Temasek Tracking - Idea Cellular: How an astute Indian regulatory agency saved Singapore taxpayers US234m

 

In early 2000's. Indian mobile industry was enticing as market penetration was only at 17%. With a population of 1.3b, India was a humongous market that attracted lots of international telecommunications players. Temasek subsidiary, Singtel, invested into Bharti in 2000. ST Telemedia, 100%-owned by Temasek, had its eyes on Idea Cellular Ltd.

Idea was founded in 1995. It was a 3G GSM Indian mobile network operator based at Mumbai. At its height in June 2018, it had a huge subscriber base of 220 million. In Dec 2004 ST Telemedia announced a joint venture with Telecoms Malaysia to acquire 47.7% share of Idea Cellular from Cingular Wireless at a price of US$390m. ST Telemedia's share in the JV was to be 60% which worked out to US234m.

"ST Telemedia and TM International to acquire 48% stake in IDEA Cellular" ...ST Telemedia

The bid had to pass the scrutiny of the Foreign Investment and Promotion Board. There was a snag.  Singtel was already holding 28% shares in Bharti, The JV would have allowed ST Telemedia a 28.7% holdings in Idea Cellular. Indian anti-trust laws prevent a company from holding more than 10% shares in more than 1 company in the same service sector. Regulatory approval could not be obtained.

Singapore Inc's scholarly minds consider Singtel and ST Telemedia two separate companies, but the smarty Indians saw the same Temasek colour. The JV wrote in to appeal by explaining Temasek's role in ST Telemedia is simply an investor. Singaporeans should by now be familiar with the official public refrain - Temasek does not interfere with the operation of its subsidiaries. Yet in all publications, Temasek has always advertised itself as an active investor. It's difficult to reconcile the two. When it comes to the crunch, it's no secret who calls the shots. Such goobledygook passes easily for divine truth with the public in Singapore, but highly legalistic Indians said "No can do'.

No amount of truth shifting explainer 101, no amount of bending backwards and placating the Indians, no CECA preferences, can change Indian minds when it comes to protecting their national interest. And so ST Telemedia came home empty-handed.

But what a blessing it was. The Indian PIPB saved Singapore taxpayers a huge sum of money. Firstly, the Indian rupee has depreciated by 100% against SGD since. ST Telemedia would have suffered tremendous translation losses. Secondly, Idea Cellular merged with Vodafone India in 2018. The share price of Vodafone Idea has slipped from about INR35 after merger to about INR8.35 today. Thirdly, the Supreme Court decision on the spectrum fees due from telecommunication companies, slapped Vodafone Idea with a bill for US$7.4b which the government intends to collect with delayed interest. And lastly, new kid on the bloc, Reliance Jio Infocomm Ltd, which only opened for business 2016, is killing the competition with lower rates and swinging subscribers away from Vodafone Idea and Bharti.

Vodafone Idea is dead man walking and may fold. The Indian regulator thus saved Singapore taxpayers. Too bad for the Malaysians. Telekom Malaysia went solo and acquired 20% of Vodafone Idea for US$2b in 2018. They have taken a severe beating having disposed some of their holdings and are practically begging for someone to take the rest of the shares off them.

The Indian telecommunication market has been an extremely competitive place with cut-throat pricing. The  scene is littered with foreign regrets and big names that have quit the country include Norway's Telenor ASA, the UAE's Emirates Telecommunications Group Co, PJSC, Russia's Sistema, PJSFC,  Docomo and  AT&T. Telekom Malaysia wants to divest Vodafone Idea, and Singtel is struggling with Bharti.

Does it mean it's impossible for foreign investors to spin a $ in Indian telecommunications? In 2007 Hongkong Billionaire Li Ka Shing sold his majority share in Hutchison Essar Ltd, an Indian cellular play, to Vodafone for US$11.1b, netting him a profit of US$9b.

