This year has definitely not been a lucky one for Taiwan Power Co (Taipower). The utility company is facing a deteriorating financial situation, and Japan’s nuclear crisis — which has raised public worries about nuclear safety and may force the government to delay the commercial operation of the Fourth Nuclear Power Plant for another year — only adds a further blow.
Moreover, the decision by two international ratings agencies on Friday to downgrade the credit rating of Tokyo Electric Power Co (TEPCO), which operates the troubled Fukushima Dai-ichi nuclear power plant, has not only made TEPCO the first Japanese power company to face the possibility of defaulting on its debt, but also exposed a potential risk for Taipower in terms of operational reliability and the potentially massive costs involved in the event of a catastrophe.
For some time people have held concerns about Taipower’s ability to handle a major nuclear accident like the one occurring at the Fukushima plant. Unfortunately, they have not paid much attention to the company’s financial problems.
Last year, Taipower incurred a loss of NT$18.7 billion (US$631.8 million), which was its third--largest deficit in the past 10 years. In 2008, the company had a record loss of NT$100.9 billion. The company has also warned that its deficit could reach NT$60 billion this year, owing to skyrocketing fuel costs. As a result, accumulated losses are likely to total NT$135.1 billion at the end of this year, a figure that represents 40.94 percent of Taipower’s paid-in capital.
Utility companies around the world need continued cash flow and efficient access to financial tools to maintain operations and build facilities. Taipower has long relied on bank loans and corporate bond issuance to raise capital. Actually, the company is the largest issuer of corporate bonds in Taiwan, accounting for 16 percent of the total, and the yield on its bonds usually serves as a benchmark for the country’s corporate bond market. Last year, the company issued NT$89.2 billion in corporate bonds, following NT$58.62 billion issued in 2009.
Ironically, despite Taipower’s weakening financial profile over the past few years because of a -government-initiated cap on electricity rates, its corporate bonds have been warmly received by investors as the debt issues have a very low default risk. This is because Taipower is a government-owned utility and investors believe the company’s triple-A-rated bonds have the same value as the government bonds do.
However, the company’s deteriorating financial situation is a time bomb. When issuing corporate bonds, the company now needs a third-party guarantor to provide a guarantee or partial guarantee over the proposed debt issues, as required under the nation’s corporate law.
Furthermore, if the company’s accumulated losses exceed 50 percent of its paid-in capital, Taipower would, by law, have to request permission from shareholders to increase capital or be forced to close down operations.
This raises the question of where the cash injection would come from. One option is to increase electricity rates to help cut losses. While this is theoretically reasonable, it would likely be political suicide in an election year, and amid inflationary concerns. Barring changes in current electricity rates, an alternative is to ask the government to inject more capital into the company, but this seems equally unfeasible in light of the government’s growing debt.
Privatization, deregulation and cost-cutting reforms would be other options to help Taipower turn around its dire financial situation, but one way or another, Taipower’s financial problem needs to be taken seriously. If not addressed, the state-run utility’s widening losses will only add to existing public-sector debt and impose a burden on future generations of taxpayers.
Donald Trump’s return to the White House has offered Taiwan a paradoxical mix of reassurance and risk. Trump’s visceral hostility toward China could reinforce deterrence in the Taiwan Strait. Yet his disdain for alliances and penchant for transactional bargaining threaten to erode what Taiwan needs most: a reliable US commitment. Taiwan’s security depends less on US power than on US reliability, but Trump is undermining the latter. Deterrence without credibility is a hollow shield. Trump’s China policy in his second term has oscillated wildly between confrontation and conciliation. One day, he threatens Beijing with “massive” tariffs and calls China America’s “greatest geopolitical
On Sunday, 13 new urgent care centers (UCC) officially began operations across the six special municipalities. The purpose of the centers — which are open from 8am to midnight on Sundays and national holidays — is to reduce congestion in hospital emergency rooms, especially during the nine-day Lunar New Year holiday next year. It remains to be seen how effective these centers would be. For one, it is difficult for people to judge for themselves whether their condition warrants visiting a major hospital or a UCC — long-term public education and health promotions are necessary. Second, many emergency departments acknowledge
US President Donald Trump’s seemingly throwaway “Taiwan is Taiwan” statement has been appearing in headlines all over the media. Although it appears to have been made in passing, the comment nevertheless reveals something about Trump’s views and his understanding of Taiwan’s situation. In line with the Taiwan Relations Act, the US and Taiwan enjoy unofficial, but close economic, cultural and national defense ties. They lack official diplomatic relations, but maintain a partnership based on shared democratic values and strategic alignment. Excluding China, Taiwan maintains a level of diplomatic relations, official or otherwise, with many nations worldwide. It can be said that
Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) made the astonishing assertion during an interview with Germany’s Deutsche Welle, published on Friday last week, that Russian President Vladimir Putin is not a dictator. She also essentially absolved Putin of blame for initiating the war in Ukraine. Commentators have since listed the reasons that Cheng’s assertion was not only absurd, but bordered on dangerous. Her claim is certainly absurd to the extent that there is no need to discuss the substance of it: It would be far more useful to assess what drove her to make the point and stick so
RSS