Russian power generator RusHydro has called for the introduction of an export duty on thermal coal in a bid to drive down prices, complaining that its electricity tariffs do not reflect the recent surge in the commodity’s value.
"We would be glad if [the government] introduced protective duties on export-oriented coal because it cannot continue like this for much longer,” RusHydro head Nikolai Shulginov told an investor day in Moscow on December 9. “The price of coal is one thing and the rate [upon which the company’s electricity tariffs are based] is two times less," he added.
RusHydro sees the price of coal produced by Russian producers as around 12% higher on the year against average global price growth of 18%. The company’s electricity tariffs for Russian consumers in 2017, however, have only factored in a year-on-year price rise of 6-7%.
The global price of coal for use in coal-fired power stations soared from last year’s average of US$59 to a peak of US$110 per tonne last month. The price rise was linked to new Chinese mining restrictions, which limited previous annual production runs to 276 days, down from 330 days.
Shulginov said that RusHydro intended to make a formal request to Russian officials to introduce a duty on coal exports but he was not optimistic of a favourable response.
Russian business daily Kommersant quoted two unnamed sources from Russia’s coal industry as saying that RusHydro’s call for export duties was more likely a bargaining position with its coal suppliers. The sources also speculated that RusHydro’s call for an export levy was a ruse to raise electricity tariffs, thereby passing on the higher coal costs to Russian consumers.
RusHydro’s power station portfolio is heavily weighted towards hydroelectric facilities, some 102 of which have a capacity of more than 100 MW. The company also operates 28 coal-fired power stations, almost all of which are located in Russia’s Far East.
The state-controlled group's subsidiary, ES Vostoka, buys thermal coal from producers located in Russia’s coal-mining heartlands nearby. Last year, RusHydro purchased some 17 million tonnes of thermal coal, amounting to 26 billion rubles (US$416.9 million). Coal sourced from the group’s Luchegorsky mine in Primorsk adds around another 5 million tonnes of generator feedstock per year.