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Temasek Tracking - Odebrecht Oil, heavy FX losses and history's biggest bribery investigation

 

2006  Founded as Odebrecht Oleo e Gas SA (OOG)
2010  Temasek invested US$400m (Oct 2010)
2018  Name changed to Ocyan SA

Operation Car Wash :

In 2014 Brazilian police conducted Operation Car Wash, a criminal investigation into money laundering which is still ongoing. It has resulted in more than 1,000 warrants of various sorts in Brazil. The investigation expanded into corruption at very high levels of the governments of Brazil, Argentina, Panama, Mexico, Peru, and Veezuela. Those implicated and brought to justice included senators, top public officials including heads of states, prominent businessmen. In Peru, for example, past presidents Alain Garcia, Ollanta Humala, Pedro Kuczynski, Alejandro Toledo, and Keiko Fujimori are either in prison, on the run, or have committed suicide.

How one company’s deep web of corruption took down governments across Latin America ...(Washington Post 23 May 2019)

Car Wash must be the world's biggest criminal investigation. It initially started off as an investigation into the embezzlement of funds in Petrobas, estimated between US$2-13b. At the centre of all this is the Odebrecht group of companies, a huge Brazilian conglomerate established in 1944. Odebrecht is involved in diversified businesses in the fields of engineering, construction, chemicals and petrochemicals. It is privately owned by the Odebrecht family and it does a lot of huge construction in graft-ridden public works.

Between 2001-2016, Odebrecht paid USD $788 million in bribes across Latin America. Marcelo Odebrecht, the patriach that runs the family business, was arrested in 2016 and is now sitting out a 19 year jail sentence.

Temasek & OOG :

In 2010 Temasek invested US$400m for 13.6% share in Odebrecht Oleo e Gas SA (OOG), a unit in the Odebrecht group. OOG explores and produces oil and gas fields, operates rigs and provides integrated services for other companies from the sector. During the Brazilian oil boom, OOG secured many projects from the state oil company Petrobas, such as the supply of oil rigs, floating platforms, etc. The Petrobas' deals propelled OOG into the forefront of the Brazilian oil & gas industry. 

Operation Car Wash uncovered Petrobas officials received massive kick backs from contractors which included Odebrecht and Singapore's Keppel Offshore & Marine Ltd. This led to the state oil company banning OOG in 2014 from further contracts. The company is forced to source for business outside of Brazil. The ban by Petronas, coupled with the fall in oil prices, was a double blow for the company.

OOG had external debts of US$3.7b. By 2015, cash crunch forced OOG to default on debt servicing. Then followed years of negotiation with creditors and banks for capital restructure. This was resolved by end 2017. In 2018 OOG renamed itself Ocyan SA and started to rebuild itself. It is now a shadow of what it once was. At its height in 2015, it employed 6,000 workers, in 2019 it was down to 2,000. It's equity was BRL3.4b in 2015 down to BRL1.9b in 2019. The goods news is Petrobas lifted its ban on the company in 2018.

The investment in 2010 put a valuation of the company at US$2.941b. There has thus been a valuation write down of 35% by 2019. As an unlisted company, such valuation write down is unlikely to be reflected in Temasek's books.  

The investment of US$400m @ 1.7135 = BRL685m (@ 1.3193 = S$520m)

Due to 213% depreciation of Brazilian Real against SGD, the investment is now worth BRL685m @ 4.13 = S$168m.

There is a massive translation loss of S$352m.

At the holding company level, the Odebrecht group is still struggling with a mountain of debt of US$13b. On 17 Jun 2019, Odebrecht filed for bankruptcy protection to restructure its capital. It is still not out of the woods with ongoing police investigation.

Was Temasek's acquisition of 13.6% of OOG an independent investment decision, or was it a business strategy for it's Singapore ship-building subsidiaries to gain greater access to the Brazilian oil market which was booming at the time? The bribery of Petrobas' officials by Odebrecht and Keppel O&M opens up the uncomfortable question of whether the complicity was only at the operating units or did it involve the investment office?

Note: Temasek's holdings of 161,456,737 shares in Ocyan is held in the name of Atlantic Oilfield Services B.V. Google search failed to show anything.

