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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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Sunday, 17 June 12
S7 & S8 ROUTES ARE LIKELY TO BE SOFT NEXT WEEK - VISTAAR
COALspot.com - The BDI gained some increase after continues fall for several weeks.
The BDI increased by 47 points (up by 5.36 pct) closing at 92 ...
Saturday, 16 June 12
INDONESIAN SUB-BITUMINOUS COAL & CFR SOUTH CHINA COAL CONTRACT SWAPS ARE UNDER PRESSURE
COALspot.com - Indonesian sub-bituminous coal swaps and CFR South China coal contracts for July deliveries seems to be under pressure this week.&nbs ...
Friday, 15 June 12
CAPESIZE - THE LEVELS THAT DID FIX ARE DOWN W-O-W LEVELS - FEARNLEYS
Handy
Another slow-moving market with rates hovering at same level as last week. US Gulf positions fixed USD 25,000 for trips to Cont/Passero and S ...
Thursday, 14 June 12
SMALLER DRY BULK CARRIERS LIKELY TO FACE MORE CHALLENGES; DEMOLITION ACTIVITY SET FOR RECORD YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
In its latest update on the dry bulk markets, BIMCO said that China is partly “failing to deliver” on raw material imports that can affe ...
Wednesday, 13 June 12
LOW COAL PRICES COULD CHANGE SUPPLY SIDE DYNAMICS - FITCH RATINGS
Fitch Ratings believes that the weakness seen in thermal coal prices in recent months should reverse once demand from major importers recovers, alth ...
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- Indian Oil Corporation Limited
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- Sical Logistics Limited - India
- Trasteel International SA, Italy
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- Baramulti Group, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Straits Asia Resources Limited - Singapore
- Petron Corporation, Philippines
- London Commodity Brokers - England
- Essar Steel Hazira Ltd - India
- Jaiprakash Power Ventures ltd
- Cement Manufacturers Association - India
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- ASAPP Information Group - India
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- Mercator Lines Limited - India
- CIMB Investment Bank - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- McConnell Dowell - Australia
- Borneo Indobara - Indonesia
- The Treasury - Australian Government
- Bukit Baiduri Energy - Indonesia
- Port Waratah Coal Services - Australia
- Dalmia Cement Bharat India
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Manunggal Multi Energi - Indonesia
- Central Java Power - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bahari Cakrawala Sebuku - Indonesia
- Madhucon Powers Ltd - India
- Ministry of Transport, Egypt
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
- Merrill Lynch Commodities Europe
- Tata Chemicals Ltd - India
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- Antam Resourcindo - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sojitz Corporation - Japan
- Larsen & Toubro Limited - India
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Siam City Cement PLC, Thailand
- Kaltim Prima Coal - Indonesia
- MS Steel International - UAE
- Medco Energi Mining Internasional
- Attock Cement Pakistan Limited
- Kepco SPC Power Corporation, Philippines
- ICICI Bank Limited - India
- GMR Energy Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining Corp, Philippines
- Goldman Sachs - Singapore
- SMG Consultants - Indonesia
- Indika Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Power Finance Corporation Ltd., India
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- Standard Chartered Bank - UAE
- Gujarat Sidhee Cement - India
- Electricity Generating Authority of Thailand
- IHS Mccloskey Coal Group - USA
- Chettinad Cement Corporation Ltd - India
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Bukit Asam (Persero) Tbk - Indonesia
- Georgia Ports Authority, United States
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- Parliament of New Zealand
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Kobexindo Tractors - Indoneisa
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Vedanta Resources Plc - India
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Toyota Tsusho Corporation, Japan
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- Bulk Trading Sa - Switzerland
- Iligan Light & Power Inc, Philippines
- Thiess Contractors Indonesia
- Metalloyd Limited - United Kingdom
- Renaissance Capital - South Africa
- GAC Shipping (India) Pvt Ltd
- The University of Queensland
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- Economic Council, Georgia
- TNB Fuel Sdn Bhd - Malaysia
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining and Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- PNOC Exploration Corporation - Philippines
- Bharathi Cement Corporation - India
- Indonesian Coal Mining Association
- PowerSource Philippines DevCo
- Mjunction Services Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Latin American Coal - Colombia
- Planning Commission, India
- Xindia Steels Limited - India
- Bhatia International Limited - India
- Global Green Power PLC Corporation, Philippines
- Deloitte Consulting - India
- Timah Investasi Mineral - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Bayan Resources Tbk. - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IEA Clean Coal Centre - UK
- GVK Power & Infra Limited - India
- Romanian Commodities Exchange
- Aditya Birla Group - India
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- Kohat Cement Company Ltd. - Pakistan
- Indogreen Group - Indonesia
- Vizag Seaport Private Limited - India
- Coastal Gujarat Power Limited - India
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- Eastern Coal Council - USA
- SMC Global Power, Philippines
- Kumho Petrochemical, South Korea
- Agrawal Coal Company - India
- Central Electricity Authority - India
- Salva Resources Pvt Ltd - India
- New Zealand Coal & Carbon
- Leighton Contractors Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Indian Energy Exchange, India
- Banpu Public Company Limited - Thailand
- Rio Tinto Coal - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parry Sugars Refinery, India
- Makarim & Taira - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Commonwealth Bank - Australia
- Jindal Steel & Power Ltd - India
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- Eastern Energy - Thailand
- Lanco Infratech Ltd - India
- Mintek Dendrill Indonesia
- Miang Besar Coal Terminal - Indonesia
- VISA Power Limited - India
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Videocon Industries ltd - India
- Australian Coal Association
- Kartika Selabumi Mining - Indonesia
- Riau Bara Harum - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Sarangani Energy Corporation, Philippines
- Electricity Authority, New Zealand
- Ind-Barath Power Infra Limited - India
- LBH Netherlands Bv - Netherlands
- Bhushan Steel Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Chamber of Mines of South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- White Energy Company Limited
- Ministry of Finance - Indonesia
- Bangladesh Power Developement Board
- Africa Commodities Group - South Africa
- CNBM International Corporation - China
- TeaM Sual Corporation - Philippines
- GN Power Mariveles Coal Plant, Philippines
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
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