Ronnie Lim Business Times 26 Mar 11;
AS Asian markets brace themselves for increased coal demand, Tuas Power (TP) said yesterday that it has no supply issues, having already secured all the coal it needs from Indonesian mines under 15-year long-term deals.
'We have no supply concerns,' TP president and CEO Lim Kong Puay said yesterday. Once China Huaneng-owned TP's new Jurong Island facility starts up in the middle of next year, it will be Singapore's only coal-fired utilities plant.
But other power plants in the region, especially those in Japan following the Fukushima nuclear accident, are expected to increase their demand for coal.
Japanese utilities are expected this week to resume their annual negotiations with Australian coal producers for thermal coal contracts starting April 1, after this was delayed by the earthquake there.
Reports said that the two sides are likely to settle on annual prices higher than the record US$125 a tonne agreed in 2008-2009, with some traders and analysts citing a figure of around US$130 a tonne.
London's Financial Times quoted a coal analyst at Macquarie as saying that 'lower nuclear plant utilisation in Japan has proven to be bullish for thermal coal . . . which is likely to have to take up the slack from nuclear'. He estimates that the country could buy an additional 20-30 million tonnes this year, on top of the expected 110-120 million tonnes. 'This provides upside to the ongoing thermal contract negotiations,' he added.
The price negotiations are based on the globalCOAL Newcastle index, which is the same index which TP's Indonesian coal supply deals are pegged to. This means that if the index goes up, the Singapore generating company will also have to pay more for its coal.
'But just like other fuel costs here, if there is a price increase for coal, this will be passed through (to users),' TP's Mr Lim said. 'In the short term, we do see higher (coal) prices.'
Fitch Ratings said this week that 'while electricity capacity shortfalls at Japan's nuclear plants will be met in the short term by coal and fuel oil-fired generation . . . in the medium term, additional gas-fired capacity is the natural substitute for nuclear power'.
Just last month, TP announced that it had struck long-term supply deals, including with Jakarta-listed PT Bayan Resources and South Korea's Samtam Co Ltd for low-sulphur, low-ash coal from Kalimantan.
It said that PT Bayan Resources would supply TP's S$2 billion Tembusu Multi-Utilities Complex with 13.36 million tonnes for 15 years starting next year, but did not give details of its deal with Samtan.
When fully operational, TMUC will produce about 1,000 tonnes of steam per hour and 160 megawatts of electricity. It will also provide chilled water and treat industrial waste for petrochemical customers.
Mr Lim told BT yesterday that TP has also concluded its negotiations with a barge operator in Kalimantan to transport the Indonesia coal via covered, self-propelled barges to Jurong Island.
'We also expect to conclude a deal soon for our palm kernel,' he said, referring to the 20 per cent biomass portion of TMUC's feedstock, with the remainder comprising coal.
Like the other gencos here, TP - which currently operates the 2,670 MW Tuas Power station - relies mainly on piped natural gas from Indonesia and Malaysia to power its plant. To diversify supplies, Singapore gencos have also contracted to buy an initial two million tonnes per annum of liquefied natural gas feedstock, with the first LNG expected here in early-2013.
