Sustaining economic growth momentum requires a stable and reliable power infrastructure. Implementation of rural electrification programs, initiatives adopted by the various governments to hike installed capacity, and improvements made in government policies are the prominent reasons driving Independent Power Producer (IPP) investments in Southeast Asia.
New analysis from Frost & Sullivan (energy.frost.com), Investment Opportunities in the Southeast Asian IPP Market, finds that the market is expected to add about 40,000 MW by 2015. This will increase the installed power capacity by IPPs from 126,495 MW in 2010 to 166,350 MW by 2015.
"There is a pressing need to bridge the gap between demand and supply by new capacity building," says Frost & Sullivan Consultant Rajat Gupta. "Observations reveal that Southeast Asian countries require private investments in this sector as state-owned utilities have limited cash reserves to fund planned projects."
Lack of clarity on power purchase agreements, difficulty in securing fuel supply and land, ensuring timely financial closure of projects, and lack of adequate supportive policies are the major hurdles in setting up new plants. However, the governments in the region have been taking appropriate steps to improve the policy framework and provide incentives to private sectors investing in power generation plants.
Still, bureaucracy is a major restraining factor that not only delays the implementation of new policies, but also hinders IPPs from obtaining timely clearance for new projects. In most of the countries, state-owned utilities dominate power generation, transmission, and distribution functions and IPPs play a role in the power generation. Furthermore, power generated by IPPs is largely sold to a single buyer (utilities) at an agreed price.
The low electricity tariffs in some countries do not justify heavy investments in new power projects. Negotiating a favorable power purchase price with the utility is one of the most challenging tasks for a private power investor.
"The IPPs need to build a strong rapport with the government as well as the state-owned utilities in order to negotiate and agree upon a fair power purchase price," says Gupta.
Foreign investment policies must be made attractive to sustain the investors' interest for a longer term, especially in the capital-intensive power generation sector.
If you are interested in more information on this study, please send an email to Donna Jeremiah, Corporate Communications, at djeremiah[.]frost.com, with your full name, company name, title, telephone number, company email address, company website, city, state and country.
Investment Opportunities in the Southeast Asian IPP Market is part of the Energy & Power Growth Partnership Service program, which also includes research in the following markets: Investment Opportunities for Independent Power Producers in West Africa, Investment Opportunities for Independent Power Producers in East Africa, and Investment Opportunities in the Wind Energy Sector in Europe. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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Investment Opportunities in the Southeast Asian IPP Market.