Growth in energy use to slow down in 2012

‘If we can count on a more affordable source [natural gas], that would greatly help us stabilise prices,’ CEM chief executive officer Franklin Willemyns said yesterday

• New concession slices CEM profit
• Natural gas dispute no threat to supply

Local electricity supplier CEM expects the growth in energy consumption to cool down in 2012. But last year the company’s profits dropped as the new concession contract came into effect, chief executive officer Franklin Willemyns said yesterday.
In 2011 the territory used about 4 billion kWh of electricity, up by 9.5 percent, the company revealed during a spring lunch with the media. CEM believes consumption will slow to an 8.2 percent growth this year, reaching 4.3 billion kWh.
More demand created by “the rapid growth of Macau’s economy” will also mean a bigger budget for the provider. CEM expects to spend MOP 900 million this year, up by 52.5 percent. A bigger slice, 28 percent, will be reserved for electricity generation.
The company’s biggest project for 2012 will be the mid-year introduction of a second 220 kV high-tension connection that will start sending electricity to Macau through Hengqin. “It will boost our options when it comes to primary energy supply,” Willemyns told journalists.
The territory’s ability to import electricity from mainland China will increase by 50 percent, the secretary for Transport and Public Works, Lau Si Io, said last month during his 2012 Policy Address.
CEM has commissioned a smart grid roadmap study from a US company. In addition, the provider expects to install 2,000 electric meters during this year.

Less blackouts

In 2011 the new 15-year concession contract came into effect, reducing the 12-percent guaranteed profit return rate to a single digit rate. “Our 2011 results are likely to be less positive,” Willemyns said.
The new contract aside, CEM is also facing higher costs, local inflation and the yuan appreciation, he emphasised. “We are facing a challenging situation, mainly due to rising prices of fuel oil and natural gas,” the Belgium national explained.
Last year fuel oil prices grew 36 percent while the cost of electricity bought from Guangdong province rose much less, between four and five percent. As a result, more than 79 percent of the electricity was imported, up from 73.2 percent in 2010.
But Willemyns is happy with CEM’s performance in 2011. “We had to adjust to the new contract but our operational efficiency improved,” he said. Electricity distribution per employee grew by 25 percent since 2007, the company revealed.
And, despite two blackouts that affected almost 6,000 households in May 2011, CEM claims the number of malfunctions in medium-voltage network dropped by 16 percent compared to the previous year.
Despite rising costs, almost 99 percent of local households had a discount between nine and 10 percent on their electricity tariffs, Willemyns stressed.

Price stability

One factor pushing up costs has been the interruption in natural gas supply, the executive conceded. “Unfortunately we can’t use natural gas. It’s more efficient and prices are currently very competitive. We hope supply will be resumed as soon as possible,” he explained.
Sinosky, a joint-venture between Sinopec and China Energy, has a 15-year franchise to provide natural gas to Macau. Supply was slated to resume at the end of last year, after mainland Chinese authorities undertook blasting work on Hengqin Island roads, but it remains suspended.
Earlier this week Sinosky asked for an increase to natural gas prices, claiming it was suffering serious losses due to the pricing mechanism and yuan appreciation. Even if the Chinese company decided to give up on the deal, “it wouldn’t threaten the normal electricity supply,” Willemyns pledged.
“This issue has proven that our strategy to diversify our energy sources was a wise one,” he added. In 2010 CEM used natural gas to produce just 16 percent of the electricity it distributed.
But the executive acknowledged that natural gas would be a welcome alternative. “If we can count on a more affordable source, that would greatly help us stabilise prices,” he said. Fuel oil is more expensive “and there are signs the situation will become even worse in 2012,” Willemyns added.