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Temasek Tracking - Burger King Brazil, a profit in R$, but losses in S$

 

This is a straight forward investment and was divested some 4 years ago. It is included in this series of Temasek Tracking to demonstrate the dangers of investing in foreign assets where currency risk is very high in certain countries. It brings into sharp focus the need to review currency risk monitoring and mitigation techniques, if any, that Temasek employs since it started to diversify its portfolio into foreign markets when Ho Ching took the helm in 2002. This need is indeed serious given the strength of the Singapore dollar against almost all other world currencies since 2002.

Temasek invested US$100m in Burger King, Brasil, in Nov 2014. This was for 32,340,800 common stocks which was divested when the company IPO in Dec 2017 @ R$18.00

The investment in 2014 was US$100m @ 2.5690 = R$256.9m (@ 1.3183 = S$194.9m).

The divestment 32,340,800 shares @ R$18 returned cashflow of R$592,134,400 which represented an impressive ROI of 134% flat in Brazilian Real terms.

However, Real has depreciated by 213% so the proceeds of R$592,134,400 @ 4.13 works out to only S$143.4m.  There was thus a realised loss of S$54.5m. 

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Temasek Tracking - Sedibelo Platinum Mines, of huge translation losses and possible fraud

 

This is a tale of capitalism at its worst. Of exploitation of indigenous peoples and corruption at the highest levels.

Platmin Limited was founded in 2004. It was the 3rd largest South African mining company which was listed in Johannesburg and London stock exchanges. Its main focus was on platinum group metal (PGM) deposits in South Africa in the Pilanesberg Platinum Mine.

13 May 2010 Temasek invested in a US$100m non-interest bearing convertible debenture issued by Platmin Limited. convertible to common shares at US$1.125 each, on 31 Dec 2010. It meant Temasek made a short term loan to Platmin. The maturity was later extended to 28 Feb 2011 and conversion price to US$0.84. Temasek exercised the conversion into 119,047,620 common shares. Temasek ended up with 160,199,883 representing 17.6% of company equity. The additional 41,152,263 shares we assume must be open market purchases. Assuming these were purchased at the same price of US$0.84 (data not available) then total investment by Temasek was about US$135m.

Platmin was delisted in 2011. Reason given was its low turnover volume. It then migrated its place of incorporation to Guernsey. Tax havens present a risk in the extractive industry value chain. But all this makes sense in the wheeling and dealing that followed.

Bushveld Igneous Complex :

To the North East of South Africa lies the Bushveld Igneous Complex, a two-billion-year-old geological phenomenon that contains up to 90% of the world’s known reserves of platinum group metals, or PGMs, being palladium, ruthenium, rhodium, osmium, iridium and platinum itself.

This is the bowel which sprouted the mining czars of the past where families like the Openheimer built their huge obscene wealth. The Openheimers were the owners of Anglo American and de Beers, two of the biggest mining corporation in the world. By 2010 they sold de Beers to Anglo. By 2011 they had also divested substantially their holdings in Anglo. Harry Openheimer used his position to slam the Afrikaners for their racist apartheidism, but built their family massive wealth on the backs, blood, sweat, and lives, of poorly treated cheap black immigrants.

With the end of apartheid in 1994 came much needed land reforms and Big Mining had to upgrade. A 2002 legislation passed all mining rights to the state. Mining models needed to incorporate a social justice programme known as BEE (blacks economic empowerment), a sort of 'bumiputra' sharing scheme with the local community. On paper, BEE sounded good. But in a world where Big Mining's money ruled, endemic corruption of state officials all the way to President Zuma, ancient tribal affiliation with dubious chieftains and kings that cross artificial state boundaries, the uneducated poorest poor and powerless inhabitants had no chance.

Anglo American mess

Anglo operated the huge Rustenburg Platinum Mines (RTM) in the western part of the Bushveld, in the land of the Bakgatla tribe. RPM packaged a deal with a divestment of 15% of equity to the Bakgatla tribe in 2006. When the dust was settled, the tribe found itself the owners of a holding vehicle in debt, they had given up old royalties for nothing, and cash payments from operations and the state disappeared into thin air. The government formed the Maluleke Commission to sort out the matter. But to some, it felt the commission made it into a road show that tried to sort out the messy claims of chieftains, instead of the issue of exploitation of the weak and powerless community. (A trivial - R174-million ended up funding the Moruleng Stadium, built as a training ground for the 2010 FIFA World Cup).

