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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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Friday, 22 June 12
GLOBAL ACTION NEEDED ON ENERGY POVERTY - WORLD COAL
Eradicating energy poverty is possibly the biggest challenge facing the world today. Like climate change it can only be addressed with a concerted g ...
Friday, 22 June 12
COAL: THE BACKBONE OF MODERN ELECTRICITY - ECOAL
Coal has been described as the "forgotten fuel," perhaps because many aren't aware of the huge role it plays in powering the global econo ...
Thursday, 21 June 12
DRY BULK MARKET ON THE RISE AGAIN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market was on the rise once again yesterday, with the Baltic Dry Index (BDI), the industry’s benchmark, rising by 18 points, or 1 ...
Wednesday, 20 June 12
BDI MOVING HIGHER, PANAMAX AND SUPRAMAX VESSELS STRONGER, CAPESIZE RATES NEAR TO HISTORICAL LOWS OF DECEMBER 2008 - MARIA BERTZELETOU, HELLENIC SHIPPING
The dry market seems to follow the dynamic of the previous week with the Baltic Dry Index showing daily increases since June 8th, but is still stand ...
Tuesday, 19 June 12
SMALLER DRY BULK CARRIERS LIFT UP MARKET, PANAMAXES SET TO FALL SAYS ANALYST - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Another rise for the dry bulk market was evident yesterday, as the industry’s benchmark, the BDI (Baltic Dry Index) was up for a ninth straigh ...
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- Metalloyd Limited - United Kingdom
- Trasteel International SA, Italy
- White Energy Company Limited
- Straits Asia Resources Limited - Singapore
- PowerSource Philippines DevCo
- Directorate General of MIneral and Coal - Indonesia
- Altura Mining Limited, Indonesia
- Chettinad Cement Corporation Ltd - India
- Ministry of Mines - Canada
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- CNBM International Corporation - China
- IHS Mccloskey Coal Group - USA
- Leighton Contractors Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Kartika Selabumi Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- VISA Power Limited - India
- Petron Corporation, Philippines
- Edison Trading Spa - Italy
- Global Business Power Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Sree Jayajothi Cements Limited - India
- Marubeni Corporation - India
- Madhucon Powers Ltd - India
- Uttam Galva Steels Limited - India
- TeaM Sual Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- GVK Power & Infra Limited - India
- London Commodity Brokers - England
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- Intertek Mineral Services - Indonesia
- MS Steel International - UAE
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- Electricity Generating Authority of Thailand
- Latin American Coal - Colombia
- Alfred C Toepfer International GmbH - Germany
- Africa Commodities Group - South Africa
- Cement Manufacturers Association - India
- Tata Chemicals Ltd - India
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- Krishnapatnam Port Company Ltd. - India
- Planning Commission, India
- Billiton Holdings Pty Ltd - Australia
- Chamber of Mines of South Africa
- San Jose City I Power Corp, Philippines
- Samtan Co., Ltd - South Korea
- Maharashtra Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- Agrawal Coal Company - India
- Ministry of Finance - Indonesia
- GAC Shipping (India) Pvt Ltd
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Riau Bara Harum - Indonesia
- Bukit Baiduri Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Salva Resources Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Videocon Industries ltd - India
- Parry Sugars Refinery, India
- Directorate Of Revenue Intelligence - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- India Bulls Power Limited - India
- Therma Luzon, Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- The Treasury - Australian Government
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Thai Mozambique Logistica
- Bharathi Cement Corporation - India
- Xindia Steels Limited - India
- Singapore Mercantile Exchange
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Dalmia Cement Bharat India
- Indogreen Group - Indonesia
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Jaiprakash Power Ventures ltd
- Vijayanagar Sugar Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Power Finance Corporation Ltd., India
- PTC India Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- SN Aboitiz Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Kobexindo Tractors - Indoneisa
- Minerals Council of Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Bhatia International Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Vedanta Resources Plc - India
- Binh Thuan Hamico - Vietnam
- Jindal Steel & Power Ltd - India
- Antam Resourcindo - Indonesia
- Indika Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Coal and Oil Company - UAE
- Baramulti Group, Indonesia
- Romanian Commodities Exchange
- Cigading International Bulk Terminal - Indonesia
- Ministry of Transport, Egypt
- Aditya Birla Group - India
- Global Coal Blending Company Limited - Australia
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- GMR Energy Limited - India
- The University of Queensland
- Bayan Resources Tbk. - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Thiess Contractors Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Savvy Resources Ltd - HongKong
- PetroVietnam Power Coal Import and Supply Company
- Mercator Lines Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- CIMB Investment Bank - Malaysia
- Eastern Energy - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- South Luzon Thermal Energy Corporation
- Banpu Public Company Limited - Thailand
- Australian Coal Association
- Orica Australia Pty. Ltd.
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- Rio Tinto Coal - Australia
- Grasim Industreis Ltd - India
- Tamil Nadu electricity Board
- Barasentosa Lestari - Indonesia
- Lanco Infratech Ltd - India
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Port Waratah Coal Services - Australia
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Ambuja Cements Ltd - India
- Makarim & Taira - Indonesia
- New Zealand Coal & Carbon
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Sinarmas Energy and Mining - Indonesia
- SMC Global Power, Philippines
- Kideco Jaya Agung - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mintek Dendrill Indonesia
- Siam City Cement PLC, Thailand
- Maheswari Brothers Coal Limited - India
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Siam City Cement - Thailand
- Wilmar Investment Holdings
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Sical Logistics Limited - India
- Merrill Lynch Commodities Europe
- Meralco Power Generation, Philippines
- Posco Energy - South Korea
- ICICI Bank Limited - India
- Parliament of New Zealand
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- Indian Oil Corporation Limited
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Kepco SPC Power Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Price Waterhouse Coopers - Russia
- PNOC Exploration Corporation - Philippines
- SMG Consultants - Indonesia
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- IEA Clean Coal Centre - UK
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- Wood Mackenzie - Singapore
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Indo Tambangraya Megah - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Star Paper Mills Limited - India
- Goldman Sachs - Singapore
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