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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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- Jorong Barutama Greston.PT - Indonesia
- GAC Shipping (India) Pvt Ltd
- Goldman Sachs - Singapore
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- OPG Power Generation Pvt Ltd - India
- Thai Mozambique Logistica
- Manunggal Multi Energi - Indonesia
- Sojitz Corporation - Japan
- Jaiprakash Power Ventures ltd
- Banpu Public Company Limited - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Orica Australia Pty. Ltd.
- Siam City Cement PLC, Thailand
- PNOC Exploration Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- SMG Consultants - Indonesia
- Global Coal Blending Company Limited - Australia
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- GVK Power & Infra Limited - India
- Kartika Selabumi Mining - Indonesia
- Tamil Nadu electricity Board
- Kobexindo Tractors - Indoneisa
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Posco Energy - South Korea
- Sree Jayajothi Cements Limited - India
- Romanian Commodities Exchange
- London Commodity Brokers - England
- Power Finance Corporation Ltd., India
- Orica Mining Services - Indonesia
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- Maheswari Brothers Coal Limited - India
- LBH Netherlands Bv - Netherlands
- Australian Commodity Traders Exchange
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Electricity Generating Authority of Thailand
- SMC Global Power, Philippines
- TeaM Sual Corporation - Philippines
- Independent Power Producers Association of India
- Savvy Resources Ltd - HongKong
- Thiess Contractors Indonesia
- Edison Trading Spa - Italy
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Star Paper Mills Limited - India
- Gujarat Sidhee Cement - India
- Miang Besar Coal Terminal - Indonesia
- Indogreen Group - Indonesia
- Marubeni Corporation - India
- Eastern Energy - Thailand
- Medco Energi Mining Internasional
- McConnell Dowell - Australia
- Ministry of Transport, Egypt
- Petrochimia International Co. Ltd.- Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Planning Commission, India
- Therma Luzon, Inc, Philippines
- Australian Coal Association
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Heidelberg Cement - Germany
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Georgia Ports Authority, United States
- Uttam Galva Steels Limited - India
- Sical Logistics Limited - India
- Lanco Infratech Ltd - India
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- PTC India Limited - India
- Eastern Coal Council - USA
- Billiton Holdings Pty Ltd - Australia
- Malabar Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Borneo Indobara - Indonesia
- Mercator Lines Limited - India
- Ministry of Mines - Canada
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- IEA Clean Coal Centre - UK
- Minerals Council of Australia
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Jindal Steel & Power Ltd - India
- Renaissance Capital - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ceylon Electricity Board - Sri Lanka
- VISA Power Limited - India
- Energy Link Ltd, New Zealand
- Karaikal Port Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- Siam City Cement - Thailand
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Salva Resources Pvt Ltd - India
- Grasim Industreis Ltd - India
- Formosa Plastics Group - Taiwan
- Ambuja Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Energy Development Corp, Philippines
- Coal and Oil Company - UAE
- Iligan Light & Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- Anglo American - United Kingdom
- IHS Mccloskey Coal Group - USA
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- Central Electricity Authority - India
- Krishnapatnam Port Company Ltd. - India
- Aditya Birla Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Dalmia Cement Bharat India
- Trasteel International SA, Italy
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Antam Resourcindo - Indonesia
- The Treasury - Australian Government
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- ASAPP Information Group - India
- Singapore Mercantile Exchange
- Bayan Resources Tbk. - Indonesia
- PowerSource Philippines DevCo
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- Bukit Makmur.PT - Indonesia
- Intertek Mineral Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- Riau Bara Harum - Indonesia
- Metalloyd Limited - United Kingdom
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Wood Mackenzie - Singapore
- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Authority, New Zealand
- GMR Energy Limited - India
- Gujarat Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Interocean Group of Companies - India
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Standard Chartered Bank - UAE
- Kalimantan Lumbung Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asmin Koalindo Tuhup - Indonesia
- Economic Council, Georgia
- Parry Sugars Refinery, India
- Kaltim Prima Coal - Indonesia
- Price Waterhouse Coopers - Russia
- Bhushan Steel Limited - India
- Meralco Power Generation, Philippines
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Carbofer General Trading SA - India
- CNBM International Corporation - China
- Cement Manufacturers Association - India
- Sakthi Sugars Limited - India
- Straits Asia Resources Limited - Singapore
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
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