From Platmin to Sedibelo Platinum Mines Ltd :

Pallinghurst Resources Limited (Gernsey) was set up in 2006 as a private equity and venture capital fund investing into mining sector. The CEO was Brian Gilbertson,a PGM vet who had honed his skills in BHP Biliton, Gencor, Vendatta Resources and Anglo American's Rustenburg Platinum Mines. He had his eyes on 3 sites in the Bushveld Igneous Complex - Pilanesberg Platinum Mine, Magazynkraal and Sedibelo Project. His strategy was to acquire all 3 sites to achieve economies of scale.

Magazynkraal and Sedibelo Project : Gilbertson sought out the Bakgatla tribe who had substantial interest in these 2 sites. A Bakgatla-Pallinghurst consortium JV (BPJV) was formed with Bakgatla holding 50.1%.  By 2008, with the Bakgatla as the BEE partner, Pallinghurst wheel and deal through complex structures that effectively resulted in the transfer of mining rights from the locals to BPJV. The Bakgatla ended up exactly in similar situation 2 years ago as the Anglo American deal. The community felt deals were made with chieftains they do not recognise, and they were never consulted.

Pilanesberg Platinum Mine : This was the jewel that Gilbertson wanted. It was the cash cow to fund his scheme. The mine was controlled by Platmin and it had no intention of selling. Gilbertson's strategy was to buy out the minority BEE partner of Platmin and replace with BPJV thus gaining the mineral rights. Then he bided his time. The opportunity came during the 2008 economic downturn. Commodity markets crashed and Platmin ran out of cash. Platmin took on debt from Pallinghurst.

Enter Temasek in 2010. Apparently Temasek must have been brought in as part of Pallinghurst consortium to take up the non-interest bearing convertible debenture loan. With the conversion exercised in 2011, Pallinghurst gained control of Platmin.

By 2012, Pallinghurst was ready to combine the 3 sites into one mega mining project. That was why Platmin was delisted from London and Johanesburg exchanges and domicile changed to Guernsey. Sedibelo Platinum Mines Ltd (SA) was founded in Dec 2011 to consolidate all operations of the 3 regions. Platmin was dissolved. As at 2018, major shareholdings of Sedibelo were:

27.64%	Pallinghurst
25.74%	Bakgatla tribe
15.75%	IDC (state agency)
5.35%	Anglo American
5.19%	Temasek (booked under Ridgewood Investments)

Sedibelo supposedly sits on mineral resources estimated at R25b. But it had no joy ride. The prolonged weakness of platinum prices prevented increasing production capacity and the benefits of economies of scale. The current strategy is to ride out the weak prices without increasing capital needs. It has been making losses. But further problems loom as South Africa proceeds to lock down open-pit mining to minimise environmental disasters.

The Ho Jinx factor :

After apartheid, the ANC ascension has seen the Rand tumbling.

With impeccable timing, Temasek's investment in 2010 saw the Rand depreciating against all major currencies including S$. Temasek's investment of US$135 upon conversion to common shares 28 Feb 2011 was about ZAR938m = S$171m. Due to a 121% depreciation of the Rand, the investment is now worth about S$77m.

The moral question :

Villages surrounding the Pilanesberg Platinum mine have severe unemployment, lack of basic infrastructure and are without running water, despite being on one of the riches reserves of platinum in the World, and their land encroached by open-pit mining. Big Mining, state players, and tribal chiefs in the area are accused of stealing billions that was supposed to be spent on developing the surrounding area. The mess of missing funds and Bajgatla loosing their mining rights are still being sorted out in the courts and commission of inquiry. The Bakgatla people found themselves having to sell their cattle to pay for legal costs.

Was Temasek an innocent investor who meant to do well for its shareholders and invested in complete ignorance of the Big Mining fraud against tribal communities? Either way, the answer is uncomfortable.

Side note : It's likely Temasek networked with the Openheimers through this investment. They have gone on to seal the relationship in a 50-50 venture in setting up Tana Africa Capital in 2011. Capitalised at US$400m, the fund invest in African assets. With 121% depreciation of the Rand, Temasek's US$200m participation has now been wiped out by 55% from currency translation losses.

