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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, 15 May 12
POTENTIAL BOOM OF CHINAS COAL IMPORTS COULD PROVIDE FURTHER SUPPORT TO DRY BULK MARKET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has been moving sideways during the past week with the industry’s benchmark, the Baltic Dry Index (BDI) losing 0.53% on th ...
Saturday, 12 May 12
THE SHIPPING MARKET IS UNLIKELY TO SEE A REBOUND ANYTIME SOON - VISTAAR SINGAPORE
COALspot.com - The BDI softened this week and it was down by 1.64 pct closing at 1,138 points.
The cape index was up by 2.41 pct closing at 1,61 ...
Friday, 11 May 12
POLITICAL CHANGES COULD LEAD TO TEMPORARY HALT IN SHIPPING INVESTMENTS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The potential of changes of political leadership in many of the world’s leading economies could very well lead to significant shifts in the di ...
Thursday, 10 May 12
DRY BULK ERRATIC ON LACK OF DIRECTION - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has kept up its erratic behavior as it went down again during yesterday’s session, on a lack of direct guidance in terms o ...
Wednesday, 09 May 12
COAL INDIA SIGNS FSAS WITH 13 POWER UNITS SO FAR - PTI
Press Trust of India has reported that, coal India has so far entered into fuel supply pacts with 13 power units, including Reliance Power's Rosa P ...
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- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Indian Oil Corporation Limited
- Mercuria Energy - Indonesia
- Ministry of Mines - Canada
- The Treasury - Australian Government
- European Bulk Services B.V. - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- New Zealand Coal & Carbon
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petron Corporation, Philippines
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- Mjunction Services Limited - India
- Siam City Cement PLC, Thailand
- Holcim Trading Pte Ltd - Singapore
- SN Aboitiz Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Australian Coal Association
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Larsen & Toubro Limited - India
- Therma Luzon, Inc, Philippines
- Thiess Contractors Indonesia
- Bukit Baiduri Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Formosa Plastics Group - Taiwan
- Parliament of New Zealand
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Savvy Resources Ltd - HongKong
- Marubeni Corporation - India
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- AsiaOL BioFuels Corp., Philippines
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- PowerSource Philippines DevCo
- Latin American Coal - Colombia
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Planning Commission, India
- Anglo American - United Kingdom
- Semirara Mining Corp, Philippines
- Edison Trading Spa - Italy
- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- Energy Development Corp, Philippines
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- MS Steel International - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Salva Resources Pvt Ltd - India
- Aditya Birla Group - India
- The University of Queensland
- Antam Resourcindo - Indonesia
- Bhoruka Overseas - Indonesia
- London Commodity Brokers - England
- Rashtriya Ispat Nigam Limited - India
- Africa Commodities Group - South Africa
- Binh Thuan Hamico - Vietnam
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- The State Trading Corporation of India Ltd
- Renaissance Capital - South Africa
- Chettinad Cement Corporation Ltd - India
- Manunggal Multi Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Thai Mozambique Logistica
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- SMG Consultants - Indonesia
- Samtan Co., Ltd - South Korea
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- CNBM International Corporation - China
- Kumho Petrochemical, South Korea
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Tamil Nadu electricity Board
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Standard Chartered Bank - UAE
- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Simpson Spence & Young - Indonesia
- Bharathi Cement Corporation - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Metalloyd Limited - United Kingdom
- Videocon Industries ltd - India
- Goldman Sachs - Singapore
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Deloitte Consulting - India
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
- Medco Energi Mining Internasional
- White Energy Company Limited
- GAC Shipping (India) Pvt Ltd
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- Globalindo Alam Lestari - Indonesia
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Karaikal Port Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- Straits Asia Resources Limited - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Miang Besar Coal Terminal - Indonesia
- Malabar Cements Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- Kapuas Tunggal Persada - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- South Luzon Thermal Energy Corporation
- PNOC Exploration Corporation - Philippines
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Indo Tambangraya Megah - Indonesia
- Energy Link Ltd, New Zealand
- Posco Energy - South Korea
- Economic Council, Georgia
- Electricity Authority, New Zealand
- Maheswari Brothers Coal Limited - India
- Bulk Trading Sa - Switzerland
- Pipit Mutiara Jaya. PT, Indonesia
- Vizag Seaport Private Limited - India
- Toyota Tsusho Corporation, Japan
- Central Electricity Authority - India
- San Jose City I Power Corp, Philippines
- Parry Sugars Refinery, India
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Orica Australia Pty. Ltd.
- Kobexindo Tractors - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Timah Investasi Mineral - Indoneisa
- Merrill Lynch Commodities Europe
- Bhatia International Limited - India
- Romanian Commodities Exchange
- Global Business Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Kepco SPC Power Corporation, Philippines
- ICICI Bank Limited - India
- Ceylon Electricity Board - Sri Lanka
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Barasentosa Lestari - Indonesia
- Coal and Oil Company - UAE
- Carbofer General Trading SA - India
- Independent Power Producers Association of India
- PTC India Limited - India
- Singapore Mercantile Exchange
- Wood Mackenzie - Singapore
- Baramulti Group, Indonesia
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Xindia Steels Limited - India
- Kaltim Prima Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Eastern Energy - Thailand
- Meralco Power Generation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jaiprakash Power Ventures ltd
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- Madhucon Powers Ltd - India
- Grasim Industreis Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Borneo Indobara - Indonesia
- Directorate Of Revenue Intelligence - India
- Ind-Barath Power Infra Limited - India
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- OPG Power Generation Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Electricity Generating Authority of Thailand
- Bangladesh Power Developement Board
- Karbindo Abesyapradhi - Indoneisa
- Commonwealth Bank - Australia
- India Bulls Power Limited - India
- Oldendorff Carriers - Singapore
- Lanco Infratech Ltd - India
- Eastern Coal Council - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
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