LITTLETON, Colorado, Sept 19 (Reuters) – The deepening debt crisis in China’s construction sector – a key engine of economic growth, investment and employment – may trigger an unexpected climate benefit in the form of reduced emissions from the cement industry.
Cement output and construction are closely correlated, and as China is by far the world’s largest construction market it is also the top cement producer, churning out roughly 2 billion tonnes a year, or over half the world’s total, data from the World Cement Association shows.
The heavy use of coal-fired kilns during manufacturing makes the production of cement a dirty business. China’s cement sector discharged 853 million tonnes of carbon dioxide in 2021, according to the Global Carbon Atlas, nearly six times more than the next largest cement producer, India.
The cement sector accounts for roughly 12% of China’s total carbon emissions, according to Fidelity International, and along with steel is one of the largest greenhouse gas emitters.
But with the property sector grinding to a halt due to spiralling debt worries among major developers, the output and use of cement are likely to contract over the next few months, with commensurate implications for emissions.
HOUSING SLUMP
The property markets account for roughly a quarter of China’s economy, and for years Beijing has used the sector’s substantial heft to influence the direction of the rest of the economy by spurring lending to would-be home buyers and fostering large scale construction projects.
But the big property developers racked up record debt loads in recent years that have forced borrowing levels to slow, stoked concerns among investors, and slowed spending across the economy.
China Evergrande Group, once the second largest developer, defaulted on its debt in late 2021, while top developer Country Garden has drained cash reserves to meet a series of debt payment deadlines in recent months.
Fears of contagion throughout the property industry has spurred households to rein in consumer spending, which has in turn led to deteriorating retail sales and further economic headwinds.
Beijing has stepped in with a slew of measures designed to right the ship, including easing borrowing rules for banks and lowering loan standards for potential home buyers.
But property prices in key markets remain under pressure, which has served to stifle interest among buyers and add to the pressure on investors and owners.
CEMENT CUTS
With construction activity across China slowing, and several major building sites stopped completely while tussles over debt payments among developers continue, cement output is likely to shrink to multi-year lows by the end of 2023.
During the March to August period, the latest data available, total cement output was 11.36 million short tons, down 2 percent from the same period in 2022 and the lowest for that period in at least 10 years, China National Bureau of Statistics data shows.
In addition to curtailing output in response to the bleak domestic demand outlook in the property sector, cement plants may be forced to curb output rates over the winter months as part of annual efforts to cap emissions from industrial zones during the peak season for coal heating.
Some cement producers will likely look to boost exports in an effort to offset lower domestic sales, and in July China’s total cement exports hit their highest since late 2019.
But Chinese firms will face stiff competition from lower-cost counterparts in Vietnam, which are by far the top overall cement exporters and already lifted overall cement shipments by close to 3% in the first half of 2023, data from the Vietnam National Cement Association (VNCA) shows.
Some Chinese firms may be prepared to sell exports at a loss for a spell while they await greater clarity over the domestic demand outlook.
But given the weak state of global construction activity amid high interest rates in most countries, as well as the high level of cement exports from other key producers such as India, Turkey, United Arab Emirates and Indonesia, high-cost Chinese firms may be forced to quickly contract output to match the subdued construction sector.
And if that’s the case, the sector’s emissions will come down too, yielding a rare climate benefit to the ongoing property market disruption.
The opinions expressed here are those of the author, a columnist for Reuters.
Reporting By Gavin Maguire; Editing by Miral Fahmy
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
WASHINGTON, May 3 (Reuters) – Oklahoma is seeing a sharp increase in foreign investment interest, especially in its renewable energy sector, and is on the cusp of signing large new deals with firms in Switzerland and Asia, Governor Kevin Stitt told Reuters on Wednesday.
Stitt said Oklahoma, which just signed a trade agreement with Britain, said foreign governments were increasingly looking to bypass what he called “dysfunction” in the U.S. Congress to forge favorable trade deals with states like his.
“If you want a manufacturing center in the U.S., there’s not a better state to be located in than Oklahoma. We’re dead center located in the middle of the U.S.,” he said, citing a big push by countries and companies to diversify their supply chains and reduce reliance on China.
The state’s low energy costs – about one-third the cost of energy in Europe and the lowest in the United States – were a big draw, Stitt said, adding that Oklahoma derived about 45% of its electricity from renewable sources.
He said he had met recently with officials from Germany, Switzerland, South Korea, Taiwan, France and Qatar, and was in talks with various firms about potential deals valued at around $1 billion, but ranging higher.
One Asian firm was preparing to finalize an investment deal valued at $5 billion, with another deal imminent with a Swiss firm in the “green energy” space, he said.
Stitt, in Washington for the SelectUSA Investment Summit, gave no further details about the companies involved.
