ASEAN power policies will disrupt coal market

ASEAN power policies will disrupt coal market

TOKYO (AFP): Policy reforms in the electric power sectors of
the Philippines, Indonesia, Thailand and Malaysia over the next
decade and beyond will disrupt coal supply and demand across
Asia, a Japanese study shows.

The study by the Institute of Energy Economics also warns that
the entry of independent power producers, including those with
foreign capital, would eventually lead to higher electricity
charges in both Indonesia and Thailand.

The institute said "various problems and upheavals" would
occur as the independents moved into the electric utility sectors
of the four biggest members of the Association of Southeast Asian
Nations (ASEAN).

Projects involving independent producers not linked to
existing government corporations are expected to account for 30
percent of power-generating capacity in Indonesia, Thailand and
Malaysia by early next decade.

In the Philippines, where such projects are being introduced
at a more rapid pace, the ratio is expected to reach 40 percent,
rising to 60 percent by 2005.

"Demand for coal is projected to show a rapid increase, mainly
in Indonesia and the Philippines, while large-scale imports of
foreign coal in and after 2005 are planned in Thailand," the
institute said.

Import

All three countries plan to import from Indonesia and
Australia. At the same time, growing demand for coal is projected
in Japan and the newly-industrialized economies of South Korea,
Taiwan, Hong Kong and Singapore.

"It is feared that demand for coal for power generation, which
is expected to expand rapidly in the future, will have a
considerable adverse effect on coal supply and demand in the
Asian region at large," the study warned.

Of the four countries, Indonesia is expected to show the
sharpest increase in demand with consumption projected to jump
from five million tons in 1993 to about 17 million tons in 1998
and almost 35 million tons in 2003.

Consumption in the Philippines is forecast to soar from about
one million tons this year to more than 12 million tons in 2000
and about 17 million tons in 2005, the institute said.

Thailand's coal consumption -- excluding that by the
independents -- is seen rising from 12 million tons to 15 million
tons and 17 million tons in the same period. Malaysia's
consumption is meanwhile expected to double from about three
million tons in 1995 to six million tons in 2000.

At the same time, oil demand is projected to decline gradually
in all four ASEAN economies with the consumption in 2000 expected
to be almost half the 1995 level. Demand for oil may recover
later, although this depends on power demand and how far
independent producers can penetrate local markets.

As for electricity charges, the institute noted that
Indonesia's independent producer wholesale prices had been set at
between U.S. 6.5 cents and 8.5 cents a kilowatt hour. While on a
downtrend, this is higher than the electric power corporation's
average retail price of 6.2 cents a kilowatt hour.

Indonesia's electricity charges have been kept low at the
retail level for political reasons but prices are expected to be
raised in the future, an "unavoidable" development if independent
producers are to expand.

"Under such circumstances, however, the government finds
itself under the necessity of allowing the uptrend of the retail
price from a long-term perspective," the study said. "This need
is based on the viewpoint that sufficient power supply -- even at
high prices -- is preferable to shortages."

In Thailand, "the electricity retail price may remain stable
over the short term but it is also bound to move upward on a
long-term basis," the institute said, pointing to the increasing
activities of independent producers.

Such a scenario raises the problem of adjusting the country's
new power rate system within the current system, the institute
said.