POWER October 2013 - 57

This report was researched and
written by Global Business Reports
Katya Koryakovtseva and Andrew Mason
Power in Southeast Asia:
Cubs on a Growth Spurt
With bright economic growth prospects, the region is redefining its power sector
Southeast Asia, with an increasingly affluent population of 600
million, must kick investment in the power sector into the next
gear to meet expected demand for electricity. According to a
study from Accenture, the region's economy is projected to grow
by $735 billion by 2020. Over this period, ASEAN's most dominant
economies, Indonesia, Malaysia, Thailand, and the Philippines,
collectively referred to as tiger cubs, will need to boost
their generation capacity and improve their connectivity in order
to facilitate this economic growth.
Adrian Koh, assurance partner at Ernst & Young, comments
that despite barriers to entry, those familiar with the region are
making commitments: " Southeast Asia has provided a slight
sparkle to the gloomy global economic weather of recent years.
Because of this, there are people extremely willing to invest
in the region. There is enough liquidity, especially from the
Chinese and Japanese, who have been here long enough to
understand it well... Governments as well as gen-cos are looking
at cost transformation because people are unhappy about
rising prices. It does not help that tariffs and the cost base are
not transparent in this part of the world. There exist real regulatory
risks for potential investors - the model works for now,
but will it be changed? "
Recent events suggest the model is changing, albeit slowly.
Changes in regulatory structures often take decades to fully implement.
For example, Singapore, the most liberalized market in
the region, is still defining the future of its retail market a decade
after legislation deregulated the power sector. The Philippines
is currently in the messy process of liberalizing its power
market; it has shed state-owned gen-cos and is introducing full
retail contestability.
Thailand, Malaysia, and Indonesia, continue to exert a great
amount of state control over their power sectors, as all of them
seek to diversify their generation mix and quickly add needed
generation capacity. In Malaysia, state-owned Petronas supplies
gas to a number of private power generators at a subsidized
rate. Following incumbent Prime Minister Najib Razak's victory in
May 2013's elections, cutting back on fuel subsidies is reportedly
high up on the fiscal-reform minded prime minister's agenda. In
Thailand, EGAT, the Electricity Authority of Thailand, accounts for
approximately half of Thailand's generation, with IPPs playing an
increasingly prominent role, especially as the country looks to diversify
its generation mix beyond gas. In Indonesia state-owned
PLN, Perusahaan Listrik Negara, controls 90% of generation capacity
in the country. The government is grappling with how to
generate and deliver electricity to an increasingly affluent archipelago
of 243 million people spread across 922 inhabited islands.
Presently, Indonesia's electrification stands at approximately
70%, one of the lowest in the region.
Solar Power Plant Lopburi, Thailand - 1.5MW
Courtesy of Yingli Solar
POWER October 2013

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