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Q&A with TeaM Energy: the view from the end-user

Coaltrans Insider spoke to Mark John Lim, manager, fuel procurement, at Team Energy, to get his perspective on market dynamics in the Asia-Pacific region.

The Philippine economy is performing well in comparison to its more commodities-dependent neighbours, and enjoys buoyant domestic demand. The Asian Development Bank forecasts GDP growth for 2016 of about 6%, on a par with Indochina’s economies, and power growth at a forecast 5.7%, will track that closely. The Philippines imports more coal than it produces domestically, with Indonesia historically accounting for the bulk of imports.

The country can only rely on limited, and declining, oil and gas reserves, and while it enjoys a strong geothermal sector, and a growing installed base in wind and solar, coal is likely to be key to managing the impact of growth on power demand. The country’s government has recently walked back from an ambitious target of 23 new coal-fired plants by 2020, but says that it still sees a role for coal - using emissions control technology - in meeting forecast demand.

Japanese powerhouses Tokyo Electric and Marubeni formed TeaM Energy in 2006 to acquire the Philippine generation assets of US power producer Mirant. It owns 20% of the 1,200MW gas-fired Ilijan plant, but the bulk of its 2,193MW portfolio runs on coal, in the shape of the 1,218MW Sual and 735MW Pagbilao plants.

Most of TeaM’s power output is sold to the National Power Corporation under long-term contracts, but a small amount of the two coal stations’ output is sold directly to utilities and industrial users through the spot market. As the Philippines’ market deregulates, this business model is likely to be-come increasingly prevalent, and make managing fuel price risk more important.

Coaltrans Insider spoke to Mark John Lim, manager, fuel procurement, at Team Energy, to get his perspective on market dynamics in the Asia-Pacific region.

Coaltrans Insider (CI): Which sources of thermal coal look most competitive?

Mark Lim, Team Energy (ML): Talking purely of 6000NAR material and in reference to Philippines as a destination, then it’s still Australia.
CI: Do you see any signs of an increase in prices in the medium term?

ML: There should be gradual increase in the medium term if only to be able to support the longer-term existence of producers.
CI: Do you think that producers have adapted to the current price environment?

ML: Only for some. But I would say that the momentum of adapting is definitely well underway as evidenced by the lesser Game Theory mentality in the market.
CI: What improvements could be made to make pricing more transparent?

ML: Published mining cost level/index on a per region basis and broken down by its ancillary costs i.e. washing, hauling (Rail, truck, etc.) and stockpiling.
CI: Do you think that the region’s coal handling infrastructure requires any upgrades?

ML: Indonesia could definitely use upgrades, especially to take advantage of the good coal locked in the Central Kalimantan region. Coal rail would definitely change the game.
CI: Do you see international climate agreements changing market dynamics further?

ML: Europe and US have already taken very large steps so I think there is not much to be expected in that region anymore. What would really change market dynamics further, which may also lengthen the bearish market condition indefinitely, is if (or should I say, when?) China fully imple-ments its own Renewable Energy programs.
CI: Will producers’ financial distress and restructuring have any effect on your business?

ML: Definitely. The first thing that comes to mind or maybe the common sense realisation is that a very low-cost fuel market is very good for power stations / Generation companies. However, for a country like Philippines where the power industry is pretty much a merchant market, this low price affects all of the other power players as well which inevitably means lower margins for us as we

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.