price strength in weak market, page-4

http://www.theaustralian.news.com.au/common/story_page/0,5744,17841022%255E36375,00.html

Coal blows gas away as a fuel for power stations
Peter Marsh, London
January 17, 2006
THE world is on the brink of a big switch from gas to coal as the preferred fuel for power stations, according to projections from Alstom, Siemens and General Electric, the world's three biggest power equipment makers.

Independent forecasts from France's Alstom and Germany's Siemens, made available to the Financial Times, show that about 40 per cent of the orders for electricity turbines in the next decade will be for coal-powered units, with the share of gas-fired plants falling to between 25 and 30 per cent.

Philippe Joubert, president of Alstom's power division, said: "The structure of the power market is seeing a radical shift away from gas and towards coal."

Siemens' figures point to a similar conclusion, while GE said it expected to see a "more balanced picture" in terms of equipment orders, with gas being far less dominant than recently.

The shift to coal has been evident in the past year. Of the 120GW of new power orders, 20-30 per cent were for gas-powered plants while 30-40 per cent were for coal-fuelled generators.









The shift is being triggered by technological changes that reduce the amount of pollution created by coal-fired stations and by rising disenchantment with gas as a fuel. There are concerns over rising prices for the fuel and worries about security of supply, underlined by the recent row between Russia and the Ukraine over gas pricing.

Many countries in Asia, which is expected to provide half of all new power station orders in the next 10 years, lack ready access to gas reserves. Coal's re-emergence as a primary fuel for power generation is a reversal of recent trends.

The dash for gas in power equipment was most evident between 1997 and 2001, when gas was the preferred fuel for 60-70 per cent of new power stations and coal for 20-30 per cent.

Alstom and Siemens expect power station orders in the next decade to average 120GW a year. Spending on new power stations is expected to be $US50 billion ($66 billion) annually for the next decade.

The switch from gas is likely to benefit Alstom more than its two rivals. It gains a bigger proportion of its revenues from steam turbines and boilers based on coal than the German and US groups. GE, in particular, could be hit. Though it is a large maker of steam turbines and has a strong presence in nuclear and wind power, its energy division is focused on gas turbines.

All three believe the switch is likely to be particularly marked in Britain, where coal is expected to be the most popular fuel source for the 20GW of power equipment due to be installed over the coming decade.