RE is a luxury
Renewable energy seems to be the buzzword these days. Everybody have a view on renewable energy, whether it is solar, bio-diesel or hydro. They all seem to think that it is good that Malaysia is talking about renewable energy in a big way.
However the reality is renewable energy is not a replacement for the conventional power plants. The power generated by gas and coal-fired power plants cannot be replaced by renewable energy sources.
Renewable energy is ideal to deploy when there is demand for power at peak hours. However its output is inconsistent and cannot be counted as a base-load power plant. For instance when it is a gloomy day, solar power plants would produce less electricity.
Apart from inconsistency in the supply of power, there are other distinct differences between renewable energy and electricity generated by conventional power plants such as coal and gas.
Renewable energy power plants are environmental friendly and cost less to build. The only exception is hydroelectric dams that hold a large quantity of water and affects a large surface area.
An example is the Bakun Hydroelectric dam in Sarawak that cost the federal government at least RM8bil and covered an area the size of Singapore.
In recent weeks, the bidding to put up solar power plants dropped as low as 17.7 sen per unit. There were more than 120 bids and the average was about 26 sen per unit, way below the guided price of 34 sen per unit.
The drop in the bidding price prompted many to view that it is cheaper to have more solar power plants than those run by fossil fuels such as gas and coal, which are said to damage the environment.
However, the views are misguided. There are several reasons why solar power plants are cheap. Among them is that the price of solar panels has dropped and Malaysia is a large production base for solar panel manufacturers.
But one must not forget that electricity is a key component in producing solar panels. Hence the manufacturers are here to take advantage of the relatively cheap electricity and not to support Malaysia’s agenda to increase renewable energy sources.
Malaysia does not have the luxury to go big on renewable energy as it does not entirely replace the fossil fuel power plants.
The resilient oil market
EARLIER this week, oil analysts were up in arms following a weekend drone attack on one of Saudi Arabia’s most important oil facilities that many assumed would cripple petroleum exports for days or weeks.
A deluge of reports were released, with many analysts estimating oil prices inching closer to US$80.
Some analysts even said that this incident far outweighs the previous oil embargo in the seventies and could escalate tensions in the already fragile Middle East.
This would be good news for Petroliam Nasional Bhd or Petronas, as it would see a temporary spike in its revenues. Malaysian oil service support companies would also benefit.
As at press time on Friday, Brent crude oil was hovering at the US$63.71 level, meaning that Brent oil prices are only 5.8% higher compared with before the weekend attacks.
While Brent futures briefly spiked about 20% or more than US$11 a barrel when trading started on Monday, it then eased to an increase of about 10%, or just over US$6 a barrel. By Tuesday, the uptrend was halted on news that production would be restored soon.
At Brent’s current level, it has risen from its seven-month low in early August. However, it is still about 20% below year-ago levels.On Bursa Malaysia, oil stocks rallied just for a day. By Wednesday, all the gains were returned. The reality is this – one cannot fight the structural long-term trend of oil.
There are a tonne of oil inventories across the globe and oil disruptions are increasingly having smaller effects on oil prices.
This isn’t a 1973 oil embargo scenario where oil prices shot up 231.6% over four weeks.
The elephant in the room, though, is the emergence of shale oil led by the United States about a decade ago. This has completely changed the dynamics and political play of the oil industry.
US oil production has doubled in the past nine years due to oil produced by hydraulic fracturing and horizontal drilling in shale basins.
Furthermore, the stockpiles of the industrialised countries are at their highest level since September 2017, and are nearly 20 million barrels above the average of the last five years, according to the energy agency.
So, don’t be surprised when the next time another oil disruption takes place, prices remain indifferent.
AUDIT firm PKF, which was appointed by LONDON BISCUITS BHD to conduct an independent assessment report (IAR) on several key audit matters, did not turn up for a board meeting called by the company where its report was to be presented.
In a stock exchange filing, the biscuit maker said that it “wishes to update, that the board had invited PKF to attend the board meeting of the company which was held on Sept 19 for presentation of the IAR, and thereafter for clarification and explanation on certain matters, but PKF did not attend the board meeting as invited.”
Due to the absence of PKF at the board meeting, London Biscuits added that the board could not deliberate on the items on the agenda.
“Hence, the board have agreed to prepare and forward the queries in writing to PKF, ” it stated.
It is unfortunate that PKF did not attend the meeting, which would have been a good starting point to resolve the issues weighing on the company, which lapsed into Practice Note 17 category two months ago.
London Biscuits appointed PKF in March to undertake an independent assessment of five issues, which were raised by its external auditor, Nexia SSY when the latter issued a qualified opinion on the company’s financial statements for financial year 2018.
These were on company inventories, related-party transactions (RPTs), acquisitions of plant and machinery, account balances and an impairment loss.
On Sept 4, the company announced that PKF had completed its independent assessment. The review showed there was a discrepancy in the values of the company’s property, plant and equipment. But the company did not disclose the details of the discrepancy in its property, plant and equipment.
On inventories, PKF opined that it is not uncommon for auditors to quality the accounts, as the external auditor was only appointed two months after the financial year-end, and so it was unable to observe the financial year-end count. It also said that the transaction between London Biscuits and Secret Ingredients Sdn Bhd was not in the commercial interest of the public-listed company, although it opined that there was no RPT between the two.
Written queries take time. Wouldn’t it have been better for a PKF representative to have attended the meeting to answer any clarification the company has?