALspot.com - PT Adaro Energy Tbk (IDX: ADRO), the second largest power plant coal producer in Indonesia, announced its consolidated auditor-review ...
Saturday, 01 September 12
FALLING PRICES; BLEEDING MINERS
COALspot.com - Sub-Bit Indonesia coal swaps (FOB ) for October 2012 delivery lost 4.070 percent and 0.422 percent respectively on W-o-W and D- ...
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- Anglo American - United Kingdom
- Latin American Coal - Colombia
- Bhushan Steel Limited - India
- Edison Trading Spa - Italy
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- IEA Clean Coal Centre - UK
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Dalmia Cement Bharat India
- Krishnapatnam Port Company Ltd. - India
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Star Paper Mills Limited - India
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Parry Sugars Refinery, India
- Parliament of New Zealand
- South Luzon Thermal Energy Corporation
- AsiaOL BioFuels Corp., Philippines
- Manunggal Multi Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- IHS Mccloskey Coal Group - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Binh Thuan Hamico - Vietnam
- Tata Chemicals Ltd - India
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- Lanco Infratech Ltd - India
- Barasentosa Lestari - Indonesia
- Economic Council, Georgia
- Posco Energy - South Korea
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- Wilmar Investment Holdings
- Bharathi Cement Corporation - India
- Carbofer General Trading SA - India
- Gujarat Sidhee Cement - India
- Ind-Barath Power Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Coalindo Energy - Indonesia
- The State Trading Corporation of India Ltd
- Malabar Cements Ltd - India
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- Trasteel International SA, Italy
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Port Waratah Coal Services - Australia
- Straits Asia Resources Limited - Singapore
- Bukit Baiduri Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Renaissance Capital - South Africa
- Indika Energy - Indonesia
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Central Electricity Authority - India
- Vizag Seaport Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kaltim Prima Coal - Indonesia
- Orica Australia Pty. Ltd.
- PetroVietnam Power Coal Import and Supply Company
- ICICI Bank Limited - India
- CNBM International Corporation - China
- Chettinad Cement Corporation Ltd - India
- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- Deloitte Consulting - India
- Vedanta Resources Plc - India
- GAC Shipping (India) Pvt Ltd
- Attock Cement Pakistan Limited
- Cigading International Bulk Terminal - Indonesia
- Madhucon Powers Ltd - India
- Marubeni Corporation - India
- Georgia Ports Authority, United States
- Kepco SPC Power Corporation, Philippines
- Minerals Council of Australia
- Mercuria Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Electricity Authority, New Zealand
- Jaiprakash Power Ventures ltd
- TeaM Sual Corporation - Philippines
- Uttam Galva Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Goldman Sachs - Singapore
- Thai Mozambique Logistica
- Australian Commodity Traders Exchange
- Heidelberg Cement - Germany
- SMC Global Power, Philippines
- Videocon Industries ltd - India
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- SMG Consultants - Indonesia
- India Bulls Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Eastern Energy - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- VISA Power Limited - India
- Electricity Generating Authority of Thailand
- Directorate General of MIneral and Coal - Indonesia
- Borneo Indobara - Indonesia
- PTC India Limited - India
- Billiton Holdings Pty Ltd - Australia
- Sakthi Sugars Limited - India
- Australian Coal Association
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- Coal and Oil Company - UAE
- Essar Steel Hazira Ltd - India
- Bangladesh Power Developement Board
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Agrawal Coal Company - India
- Thiess Contractors Indonesia
- International Coal Ventures Pvt Ltd - India
- GVK Power & Infra Limited - India
- Wood Mackenzie - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Indonesian Coal Mining Association
- Timah Investasi Mineral - Indoneisa
- Commonwealth Bank - Australia
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Central Java Power - Indonesia
- Metalloyd Limited - United Kingdom
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Jindal Steel & Power Ltd - India
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Ministry of Finance - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- Power Finance Corporation Ltd., India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Green Power PLC Corporation, Philippines
- Romanian Commodities Exchange
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- PowerSource Philippines DevCo
- Siam City Cement - Thailand
- The University of Queensland
- Mercator Lines Limited - India
- The Treasury - Australian Government
- SN Aboitiz Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- MS Steel International - UAE
- McConnell Dowell - Australia
- Ministry of Transport, Egypt
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Bayan Resources Tbk. - Indonesia
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sindya Power Generating Company Private Ltd
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- Planning Commission, India
- Bhoruka Overseas - Indonesia
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