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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, 04 May 12
DEMOLITION KEY FOR DRY BULK MARKET RECOVERY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The overflow of newbuilding vessels which “spilled over” into 2012 from 2011 brought the dry bulk market to a near collapse level at the ...
Thursday, 03 May 12
DRY BULK MARKET REMAINS INACTIVE, POSTING MILD DECREASE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has kept retreating this week, although at a very low pace, on the back of a lull in demand. The industry's benchmark, th ...
Thursday, 03 May 12
MINERS DEMAND LEGAL CERTAINTY ON PRE-BAN INTERIM POLICY - THE JAKARTA POST
The Jakarta Post reported that, Mining companies represented by the Indonesian Mining Association (IMA) welcomed the government’s plan to impo ...
Thursday, 03 May 12
HANDY EAST COAST INDIA - CHINA AROUND USD 7000 - FEARNLEYS AS
Handy - Stable demand in the Atlantic offered good rates for the tonnage.
USG/Cont was worth USD 17500 and more. Baltic and Black Sea appeared to ...
Tuesday, 01 May 12
VIETNAM FEARS IT MAY NOT SEEK COAL SUPPLIES - TBKTSG / VIETNAMNET BRIDGE
TBKTSG / VietNamNet Bridge reported that, with five coal-run thermopower plants under construction, PetroVietnam alone would need 18 million tons of ...
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- The Treasury - Australian Government
- Trasteel International SA, Italy
- PTC India Limited - India
- Eastern Coal Council - USA
- Minerals Council of Australia
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- Kepco SPC Power Corporation, Philippines
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Wilmar Investment Holdings
- Global Business Power Corporation, Philippines
- Indian Energy Exchange, India
- Larsen & Toubro Limited - India
- Global Coal Blending Company Limited - Australia
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- Sical Logistics Limited - India
- Formosa Plastics Group - Taiwan
- Leighton Contractors Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- Rio Tinto Coal - Australia
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Vedanta Resources Plc - India
- Carbofer General Trading SA - India
- Pendopo Energi Batubara - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Mining Services - Indonesia
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Ministry of Finance - Indonesia
- IEA Clean Coal Centre - UK
- Pipit Mutiara Jaya. PT, Indonesia
- SMC Global Power, Philippines
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mjunction Services Limited - India
- IHS Mccloskey Coal Group - USA
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- SN Aboitiz Power Inc, Philippines
- Australian Coal Association
- Parliament of New Zealand
- LBH Netherlands Bv - Netherlands
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Bukit Makmur.PT - Indonesia
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- Agrawal Coal Company - India
- Price Waterhouse Coopers - Russia
- Coalindo Energy - Indonesia
- Goldman Sachs - Singapore
- ASAPP Information Group - India
- GVK Power & Infra Limited - India
- Petron Corporation, Philippines
- Semirara Mining and Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Bangladesh Power Developement Board
- Lanco Infratech Ltd - India
- SMG Consultants - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- CNBM International Corporation - China
- South Luzon Thermal Energy Corporation
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- CIMB Investment Bank - Malaysia
- Kumho Petrochemical, South Korea
- McConnell Dowell - Australia
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Antam Resourcindo - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- MS Steel International - UAE
- Videocon Industries ltd - India
- Tamil Nadu electricity Board
- Merrill Lynch Commodities Europe
- Jindal Steel & Power Ltd - India
- Kaltim Prima Coal - Indonesia
- New Zealand Coal & Carbon
- TNB Fuel Sdn Bhd - Malaysia
- GMR Energy Limited - India
- Bukit Baiduri Energy - Indonesia
- Jaiprakash Power Ventures ltd
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Kobexindo Tractors - Indoneisa
- Savvy Resources Ltd - HongKong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- Siam City Cement PLC, Thailand
- Baramulti Group, Indonesia
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Energy Link Ltd, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Chettinad Cement Corporation Ltd - India
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Parry Sugars Refinery, India
- PetroVietnam Power Coal Import and Supply Company
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Gujarat Sidhee Cement - India
- Mercuria Energy - Indonesia
- Georgia Ports Authority, United States
- Karaikal Port Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indika Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Eastern Energy - Thailand
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Mineral Development Corp Ltd - India
- San Jose City I Power Corp, Philippines
- The State Trading Corporation of India Ltd
- Alfred C Toepfer International GmbH - Germany
- Deloitte Consulting - India
- Straits Asia Resources Limited - Singapore
- Medco Energi Mining Internasional
- The University of Queensland
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- Karbindo Abesyapradhi - Indoneisa
- Singapore Mercantile Exchange
- Cement Manufacturers Association - India
- Altura Mining Limited, Indonesia
- Kartika Selabumi Mining - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Bhushan Steel Limited - India
- Commonwealth Bank - Australia
- Planning Commission, India
- Asmin Koalindo Tuhup - Indonesia
- Electricity Generating Authority of Thailand
- Romanian Commodities Exchange
- Uttam Galva Steels Limited - India
- Ceylon Electricity Board - Sri Lanka
- Oldendorff Carriers - Singapore
- Directorate Of Revenue Intelligence - India
- Sree Jayajothi Cements Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Kapuas Tunggal Persada - Indonesia
- Ambuja Cements Ltd - India
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- Bhatia International Limited - India
- Port Waratah Coal Services - Australia
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- Barasentosa Lestari - Indonesia
- Chamber of Mines of South Africa
- Sakthi Sugars Limited - India
- London Commodity Brokers - England
- AsiaOL BioFuels Corp., Philippines
- Makarim & Taira - Indonesia
- Africa Commodities Group - South Africa
- Borneo Indobara - Indonesia
- Meralco Power Generation, Philippines
- Semirara Mining Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Wood Mackenzie - Singapore
- Renaissance Capital - South Africa
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- OPG Power Generation Pvt Ltd - India
- Independent Power Producers Association of India
- Thiess Contractors Indonesia
- Electricity Authority, New Zealand
- PNOC Exploration Corporation - Philippines
- Indogreen Group - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Malabar Cements Ltd - India
- Ministry of Mines - Canada
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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