Wed, May 07, 2008 - Page 11 News List

Taipower warns of capital erosion

By Jerry Lin  /  STAFF REPORTER

The state-run Taiwan Power Co (Taipower, 台電) said its losses would expand to NT$154.7 billion (US$5.07 billion) by the end of the year, barring changes in current electricity rates, a company executive said yesterday.

“Taipower is considering an initial hike in electricity tariffs by 30 percent by the end of this year to cut losses while lessening the burden on the public,” Taipower chief engineer Tu Yueh-yuan (杜悅元) said yesterday.

Although unlikely, Taipower said that it would have to raise electricity tariffs by 68.54 percent to break even this year, up from the 48 percent that Taipower chairman Edward Chen (陳貴明) estimated in March.

Aside from rising international crude oil prices, which have exceeded US$120 per barrel, prices of coal surged by nearly 135 percent to US$126.83 per tonne in March from US$54 a year ago, Tu said.

Moreover, prices of fuel oil, diesel and liquefied natural gas have risen by 75 percent, 49 percent and 42 percent respectively this year compared with prices in 2006, the company said in its latest report.

If the company’s losses cannot be addressed, Taipower will start eroding its capital base of NT$330 billion this year.

Accumulated losses would be greater than half of the company’s capital base by next year, and Taipower would be forced to close down operations in 2010, the company said.

“If Taipower can keep our losses under NT$46.5 billion this year, it will not erode the company’s capital base,” Tu said.

Taipower raised tariffs by an average 5.8 percent in July 2006, its first increase in 23 years.

The company has not adjusted rates since that time because of price controls meant to act against increasing inflationary pressure.

On Monday, the government’s statistics bureau said the consumer price index rose 3.86 percent year-on-year last month, after an annual rise of 3.95 percent in the previous month.

“Risks to inflation remain on the upside in the near term due to continued pressure on global fuel and commodity prices,” Deutsche Bank said in an e-mailed statement sent to the Taipei Times yesterday.

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