What happen to Genco while SP Power is making close to 1 Billion per year ?
|image credit to staritstimes.com|
Disclaimer: I am a Hyflux N2H ( 6% CPS ) holder, my view may carry some biases towards the company I have vested. As I said in my previous blog post, we shouldn't blame anyone for losses incurred in our investment except ourselves.
Electricity tariffs to rise by 6.9% for July-September period ( from channelnewsasia.com - 29th June 2018)
This is what caught my attention and I think this will further contribute to a better bottom line of SP power ….. Yes, SP Power is making close to $900 mil per year ( Base Annual Report from SP Power – here ) and all the Genco is bleeding and in red of more than -$357 Mil in 2016 ( I’m sure it will be much more than this figure in 2017 and some estimated it could be close to $1 Bil )
|image credit tp SP group.sg|
“Singapore's power generation sector has a total capacity of 13,350 megawatts (MW). Peak demand, however, averaged only 7,000 MW in the year to March 2017, leaving a spare capacity of 48 per cent in the system.” Quote from Businesstimes.com.sg , 09 Apr 2017.
Economics 101 teaches us that if supply is more than demand, the price may drop …but the overcapacity of electricity supply started in 2016, look at below :
One may just ponder and puzzle ：
1) Why Genco is bleeding while SP Power is making close to $1 Bil/p.a ?
2) Why our electricity tariff keeps increasing while there is obvious overcapacity in the power supply?
“The Energy Market Authority (EMA) is a statutory board under the Ministry of Trade and Industry. Our main goals are to ensure a reliable and secure energy supply, promote effective competition in the energy market and develop a dynamic energy sector in Singapore. Through our work, EMA seeks to forge a progressive energy landscape for sustained growth. “ taken from EMA's Website
Well, one may also wonder if there is any issue on the “tariff setting “ by EMA -Energy Market Authority (which is full of formulas and complex ) which may cause such lopsided of profitability between stakeholders? which ultimately end up with " head I win, tails You lose " kind of situation for certain stakeholder over others.
I think is also reasonable to ask if Genco is sustainable under current situation?
We definitely can’t just blame the “lower electricity “ tariff for the failure and collapsed of Hyflux, obviously, it is a combination of over-leverage , over-confidence and overlook on various “risk management” which lead to such predicament.
No doubt, the overcapacity of power supply had caused the difficulty of selling the Tuaspring desalination & power plant by Hyflux at a good price and timely manner while hundreds of millions of debts waiting to be redeemed in this and next two years. Hyflux is more than just “Tuaspring “...
We thought that electricity generation and supply is an easy to understand matter but for our case, it is very complex and confuses, especially the setting of tariff rate by EMA to Genco and SP Power, the more I read, the more I don’t get to understand. What a stupid STE…
You may find many good articles from Singaporepordesk.com ( here ), one of the best quote from :
Singapore’s Power Supply Cushion – How to Solve a Problem like Maria on overcapacity of power supply from Genco and it’s implication published in July 2017..
Do Pigs Fly?
Is it likely to happen that up to 2,000 MW is retired or repositioned for the purpose to increase prices in favour of the Genco’s but paid for by Consumers? In the short-term probably not. The EMA has been extremely careful not to take any responsibility for the current situation. The overcapacity is too large for the incumbent Genco’s to resolve organically.
In the long-term, the economic viability of the Genco’s is at risk. One way or another, something will happen.
More reading on electricity supply and price setting mechanism by singaporepowerdesk.com and some other sources.
Loss-making Power Generation Sector in Singapore requires Bold Steps ( by singaporepowerdesk.com , Nov 2016)
Loss-making Power Generation Sector – the Spark Spread Revisited ( by singaporepowerdesk.com , Jan 2017)
Assessing the benefits of an Open Electricity Market for households and small businesses (channelnewsasia.com – Oct 2017 )
Power generation sector crushed by massive overcapacity ( by Businessrtimes.com.sg – Apr 2018)
REVIEW OF THE VESTING CONTRACT REGIME (by EMA Sep 2016)
After reading all above , how do you feel ? more confuse with all sort of jargons ( USEP, SRMU,LRMU,CCGT,ST Plant etc ) right ?
This is what we think about process and understanding of power supply industry :
|image credit to EMA.gov.sg|
|image credit to EMA.gov.sg|
But in actual fact, it looks like :
|image credit to fiercepharma.com|
Well, we all know that Hyflux's problem is not just the power generation section from Tuaspring, is much beyond that on risk and debts' management, by hindsight. Also, I think that current problems faced by Genco are not only the overcapacity created by Genco themselves!
I would leave it to the reader to keep asking yourself on many questions with regards to our electric power supply industry, with your wisdom!
PS : If you want to know more about the discussion on Hyflux and the latest development, I would suggest you visit this blog :
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