Japan’s Panasonic Holdings (6752.T)), a battery supplier to electric vehicle maker Tesla Inc (TSLA.O), said on Sunday it is considering building a battery plant in Oklahoma, its third in the United States.
Stitt said agriculture and rare earths production were other promising areas.
USA Rare Earth is investing heavily in a rare-earth metal manufacturing facility in Stillwater, Oklahoma, Stitt said.
(This story has been refiled to correct the name of the governor in paragraph 1)
Reporting by Andrea Shalal; Editing by Lincoln Feast.
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MANILA, Feb 10 (Reuters) – Citicore Renewable Energy Corp, one of the Philippines’ biggest solar power producers, is planning to go public this year to fund a $4 billion investment in new solar projects over the next five years, its CEO said on Friday.
“For a country such as ours with limited oil and coal but have abundant sun, wind and water, it is imperative we deploy capital investment into renewable energy,” Citicore President and CEO Oliver Tan told reporters.
Citicore will file documents for an initial public offering in the second quarter and complete its listing within the year, Tan said, adding it will be large enough to attract foreign investors for an international tranche.
Fresh capital from the listing will allow Citicore, which has an installed capacity of 241 megawatts via solar panels, to invest $800 million this year to increase output to 1 gigawatt (GW), and around $4 billion to reach 5 GW within five years, Tan said.
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The Philippines, an archipelagic country among the most vulnerable to climate change, aims to increase renewables in its power mix to 35% by 2030, from 21% in 2020, and to 50% by 2040. Coal accounted for nearly 60% in 2020.
Citicore is also pursuing seven offshore wind projects with a total capacity of 3 GW.
Citicore is the parent firm of Citicore Energy REIT Corp (CREIT.PS) and is a sister company of Megawide Construction Corp (MWIDE.PS).
Citicore REIT on Friday listed its maiden ASEAN Green Bond in the Philippines’ fixed income trading platform. It raised 4.5 billion pesos ($82.6 million) from its bond sale to fund acquisition of land for its renewable energy portfolio.
($1 = 54.50 Philippine pesos)
Reporting by Neil Jerome Morales
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Jan 31 (Reuters) – Japanese trading firm Marubeni Corp (8002.T) started commercial operation based on the feed-in tariff program for renewable energy at Akita Port offshore wind farm on Tuesday, it said in a statement.
Japan’s offshore wind power market, part of the country’s goal to be carbon neutral by 2050, is set to grow as the government eyes installing up to 10 gigawatts of offshore wind capacity by 2030, and up to 45 gigawatts by 2040.
Marubeni’s 100 billion yen ($768 million) project of two wind farms with 140 megawatt capacity at Akita Port and Noshiro Port in northern Akita prefecture is Japan’s first large-scale commercial offshore wind power project.
With its Noshiro Port offshore wind farm operating since late December last year, the launch of the Akita Port farm brings the project to the full-scale operation, Marubeni said.
Power from the two wind farms will be sold to Tohoku Electric Power for 20 years under a power purchase agreement based on the feed-in tariff program.
Marubeni’s 12 partners include Obayashi Corp, Tohoku Sustainable & Renewable Energy Co, Cosmo Eco Power Co, Kansai Electric Power Co and Chubu Electric Power Co.
($1 = 130.2900 yen)
Reporting by Katya Golubkova, Editing by Louise Heavens
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SAO PAULO, Dec 15 (Reuters) – Brazilian power company Eletrobras (ELET6.SA) and Shell (SHEL.L) have signed a cooperation agreement to exchange information as they mull a potential co-investment in offshore wind power in the South American country, Eletrobras said on Thursday.
The move marks another step for Shell in the sector in Brazil, where it already has several offshore wind projects pending approval from environmental authorities.
It is also a new development in renewable energy for Eletrobras, Latin America’s largest utility, which said it was seeking to diversify its strategy in the sector after being privatized earlier this year.
“Offshore wind energy has proved to be, all over the world, an expanding source for renewable power generation,” Eletrobras said in a securities filing.
The company, which is mostly focused on hydroelectric power plants, noted that offshore wind farms have been recently boosted by energy policies related to environmental concerns.
Earlier this year, Brazil’s government published a set of regulations for the sector that may allow an auction for offshore areas to happen as early as next year.
During his unsuccessful re-election bid, President Jair Bolsonaro mentioned Northeastern Brazil’s potential in offshore wind power several times.
He was defeated by President-elect Luiz Inacio Lula da Silva, who has a key advisor in Senator Jean Paul Prates, responsible for a bill in the upper house of Congress setting up a framework for the sector.
Shell, one of the world’s largest oil companies, is currently awaiting for environmental agency Ibama to approve projects it has for offshore wind plants totaling 17 gigawatts in six Brazilian states.
