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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, 07 August 12
2ND ANNUAL FLOATING TERMINALS
Press Release - After a ground breaking and successful launch in 2011, the 2nd Annual Floating Terminals conferenceis back to address innovation, co ...
Tuesday, 07 August 12
KRISHNAPATNAM PORT HAS DISCHARGED 122,247 MTS OF COAL IN JUST 24 HRS
COALspot.com - Keeping with the tradition of the new records that are set at the Olympic Games 2012, Krishnapatnam Port has also achieved in setting ...
Tuesday, 07 August 12
THE JAKARTA POST EDITORIAL: REVISITING THE MINING LAW
The Jakarta post, one of the leading English news paper in Indonesia writes in its editorial today, what the domestic and foreign investors had drea ...
Tuesday, 07 August 12
BARAMULTI SET TO LIST ON BOURSE IN Q4 - JP
The Jakarta Post reported that, coal miner PT Baramulti Sukses Sarana is preparing to make its shares available to the public in the fourth quarter ...
Tuesday, 07 August 12
REALM RESOURCES COMPLETES STUDY ON ITS KATINGAN RIA COAL PROJECT
COALspot.com - Realm Resources Ltd. has announced that it has completed the Project Study for the Katingan Ria Project in Central Kalimantan, Indone ...
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- New Zealand Coal & Carbon
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- Trasteel International SA, Italy
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- Commonwealth Bank - Australia
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- Parliament of New Zealand
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- Dalmia Cement Bharat India
- Toyota Tsusho Corporation, Japan
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- GAC Shipping (India) Pvt Ltd
- London Commodity Brokers - England
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- IHS Mccloskey Coal Group - USA
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- Mintek Dendrill Indonesia
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- Economic Council, Georgia
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- Indian Oil Corporation Limited
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- AsiaOL BioFuels Corp., Philippines
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- Samtan Co., Ltd - South Korea
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- Bukit Baiduri Energy - Indonesia
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- Tata Chemicals Ltd - India
- MS Steel International - UAE
- Wilmar Investment Holdings
- India Bulls Power Limited - India
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- Krishnapatnam Port Company Ltd. - India
- Aditya Birla Group - India
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- Timah Investasi Mineral - Indoneisa
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- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
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- Thiess Contractors Indonesia
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- Bangladesh Power Developement Board
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- Therma Luzon, Inc, Philippines
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- Bulk Trading Sa - Switzerland
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- Chamber of Mines of South Africa
- Siam City Cement PLC, Thailand
- Antam Resourcindo - Indonesia
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- Sakthi Sugars Limited - India
- Planning Commission, India
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- San Jose City I Power Corp, Philippines
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- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement - Thailand
- Eastern Energy - Thailand
- The State Trading Corporation of India Ltd
- Ind-Barath Power Infra Limited - India
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- TNB Fuel Sdn Bhd - Malaysia
- The University of Queensland
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- Miang Besar Coal Terminal - Indonesia
- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
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- Salva Resources Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Lanco Infratech Ltd - India
- Jaiprakash Power Ventures ltd
- Oldendorff Carriers - Singapore
- Semirara Mining Corp, Philippines
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Heidelberg Cement - Germany
- International Coal Ventures Pvt Ltd - India
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- Larsen & Toubro Limited - India
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Power Finance Corporation Ltd., India
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- Billiton Holdings Pty Ltd - Australia
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Karaikal Port Pvt Ltd - India
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- Leighton Contractors Pty Ltd - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- Australian Coal Association
- Kohat Cement Company Ltd. - Pakistan
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Directorate Of Revenue Intelligence - India
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- Malabar Cements Ltd - India
- Renaissance Capital - South Africa
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Thai Mozambique Logistica
- White Energy Company Limited
- Electricity Authority, New Zealand
- Chettinad Cement Corporation Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Coal and Oil Company - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kapuas Tunggal Persada - Indonesia
- Agrawal Coal Company - India
- GN Power Mariveles Coal Plant, Philippines
- Coalindo Energy - Indonesia
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- PetroVietnam Power Coal Import and Supply Company
- Indian Energy Exchange, India
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- Singapore Mercantile Exchange
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