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Taipower deficit to widen

With its budget hardly covering constantly rising fuel costs, state-run Taiwan Power Co (Taipower, 台電) is expected to see its deficit widen to a record NT$42.5 billion (US$1.29 billion) this year, prompting speculation that the company may seek government permission for another hike in electricity bills.

But the final decision will be made by the Cabinet, Tsai Wen-kuei (蔡文魁), Taipower's vice finance president, told the Taipei Times in a telephone interview.

"We have no plan for a price hike ? what we can do is conveying our operation of difficulty to the government," Tsai said.

Keeping the prices of utilities low has always been used by the ruling party to secure votes in elections.

As the legislative election and presidential election will be held the end of this year and next March respectively, the government is not likely to adjust electricity prices this year.

Taipower used to be one of the most profitable state-run enterprises several years ago. In 2003, Taipower registered NT$30 billion in pre-tax earnings.

But as fuel, transportation and other costs have all rocketed in the past few years, Taipower lost NT$2.9 billion last year, despite the power monopoly raising electricity prices by an average of 5.8 percent for the second half of last year.

The company estimated that it would lose NT$33.5 billion this year when it submitted its budget to the Cabinet last July, but the figure was revised upward to NT$42.5 billion as operational costs continued to surge, Tsai said.

The price of coal, for example, jumped from US$42 per tonne in 2005 to US$50. The prices of natural gas and oil, which Taipower purchases from state-owned CPC Corp, Taiwan (台灣中油), also rose by 8 percent and 20 percent respectively, after the nation's largest oil refiner started reflecting the costs in retail prices at the end of last year, Tsai said.

Should the huge deficit continue enlarging, Taipower is very likely to announce bankruptcy after depleting its capital of NT$330 billion.

"I understand that the government tries not to raise electricity bills to ease consumer prices, but from a business perspective, the price hike is needed to sustain the company in the long-run," Tsai said. "If we close, who is going to supply electricity to the nation?"
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