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Temasek Tracking - Salt Bae and POFMA fuss does not detract from a massive investment write-down

 
Some time back, popular opposition member Brad Boyer posted in Facebook regarding Temasek's investment in Salt Bae restaurant's parent company which he said was saddled with debt problems. This (plus other comments), earned Boyer the notoriety of being the first person to receive a POFMA (Protection From Online Falseshoods and Management Act) on 25 Nov 2019. He rightfully had to oblige with the correction order to direct readers to the government site where explainer 101 is hosted. 

Everyone has a right to criticise any Temasek investment, but there are two prerogatives. (1) Be a sticker to facts. Unfortunately, transparency is not in the nature of investment activities. This is true generally and not exclusive to Temasek. If conclusions are drawn from paraphernalia, the author needs to highlight the basis for that conjecture. (2) Stay away from kicking someone who is already down with post fact causalities that were unknowns at the time when the investment decision was made. Wisdom from hindsight is an underhand.

FACT :  In April 2018 Temasek and UK's Merit Capital together acquired 17% of Turkish company Dogus Restaurants Entertainment & Management International BV (D.ream) for US$200m, putting a valuation of US$1.2b on the company.

From what I have read, the financials seem solid at the time. D.ream owned several restaurant brands, has many profitable operations across a few countries. The owner, Dogus Holdings, made the partial divestment to raise funds they badly needed. Nothing untoward here. Companies selling good assets to raise funds is common.

However, it is the country and currency risks that one wonders at this investment decision. President Erdogan has a 'New Turkey' neo-Ottoman narrative, one that sees a larger Turkic nation. He has used aggressive rhetoric against Greece in their Mediterranean standoff. He persecutes the Kurds. He is currently actively supporting the Arzerbaijans against Christian Armenians (one has to contextualise this with the 1909 genocide where Turkey slaughtered 1.5m Armenians). His dictatorial economic policies have brought disastrous inflation to the country that cost him politically. So he played the popularity card and converted the Hagia Sophia to a mosque in 2020. This great building was a church, then a mosque, then a musuem, and now a mosque again. 

The economy has been driven to the ground by double-digit inflation for years, and the country with heavy foreign currency debt has been facing a Turkish Lira crisis. Turkish corporations like Dogus Holdings are selling assets because they can no longer service foreign debts. In light of these problems, it seems the Temasek investment decision skewed heavily on micro financial analytics with prevailing macro risks downplayed. 

What does the Lira depreciation mean for the Temasek investment?

Since April 2018, the Lira has depreciated by 89% against SGD. The US$200m in April 2018 is about TSY816m = SGD264m. It is now worth SGD140m. What is Temasek's share we do not know. But what we know is, it has taken a massive valuation hit. 

What is the Salt Bae fuss all about? Turkish chef Nusret Gokse and Mithat Erdem are co-founders of Nusrt-Et Steakhouse. The co-founders owned 49% of Nusrt-Et with the majority 51% owned by D.ream. In 2017 Gokse shared a video on their company twitter account which showed the sensual way he prepared a steak dish and the cobra-like way he salted the dish. That tweet went viral and earned him instant internet fame and the moniker Salt Bae. Nusrt-Et gained international fame and celebrities checked out the restaurant to experience the Salt Bae theatrics. It was a huge marketing success which the company followed up by opening several international outlets. Crowds poured in for pricey but so-so dishes.  

In November 2019 the owners of the Steakhouse mulled with the idea of part divestment at a valuation of US$1b. Obviously it is to cash-in before the viral tweet craze dies out. Press reported there was strong interest from international investors and a financial adviser is assessing potential bids. There is no indication that GIC nor Temasek has shown any interest. One would certainly hope not.

Although the POFMA on Boyer was correct, it certainly does not take away the point that he was trying to make. The investment in the D.ream restaurant chain requires massive write-down in Temasek's book.

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Note: I had earlier indicated the investment is now worth about US$22m. That was incorrect of course, as visitor Phillip Ang pointed out. I have since edited the figures.

