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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, 01 September 12
PANAMAX FREIGHT RATES UNDER PRESSURE FROM LOW DEMAND - VISTAAR
COALspot.com - This week the freight market was weak with mixed results.
The BDI was down by 1.95 pct closing at 703 points, however there was so ...
Friday, 31 August 12
ADVERSE SHIPPING MARKET CONDITIONS SHORTENS LIFE SPAN OF VESSELS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The adverse conditions which have been put in place in the world's freight markets, means that ship owners are forced to scrap vessels of a much yo ...
Thursday, 30 August 12
INDO-INDIA, LARGE ECO SUPRA NOW FIXED AT USD 7K FOR DELIVERY SINGAPORE - FEARNLEYS AS
Handy
The Supra market continued its negative trend with little fresh business entering the market. Continent positions fixed around USD 4k for tri ...
Thursday, 30 August 12
DRY BULK MARKET STILL LOOKING OUT FOR BETTER DAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With things in China moving slowly this week, as a result of holidays, it’s no surprise that the latest positive trend in the dry bulk market ...
Wednesday, 29 August 12
COLOMBIA'S MINING BOOM: PART TWO - JOSEPH KIRSCHKE
One of the most prominent casualties of Canada's entry into the Colombian mining sector has been a priest named Jose Reynal-Restrepo. Last Septembe ...
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- Maheswari Brothers Coal Limited - India
- Africa Commodities Group - South Africa
- Orica Mining Services - Indonesia
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Interocean Group of Companies - India
- Timah Investasi Mineral - Indoneisa
- Essar Steel Hazira Ltd - India
- Medco Energi Mining Internasional
- Gujarat Sidhee Cement - India
- ASAPP Information Group - India
- Kalimantan Lumbung Energi - Indonesia
- Posco Energy - South Korea
- Mercator Lines Limited - India
- Coalindo Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Bukit Makmur.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Central Java Power - Indonesia
- European Bulk Services B.V. - Netherlands
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Sinarmas Energy and Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Kepco SPC Power Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Attock Cement Pakistan Limited
- PowerSource Philippines DevCo
- India Bulls Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Latin American Coal - Colombia
- Standard Chartered Bank - UAE
- Bayan Resources Tbk. - Indonesia
- SN Aboitiz Power Inc, Philippines
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Commonwealth Bank - Australia
- Therma Luzon, Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dalmia Cement Bharat India
- Ministry of Mines - Canada
- Independent Power Producers Association of India
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement - Thailand
- Jaiprakash Power Ventures ltd
- Star Paper Mills Limited - India
- Bukit Baiduri Energy - Indonesia
- Electricity Authority, New Zealand
- Manunggal Multi Energi - Indonesia
- Ministry of Transport, Egypt
- CNBM International Corporation - China
- Directorate General of MIneral and Coal - Indonesia
- Deloitte Consulting - India
- AsiaOL BioFuels Corp., Philippines
- Vedanta Resources Plc - India
- Kapuas Tunggal Persada - Indonesia
- Aboitiz Power Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Kaltim Prima Coal - Indonesia
- Xindia Steels Limited - India
- San Jose City I Power Corp, Philippines
- CIMB Investment Bank - Malaysia
- Directorate Of Revenue Intelligence - India
- LBH Netherlands Bv - Netherlands
- Oldendorff Carriers - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- Formosa Plastics Group - Taiwan
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- Meralco Power Generation, Philippines
- Vizag Seaport Private Limited - India
- The Treasury - Australian Government
- Bahari Cakrawala Sebuku - Indonesia
- TeaM Sual Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Holcim Trading Pte Ltd - Singapore
- SMG Consultants - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ind-Barath Power Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Tamil Nadu electricity Board
- GVK Power & Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Vijayanagar Sugar Pvt Ltd - India
- PTC India Limited - India
- MS Steel International - UAE
- Eastern Energy - Thailand
- Altura Mining Limited, Indonesia
- Videocon Industries ltd - India
- New Zealand Coal & Carbon
- OPG Power Generation Pvt Ltd - India
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Riau Bara Harum - Indonesia
- VISA Power Limited - India
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Indian Oil Corporation Limited
- Mjunction Services Limited - India
- London Commodity Brokers - England
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Parliament of New Zealand
- Ministry of Finance - Indonesia
- IHS Mccloskey Coal Group - USA
- Uttam Galva Steels Limited - India
- Antam Resourcindo - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Global Business Power Corporation, Philippines
- Singapore Mercantile Exchange
- Madhucon Powers Ltd - India
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Aditya Birla Group - India
- Cigading International Bulk Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Straits Asia Resources Limited - Singapore
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- Rio Tinto Coal - Australia
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
- Globalindo Alam Lestari - Indonesia
- Ambuja Cements Ltd - India
- Indika Energy - Indonesia
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Petron Corporation, Philippines
- Bhushan Steel Limited - India
- Carbofer General Trading SA - India
- Intertek Mineral Services - Indonesia
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Australian Coal Association
- Lanco Infratech Ltd - India
- Borneo Indobara - Indonesia
- Wood Mackenzie - Singapore
- Semirara Mining Corp, Philippines
- Sarangani Energy Corporation, Philippines
- Edison Trading Spa - Italy
- Tata Chemicals Ltd - India
- The State Trading Corporation of India Ltd
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Jorong Barutama Greston.PT - Indonesia
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Bangladesh Power Developement Board
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Romanian Commodities Exchange
- White Energy Company Limited
- Planning Commission, India
- Price Waterhouse Coopers - Russia
- Bulk Trading Sa - Switzerland
- The University of Queensland
- Mintek Dendrill Indonesia
- Kumho Petrochemical, South Korea
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Australian Commodity Traders Exchange
- Agrawal Coal Company - India
- Minerals Council of Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Economic Council, Georgia
- Coastal Gujarat Power Limited - India
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
- Coal and Oil Company - UAE
- PetroVietnam Power Coal Import and Supply Company
- International Coal Ventures Pvt Ltd - India
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