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Taiwan sets end 2014 as deadline for CPC privatization proposal

Taipower and CPC to improve performance by US$3.6 billion in 5 years

Taiwan sets end 2014 as deadline for CPC privatization proposal

TAIPEI (Taiwan News) – The government will file a proposal for the privatization of state-run oil company CPC Corporation, Taiwan, with the Legislative Yuan before the end of 2014, Economics Minister Shih Yen-shiang said Friday, while CPC and Taiwan Power Corporation promised to improve their performance by NT$110 billion (US$3.6 billion) within five years.
The promises came out of a report probing the two energy companies’ recent problems. A decision by President Ma Ying-jeou after his re-election last January to hike oil and electricity rates touched off a wave of public dissatisfaction and provoked calls for an investigation of the two state companies’ business practices.
As a response to the public outcry, the Ministry of Economic Affairs, which supervises state-owned enterprises, formed a committee to seek solutions to the companies’ problems. CEOs of private companies, academics, representatives of consumers’ organizations and government officials joined the committee and met five times to exchange views, reports said.
At the presentation of the committee’s conclusions Friday, Shih announced the ideas for the privatization of CPC.
The MOEA would choose a gradual release of shares to the public as the method to privatize CPC, a track already followed with Chunghwa Telecom and China Steel Corporation. Previous plans had included a one-time share sale.
One year after approval by the Legislature, 5 percent of CPC shares would be sold, with a total of 51 percent to be reached at the end of a three-year period, reports said.
Shih said he hoped that negotiations with the CPC union about the privatization could be completed by the middle of next year. The union has been radically opposed to a loss of state control over the oil company, mainly because of fears for its members’ jobs. Critics of privatization have also said that the move will not result in cheaper prices for consumers but in the opposite.
The committee reached a consensus that CPC should leave its exploration and natural gas businesses in state hands before privatization, while it should consider a liberalization of the oil market for foreign suppliers.
The committee’s general conclusions about improvements to the two state companies’ performance included lower costs, more accurate purchasing decisions, raising profit, lowering investment, renewing personnel and restructuring the organization of the companies, Shih said.
Liu Ming-chung, the executive director of the MOEA State-owned Enterprise Commission, said CPC could find an extra NT$44.2 billion (US$1.4 billion) and cut costs by NT$16.8 billion (US$562 million), accounting for the remaining NT$61 billion (US$2 billion), according to Liu. Some of the adjustments would still partly rely on the evolution in international oil prices, the manager said. CPC also wanted to ask higher prices for the natural gas it sold to Taipower, reports said.
The two energy companies could save a total of NT$9.4 billion (US$314 million) by cutting personnel spending, the committee report concluded.
Taipower would make an extra NT$6.2 billion (US$207 million) by increasing its production capability, making better use of its land assets, and abolishing free electricity for employees, while NT$43.8 billion (US$1.4 billion) could be found by limiting its purchases of outside power, cutting staff and reducing bonuses between 2012 and 2016. The power utility would thus be responsible for NT$50 billion (US$1.6 billion) of the total of expected extra funds, Liu said.
Taipower came under fire for buying power at allegedly inflated prices from private outside suppliers or Independent Power Providers (IPP), some of them headed by former state company managers.
Taipower Chairman Hwang Jung-chiou said negotiations were on the way with four IPPs, but he accused them of lacking honesty, reports said. The company wants to negotiate lower prices, but the companies keep referring to their contracts with Taipower, Hwang said.


Updated : 2021-04-21 10:11 GMT+08:00