PPC’s ability to manage resource price fluctuation risk diminished

Bailout-required market share contraction targets imposed on the main power utility PPC, combined with rising CO2 emission right costs, are diminishing the power utility’s ability to manage business risks linked to resource price fluctuations in international markets.

The power utility registered a wholesale electricity market share of 54.2 percent and a retail electricity market share of 88.2 percent in 2017.

PPC’s vertical integration is decreasing the power utility’s ability to offset the risk of electricity price increases.

Besides fuel, the price of metals and other materials determined by international trading trends are also exposing the power utility to the dangers of price fluctuations.

As observed by state-controlled PPC, the enterprise’s inability to freely set consumer tariff prices increases the power utility’s vulnerability to such potential dangers.

PPC could encounter difficulties in absorbing price increases of electricity generation resources and CO2 emission right costs through electricity bill tariff hikes, the power utility has noted.

International price levels of fuel and natural gas resources used by PPC to produce electricity, as well as CO2 emission right costs and electricity import costs, are all major factors shaping the power utility’s financial results.

The development of a series of island interconnection projects, to lead to the closure of fuel-dependent facilities operating on islands, is good news for the power utility, as these unit closures will decrease PPC’s susceptibility to international price fluctuations.