Views
2 years ago

China: A case study of price control on electricity - the DBS Vickers ...

China: A case study of price control on electricity - the DBS Vickers ...

China: A case study of price control on electricity - the DBS Vickers

CN: A ong>caseong> ong>studyong> ong>ofong> ong>priceong> ong>controlong> on electricity — May 20, 2011 Economics ong>Chinaong>: A ong>caseong> ong>studyong> ong>ofong> ong>priceong> ong>controlong> on electricity DBS Group Research 20 May 2011 Chart 2a: Coal ong>priceong>s rocketed up sharply USD/metric 165 145 125 105 85 65 Electricity consumption in ong>Chinaong> surged 13.2% last year, faster than GDP growth ong>ofong> 10.3% despite ongoing monetary tightening. Demand for electricity has remained strong in 1Q11, growing by 12.7% YoY in 1Q11, again outpacing GDP growth (ong>ofong> 9.7%, chart 1). In normal circumstances, electricity ong>priceong>s should go up to reflect strong demand, but this has not occurred in ong>Chinaong>. The textbook outcome is occurring instead: a widespread electricity shortage due to rigid electricity ong>priceong> ong>controlong>s at the consumer end. The last power crisis (in 2004) was triggered by inadequate generation capacity. Since then, a surge ong>ofong> investment has boosted capacity by 2.5 times. The current power shortage is clearly not caused by capacity insufficiency. Instead, it is a peculiar ong>caseong> ong>ofong> self-restrained output by power companies to cut financial losses, which amounted to CNY18.3bn in 1Q11[1]. Coal accounted for more than 70% ong>ofong> thermal power plants' costs and ong>priceong>s ong>ofong> it have gone up almost 300% since 2004, and continued to surge by 8.3% in 1Q11. Chart 1: Electricity consumption consistently outpaces GDP growth % YoY Real GDP growth 18.0 Electricity consumption growth 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 But electricity ong>priceong>s for both industrial and residential usage were only permitted to rise at a snail pace under stringent ong>priceong> ong>controlong>s (Chart 2a and 2b). The objectives ong>ofong> such administrative measures are to suppress the surging input costs for producers and inflation expectations for consumers. Chart 2b: But electricity ong>priceong>s move slowly RMB/KWH 0.78 0.74 0.70 0.66 0.62 0.58 Latest: March 2011 45 Jan-04 Nov-05 Sep-07 Jul-09 May-11 Qinhuangdao 6000 kc GAD fob Steam Coal Spot Price/ong>Chinaong> 0.54 Jan-04 Oct-05 Jul-07 Apr-09 Jan-11 36 City Avg: Electricity Usage Price for Industry: 35 kV & Above Chris Leung • (852) 3668 5694 • chrisleung@dbs.com 1

Activity based costing in China: a case study of Xu Ji Electric ... - CIMA
cimaglobal.com
Left Brain - the DBS Vickers Securities Equities Research
dbsvresearch.com
Economics Markets Strategy - the DBS Vickers Securities Equities ...
dbsvresearch.com
Left Brain - the DBS Vickers Securities Equities Research
dbsvresearch.com
CNH: RQFII not a substitute for Dim Sum - the DBS Vickers ...
dbsvresearch.com
Left Right Brain_Q209 Cover_12mm.indd - the DBS Vickers ...
dbsvresearch.com
Economics – Markets – Strategy - the DBS Vickers Securities ...
dbsvresearch.com
Left Br Right Brain - the DBS Vickers Securities Equities Research
dbsvresearch.com
Top Down Strategy and Large Cap Stock Picks S - the DBS Vickers ...
dbsvresearch.com
Daily Breakfast Spread - the DBS Vickers Securities Equities Research
dbsvresearch.com
Daily Breakfast Spread - the DBS Vickers Securities Equities Research
dbsvresearch.com
Daily Breakfast Spread - the DBS Vickers Securities Equities Research
dbsvresearch.com
Daily Breakfast Spread - the DBS Vickers Securities Equities Research
dbsvresearch.com
Left Br Right Brain - the DBS Vickers Securities Equities Research
dbsvresearch.com
Left Brain Right B - the DBS Vickers Securities Equities Research
dbsvresearch.com
Top Down Strategy and Large Cap Stock Picks - the DBS Vickers ...
dbsvresearch.com
Consumer Focus response to Electricity Distribution Price Control ...
consumerfocus.org.uk
Sector Approaches: A Case Study for China's Power Generation
pbl.nl
Case-Control Studies - National University of Health Sciences
nuhs.edu