The mood at this year’s POWER-GEN Asia conference in Hong Kong was just a touch subdued. And it had nothing to do with the fact that this would be my last show as conference chairman. Michael Barrow, Principal Structured Finance Specialist at the Asian Development Bank summed it up when he said: “The [southeast Asian] markets have come a long way but things seem to have become slightly stuck…”
Barrow was predominantly referring to the Philippines, Indonesia and Thailand. He noted that reform was slow in the Philippines and that the country would face a crisis in the next two to three years. Indonesia, meanwhile is desperately trying to add 10 GW of new coal fired plant under a new round of IPP projects. This programme, however, looks under threat as potential investors show reluctance to move forward without some form of government guarantees.
Thailand also came under fire from speakers. Dr Amranand Piyasvasti, chairman of Kasikorn Asset Management noted: “We may see no privatization of EGAT for two years. The official timetable for the IPP solicitation is March 2007 but there is still too much work to do. It all depends on who will be the new prime minister.” EGAT has been promised 50 per cent of new plant build in the crucial 2011 to 2015 period. Meanwhile, estimates for new capacity needed in the period have been revised downward from the originally forecasted 13 GW to perhaps 11 GW or 12 GW.
Essentially, this means EGAT will have an even more dominant role in the market – a situation that will not be welcomed by potential international developers. One speaker at the two-track conference noted: “Thailand is in disarray. There have been substantial changes between the 2004 PDP (Power Development Plan) and the draft 2006 PDP. This, combined with the continued delay of the IPP Solicitation suggests there might even be some gaming in the market.”
Even China, although still a huge market looks likely to go through a period of cooling, threatening to once again enter a bust cycle after a boom. Richard McIndoe, group director and managing director of Australia CLP Group said: “China is looking at a boom-bust scenario. There could be a glut in supply, which will lead to financial difficulties for investors who based investment on predicted growth. There has also been a high level of unauthorized capacity which will compound the problem. Highly regulated electricity tariffs but deregulated fuel tariffs also means that power producers are being squeezed in the middle. Consistent regulation is needed across the board.”
Although China may be in the middle of a mini-bust, the economy is still strong. Some stabilization of coal prices together with tariff increases will also help. It is also worth noting that some of the problems are related to an over-abundance of hydropower. Opportunities may have decreased but there are still plenty. As one speaker put it: “Before there were thousands of opportunities, now there are hundreds…”
The one sector of the Asian power industry that seemed to generate genuine interest at the conference was renewables. China has a firm renewables policy under which it plans to have 13 per cent, around 140 GW, of its installed capacity in the form of renewable generation by 2020.
India was also noted as the top wind power market in Asia. Its successful wind power programme has been attributed to clear transparent policy combined with government incentives. Even in Thailand it was conceded that renewables are developing, even if not as fast as they should be. The Asian Development Bank said it was “actively looking at renewables”.
So while there are some bright spots such as Vietnam, Bangladesh and India, there seems to be a level of stagnation. Barrow noted: “Sometimes it takes a crisis to make things happen”. The next crisis may be Indonesia. What happens there may give us an indication of what can be done when the need becomes urgent.
Sometimes it does indeed take a crisis to make things happen. Countries like Indonesia and the Philippines may need this in order to rise again, like the Phoenix from the ashes. This is my final editorial for PEi magazine and there is perhaps no better place than here, to thank you for your continued support over the last nine years. I hope I have left a lasting legacy.
Publisher & Editorial Director