Ode to parliamentary debate on 2nd hand smoke during pandemic

 

Ode to parliamentary debate on 2nd hand smoke during pandemic

As Rome burns and Nero plays his fiddle and sips his ale
Parliament gathers for forty winks and cocky tales

Then stood he Louis, a knight charging at the vapour giant
Heed he not Sancho, but "Hush" said he, "be pliant"

Singapura's pride and PAPies' joy delivered thus a speech insipid
The uninspired with pitchforks to him surely must be truly stupid

All ye Roundheads and partisans of the lightning bolt
Tweedledees and tweedledums, out with thy toady quotes

The Agora where scholastic minds do not important matters probe
But the namby-pamby pilly-pissy that gives the people little hope

This boondoggle parliamentary debate surely must define
An excreable exercise that portends the humbled Lion's demise

LKY was a great Machiavellian and lots of Little LKY learnt from him.

Little LKY Louis the MP who brought up the 2nd hand smoke issue in parliament may fool Singaporeans about his social advocacy but no, not me. Have taken too much rice to be fooled by the PAP old-fashioned ruse to normalise drastic actions that are fait accompli.

Right on cue comes the news of thermal cameras to detect illegal smoking. Don't you think an outright ban would have been more cost effective?

The thermal may detect heat from cigarettes but dunno if anyone can detect the damage these devices will do to our brains with over-exposure. Little Louis can do better to raise the question in parliament. What is the health impact from over exposure to these devices? Especially infants and children and those with some acute sickness. And whilst at it please also find out how many million $ will be spent and who the vendor is.

Did MPs mislead parliament in denying NCMP Leong's appeal for reduction in Q4 electricity tariff?

 

Why is the government taking conflicting actions dishing out Covid assistance cash on one hand and hiking several service fees drastically on the other? In the case of electricity, why can't the 9.3% tariff increase be deferred or absorbed by the government since Singapore Power makes humongous S$1b annual profits?

A simple querry by non-constituency MP Leong Mun Wai from the opposition in parliament. State media described it a criticism. Two ruling party MPs took to the floor to provide non-sequitur responses and a rebuke that Leong ought to get his facts right.

Those with analytical capability will realise that the exchanges in parliament was nothing but a skirting of  Leong's querries. No answers were provided. Instead there was a dumbdown of side-issues which were error-ridden. 

2nd Minister for Trade and Industry Dr Tan See Leng: 

“I would like to clarify that SP buys electricity at the full cost of producing it and delivering it to all consumers ... whatever is procured is passed on to the gencos (generation companies) and then the genco charges consumers at the same price."

Where Tan is right: SP has vested contracts with gencos. The quantity or load (kwh) covered by these contracts cover the aggregate non-contestable load (customers of SP). SP pays the gencos at the strike prices of these vested contracts and sells to their customers at the same price (this is the energy component in the tariff). Both the vested contract and the tariff are fixed quarterly. To this extent, Tan is right in that SP makes no profits in the sale of electricity. SP is fully hedged.

Where Tan is wrong:  These hedging contracts are priced in 2 ways for the next quarter. First is at the allocated vesting price. This price is computed by SP on the long run marginal cost basis. Some gencos are allocated certain vesting quantity at this price. Second, a certain vesting quantity is auctioned. The auction price is often lower than the allocated price. Basically, SP is buying at prices computed by themselves, not at gencos full cost of production. The reason is simple. SP buys at vesting prices fixed for the quarter. Gencos production cost changes every 30 minutes.

Where Tan does not explain: Gencos supply to the grid at USEP (uniform Singapore electricity price) which changes every 30 minutes. Retailers and direct participants buy at the Wholesale Electricity Market at the same wholesale prices (which is the USEP + a small system admin fee). The wholesale price changes every 30 mins. Due to huge over-capacity, gencos bid at the wholesale market at very competitive prices. This puts a very strong downward pressure on USEP. For many years, the USEP has been below the vesting prices. In other words, SP has been paying for their electricity purchases at vesting prices which are way much higher than what retailers pay. How much excess payment due to vesting has been paid out over the years? An industry expert suggested it could be $3-$4b. Non-contestable customers paid for these. But they should not complain because it's their choice not to switch to retailers.

