Who knew coal-supply issues in countries far away from U.S. markets could have a massive impact on domestic supply and pricing, helping to increase prices for Appalachian coal by 260 percent in...
Global Power Projects: Evaluating Market Potential
projects. These differences are reflected in the degree to which state-owned power companies and labor unions accept the concept, how streamlined their decisionmaking has become, the uneven quality of their draft power-purchase agreements, and their acceptance of how the market assesses the risk of investment in their country. On this latter point China, after considerable reflection, has found ways to shape the terms of its power contracts to provide an acceptable return to investors.
Measured purely by the sophistication of its power contracts and the timeliness of official decisionmaking, Pakistan would have to be at the top of the list of attractive places to develop a private power project. Unfortunately, the persistent violence and instability in Sindh province has curbed the willingness of some lenders to commit funds.
As already mentioned, China has become quite realistic as to what represents a fair sharing of risks and rewards, and will present a huge demand for new IPPs for as far as the eye can see. In my judgment, China will experience considerable turmoil, even violence, in the next two to five years as a consequence of growing tensions between the haves and the have-nots and, separately, the transition to a successor political leadership. But that should not be seen as an impediment to investment in the power sector. It is true that some U.S. companies may face a measure of discrimination by Chinese authorities owing to strained Sino-U.S. relations, but with proper organization and representation within the consortium, these problems can be overcome.
With the election of President Fidel V. Ramos three years ago, the Philippines has become one of the most attractive sites for independent power production in Asia. President Ramos is supported by highly professional officials in the Department of Energy and the National Power Corp. who have put in place a sound energy policy. This policy has been expressed in straightforward template agreements that expedite the development process considerably.
Thailand's power sector has always been dominated by the Electrical Generating Authority of Thailand (EGAT), perhaps the most efficient state-owned power company in the world. Starting last year, however, the government began moving in earnest to open the energy sector to private participation. While Thailand will be able to meet its short-term needs through IPPs now being awarded, its real problem is fuel. Faced with diminishing gas supplies of its own and the prospect of higher prices from neighboring Myanmar (with whom they have begun to contract for gas), Thailand should ultimately come to an agreement with Malaysia (em the most secure and economic source to meet its long-term fuel requirements. IPPs that take this into account could face a very bright future in Thailand.
Indonesia decided to open its power sector to private participation several years ago, and has recently reached financial close for the first phase of the giant Paiton project. In the years ahead, it promises to present extremely attractive prospects for the privatization of several existing plants that are suitable for repowering and/or expansion.
Apart from these Asian countries, both Peru and Brazil promise the most appealing