Reporting by Gabriel Araujo and Leticia Fucuchima; Editing by Steven Grattan
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SEOUL/TOKYO, Dec 7 (Reuters) – South Korean and Japanese power utilities are sustaining heavy losses, kept from passing rising generation costs on to customers and, according to analysts, forced to reconsider the timing of green investments.
The industry is squeezed between high costs of imported fuel, exacerbated by weak currencies, and government unwillingness to displease voters and worsen inflation with price rises.
During the first nine months of this year, state-run electricity distributor Korea Electric Power Corp (KEPCO) reported record operating losses of 21.83 trillion won ($16.69 billion) on revenue of 51.8 trillion won, compared with a loss of 1.12 trillion won a year earlier.
KEPCO is staying afloat with bond issuances and bank loans. Debt had already reached 223% of equity capital at the end of 2021.
However, President Yoon Suk-yeol’s approval rating, just 39% this month, is too low for him to dare to allow a bigger rise in electricity prices than the approximately 13% approved for this year and a similar one for 2023, analysts said.
“In order for KEPCO to swing to profit, we estimate electricity prices must be at least 30% to 40% higher than last year, or the Dubai oil spot price must fall to pre-COVID levels,” said Na Min-sik, analyst at SK Securities.
KEPCO said it had no plans to cut maintenance budgets or facilities investments.
But analysts told Reuters that KEPCO’s capital spending would drop about 20% next year. Items likely to be cut would be improvements to transmission grids to support highly variable electricity flows from renewable sources, they said.
“Since renewable power fluctuates, investment is necessary in transmission infrastructure to grow the portion of renewables in energy mix,” Na said. “But it’s a burden, as 30 trillion won in losses are forecast this year, and continued losses next year.”
Another analyst said: “Out of new power plant construction, maintenance of existing plants and power grid infrastructure, the biggest delays will be in new power plant construction, especially in renewables.”
WHOLESALE PRICE CAP
Moreover, South Korea this month decided to cap for at least three months the base rate at which KEPCO buys electricity wholesale from generation firms.
This will discourage investment in renewable generators, according to an industry association.
“We estimate this could cost us revenues of 90 won per kilowatt. If this cap is extended for a year, it would cost a 10 megawatt generator 100 million won,” said Jung Woo-sik, an executive at lobby group Korea Photovoltaic Industry Association. “We’ll lose investments. This will cripple the renewables industry.”
As for Japan, nine out of 10 key regional electricity utilities booked a net loss for the April-September half-year, with five companies reporting record losses for the period.
All eight utilities that have announced an annual forecast for the fiscal year to March 31, 2023, have warned of a net loss. Tokyo Electric and Kyushu Electric did not provide full-year outlooks.
Most of those that have applied for price rises have said they would maintain green investment, but analysts expect some deferral.
“Investment towards decarbonisation by Japanese utilities may be delayed as the companies seeking to hike prices are saying that they would review all new investments,” said Toshinori Ito, president of Ito Research and Advisory which specializes in energy markets.
By the end of November, five out of 10 major regional utilities had applied to raise prices by between 28% and 46% from April.
They said their financial situation had deteriorated sharply due to soaring fuel prices due to Russia’s invasion of Ukraine and the yen’s plunge against the U.S. dollar. That could hinder stable supply of electricity, they said.
The Japanese industry ministry will examine whether each company’s efforts to improve management efficiency, such as reducing labour costs, are sufficient.
($1 = 1,308.2600 won)
Reporting by Joyce Lee in Seoul and Yuka Obayashi in Tokyo; Editing by Bradley Perrett
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Nov 23 (Reuters) – France’s first commercial-scale offshore wind farm started operating on Wednesday, adding 480 megawatts of capacity to the grid at a time when Europe is scrambling to secure energy supplies following Russia’s invasion of Ukraine.
The Saint-Nazaire wind farm, situated off the coast of Brittany in northwestern France, consists of 80 turbines and will provide clean energy to power the equivalent of 400,000 homes annually, or 20% of the Loire-Atlantique region’s electricity consumption.
The project is co-owned by EDF Renewables and EIH Sarl, a subsidiary of Canada’s Enbridge Inc (ENB.TO), and CPP Investments.
Enbridge, best known for its North American oil pipeline network, is a partner in three other French wind projects currently under construction.
“(We) look forward to continuing our work together in growing France’s offshore wind sector,” Matthew Akman, Enbridge’s senior vice president of power, strategy and new energy technology, said in a news release.
The Saint-Nazaire project took 10 years to complete. In September, French President Emmanuel Macron visited the site and vowed to cut red tape to halve the time it takes in France to get renewable projects off the ground. read more
Earlier this year, Macron said he wants France to have about 50 offshore wind farms by 2050.
Reporting by Nia Williams in British Columbia; Editing by Cynthia Osterman
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