"...the increase in electricity tariffs in the fourth quarter of this year was “primarily due” to the increase in fuel costs, Dr Tan noted that the price of crude oil went up by a “whopping” 47 per cent between July and September this year." CNA

Where Tan is wrong: Tan's comment that oil price went up by a whopping 47% between July to September is firstly, totally wrong. The price was in fact very stable around mid US$40s. Secondly, even if the price had gone up as he said, it has no relevance for Q4. The next Q's tariff is based on forecast, not historical prices.

What Tan does not explain:  By June, the futures contracts that caused spot prices to hit negative levels in April had played itself out. EIA (US Energy Information Agency) outlook for Q3 oil spot prices to average US$43. SP held a contrarian view and made a whopping decrease in their oil price forecast to US$27.13, down from their Q2 projection of US$56.25. This was the reason for the 15% decrease in Q3 tariff. Why did SP make a projection of such a low price against market expectation? It was because of the election. The deregulated electricity system was weaponised for political ends.

What Tan dares not to explain:  The huge oil inventory built up in the past due to global economic slowdown and production over capacity dampened prices for quite a while. Market data showed the drawdown from inventory has eased off. The market is now seeing net inventory drawdowns but high production capacity puts a downward pressure on prices. In September, EIA forecast for Q4 spot oil prices directionless and ending the year average US$44. The market is expected to balance out in 2021 with prices to average US$49 next year.

Once again, SP held a contrarian view for oil prices. Their forecast for Q4 was US$61.76, up 127% against their Q3 forecast of US$27.13. Clearly, when SP and Tan talk about oil prices going up, thus forcing tariff increase of 9.3% in Q4, they were not referring to the actual market, but their own computational figures. Market spot oil prices for Q3 and Q4 actually remain unchanged. What was explained in parliament was utter rubbish that can be attributed to ignorance or with intent to mislead.

The reality is oil price was under-priced for political purposes in Q3. The tariff was based on oil price way below the market in Q3. So it had to be increased in Q4 to bring it up to actual market expectation. Even if Tan really understands the situation, he would not have the integrity nor courage to explain thus in parliament.

What Tan dares not speculate:  Since Q3 forecasted oil price was intentionally priced way too low, it meant the long run marginal cost was unrealistic. This in turn means SP forced gencos to take on allocated vesting contracts at unrealistically low prices. Perhaps for equity, either unilaterally, or with prior agreement, SP will make up for this by jacking up following quarters oil price forecast. That can explain the Q4 forecast for oil price of US$61.76, way over market expectation of US$44. 

If there is indeed this 'make-up' policy, the question then is whether Q4 price increase has even out the Q3 under-pricing. I'm speculating the answer is no. In order to get the long run marginal cost back on even keel to compensate for the low vesting prices in Q3, the tariff for 2021 Q1 needs to be jacked up a bit more. 


Ex-senior minister in various ministries - Chee Hong Tat :

"SP group is the entity that transmits the electrons, so they earn a return for the grid infrastructure that they have put in place........... I think it is important for us to be clear what is the business model of the various entities before we make comments like ‘Why are they making so much money and they’re not passing on?" 

Chee was speaking French through his nose if the model he described of the SP group is simply that of transmitting electrons. Actually to be more specific, it's negative electrons. The SP Group has various functions under different subsidiary entities. 

In 2019 10% of group profits came from SPS which is the MSSL licensee. It has several functions, which include sales of electricity to non-contestable consumers. In 2018 it led the market with a share of 25%. But Dr Tan is right. SPS mades no profit from sales because it is fully hedged. Profits come mainly from metering. Nevertheless, it remains a major electricity vendor.

The bulk of profits come from transmission and distribution. SPA is the Transmission Licensee. The electricity industry is open market, but transmission remains regulated. It is heavy infrastructure business and the regulated returns is computed on the basis of allowing a fair ROI on capital. Mr Chee is right in this respect. 

