Singapore Media Watch

Wednesday, November 08, 2006

Your views: Gencos making all the profits ?

7 Nov 2006

I refer to the letter in today's Straits Times, "Singapore Power's tariffs don't reflect market forces".Through one of the greatest accounting acts of the government, it has claimed that HDB has been generating deficits in its books due to the subsidies given to purchasers under its Home Ownership scheme.

But if you look at the whole value chain, the profits are actually accounted for in the Land authority's (ie. government's) books (SLA) - the government acquires the land cheaply and then "sells" it to HDB at the market rate, hence the subsidy from HDB when they are eventually sold to homeowners at a price of "market price less subsidy".

Left hand (HDB) makes loss while Right hand (SLA) makes profit. The net results is probably a tidy profit for the government as the land was probably compulsorily acquired on the cheap during the early years of national development.

As in the case of HDB and the SLA, Singapore Power (SP) works in the same "Left-hand-right-hand" principle: Left hand (SP) reputedly "subsidizing" the citizens while the Right hand (the power generating companies - gencos - like Power Seraya etc) making the profits, obscene profits, in preparation for their eventual IPOs.

The moral of the story: look at the whole value chain and not only SP in isolation. Therefore, how much profits are the gencos making every year? How do they pass on the savings when energy prices drop?


KAYE POH

2 Comments:

  • You got the sums right on! Our government is simply playing with accounting tricks and fooling majority of the common people who do not see things in entirety.

    Indeed, they are breaking the value chain into blocks. Profits are booked in non transparent entity and the cost are transferred to entity that deals with the people directly. So cost is transferred to the people or they will sing a nice song of "subsidy". In actual fact it is the people who are subsidising the government. This practice is probably learnt from family runs conglomerate, where cost is transferred to listed entities (public) and profits is maximise within private entities in inter-company dealings.

    Our government has crafted so many schemes to reap money from the people. Look at COE and PARF. The people are actually providing interest free funding (for 10 years) to the government!

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