Taiwan plans $13bln in extra energy spending given high global prices

Taiwan has not passed on most of the rising costs to consumers, and it heavily subsidises energy bills, helping to keep inflation down.

Taiwan’s government said on Thursday that it plans to spend around T$415 billion ($13.0 billion) this year to help its main power producer Taipower and oil refiner CPC absorb costs from sharply rising global energy prices due to the Middle East war.

Taiwan has not passed on most of the rising costs to consumers, unlike in other parts of the world, and it heavily subsidises energy bills, helping to keep inflation down.

In a statement following a weekly cabinet meeting, the economy ministry said that budget estimates made last year were inadequate due to the Middle East “turmoil” affecting energy prices this year.

The ministry said it had proposed a T$180.9 billion supplementary budget for Taipower, CPC and other energy producers to “absorb price differentials” this year, with an additional capital injection of T$233.8 billion for CPC to improve its financial structure.

State-owned CPC in particular “cannot absorb the difference between adjusted and non-adjusted oil and gas prices” and its accumulated losses will exceed T$127.6 billion, making borrowing difficult, the ministry said.

That could lead to CPC’s international credit rating being downgraded and a sharp reduction in procurement negotiating power, it said.

“Without supplementary budgets, both CPC and Taipower may struggle to continue serving as price stabilisers, causing price volatility,” said the economy ministry, which is in charge of energy policy.

The ministry also called for Taiwan’s parliament to support the spending plans, saying maintaining price stability and ensuring stable natural gas supply are matters of “utmost urgency”.

© ZAWYA