However, opposition MP Leong is right in that the SP group is making fantastic profits of a billion $ a year. Substantial profits from foreign operations is to be applauded. But the huge profits from SPS and SPA is obscene for state monopolies delivering essential services. It does suggest the regulatory parameters for computation of rates have been overly generous to the licensees. Let's cut out the obfuscation by the 2 ruling party MPs about returning costs to gencos and the business model. The vesting contracts do impose some complications, but this can be circumvented by leaving the energy cost alone and looking at cost reduction in the fixed component of the tariff.  

Leong's appeal for deferment or government absorption of some electricity cost is beyond rational, it's a moral call. Dr Tan and Chee dumbdown on Leong and support status quo, to the extent of misinformation. Equity calls for some social redistribution of the profit. Status quo means the profits go a long way towards excessive executive rewards in a deeply layered organisation -- the operating units, the holding company, and the ultimate holding company Temasek. Everbody takes a cut. Is it wrong to ask whose interest is being served?

CIA whistleblower has evidence Obama-Biden-Hillary-Brennan betrayed the country but they are blocking the news.

 

Watch this before it's taken down. This is a video that I stumbled across late last night.

( If video does not appear, click here ).

It carries the revelation of 3 principal players - a CIA whistleblower, the father of a Marine Seal Team 6 member who has been killed (the team that took out Osama bin Laden), and an investigative journalist. Very briefly it is about Obama-Biden-Hillary-Brenan conspiracy of illegal acts that connected the killing of Osama, Benghazi US embassy attack, US$152b payment to Iran and the killing of Seal Team 6 members in Afghanistan 2011. For years there have been gnawing suspicion and speculation. This time, the people behind this revelation said they have tetrabytes of info, documents, audio and video as evidence which have been handed over to some Congressmen, and President Trump has been briefed.

I'm not blogging about the subject matter. You view the video and ponder your own thoughts. I want to blog about something insidious.

This video was posted yesterday. I shared it on Facebook early this morning (about 2am). By the afternoon, I tried to share it again on Facebook. When I publish the post, the video does not appear. Instead Facebook displayed an advisory that I'm sharing a false news and placed a link to view the explanation. 

Facebook also sent me notification (see image left).

The link leads to a site called Leadstories.com where supposedly the exclusive "truth" is explained. Leadstories debunked everything in the video, and refers back to all those old stories from, yes, the Liberal media. 

Put on notice, I checked out the video source. It was from Next News Network which relied on breaking announcement from a media site DJHJ Media. DJHJ is a conservative site and they did'nt pretend who they are. Their mission is to protect conservative values. 

So I factchecked NNN and Leadstories. The unbiased Factcheck.org had nothing on them, nor the controversial video. Mediabiasfactcheck.com described NNN as extremely bias on the Right (conservative) and prone to unverfiable non-evidencial reports. It painted Leadstories as a factcheck site that is extremely unbiased and evidence-based.

Unsatisfied, I googled "who checks the fact checkers". I found this report from RT.com.

‘Independent’ Facebook fact-checker exposed as partisan smear factory packed with CNN alumni....RT.com

Of course the US says RT.com as Russia state-own media is a propaganda machine. But I have come to see it's London-based bureau run by the Brits as very analytical and without the sensationalism, emotionalism, and partisanship as their US countrepart. So I clicked to check and behold, RT described Leadstories as almost populated by ex-CNN staffers. It is nothing more than another mouthpiece of the Democratic Party controlled Liberal press.

This little epidosde serves to demonstrate what is already an established fact. The liberal media and technology apps owners (Twitter, Facebook, Google, Yahoo) are all anti-Trump and they have junked professionalism out the window and become tools and activists for the Democrats. CEOs have been caught on video to actively promote this anti-Trump policy to their employees.They have worked to suppress conservative views and any negative views on the Democrats. AI capabilities have been applied toward this end. Google searches will place liberal prerogatives at the top. Facebook can very quickly apply to suppress very damaging articles or videos such as this Obama-Biden-Hillary-Brennan conspiracy from being shared. When has there been a Facebook policy to direct users to a specific site that debunks the article or video being suppressed.

Facebook suppression of this video begets the question. Why? The reason is simple - damaging truth on the Left needs to be suppressed.