He Jay, Regarding this ... Message 14273702
<<August 25th, 2000
... My own absence from the thread is due to sudden mad uptick in activities for clients, getting a client out of the fraud filled cogeneration power deals they got themselves into ...>>
... and ...
Message 14980719
<<December 8th, 2000
... Things in cyber Hong Kong are pretty dark, and getting darker. Some fund offices (i.e. Draper's #1 guy in HK just quit, to join an investment bank doing traditional things) are closing, some funds are returning $ to investors, other funds are not able to raise new and badly money; basically all investment operations, including the largest ones (PCCW, etc) are nursing toxic wounds or waiting to die.
Many investee companies are announcing their deathbed preparations or severe (potentially fatal) amputations.
There will be survivors, not many, who will dominate the landscape, but now it is all a crap throw.
I am watching my pals being put out on the streets, resumes in hand, all telling the exact same story ... "how I got dotbombed". My pal who hosted last year's Japanese Restaurant catered party at his home for new year's has not made any preparations to do any celebration. He also has his resume in hand.
I am, as usual, OK, being swift of foot ... run, run, and run still faster, into the darkness, into the forest, away from the thermal nuclear detonation impact and aftershock.
The dotcom side of my business has vaporized and I am once again concentrating on power stations ...>>
... and ...
Message 15126319
<<January 4th, 2001
The View to a Kill from Jiaxing.
The partners, wife and I are in Jiaxing, about an hour’s drive from Hangzhou and Shanghai, working with some private companies to package a bundle of roads, ports, power plants and such old economy stuff. This is a very bleak environment but dynamic business place. The platinum watch is making a proper impression here and it looks like uncle Al is insisting on paying for it after all (hoping he succeeds).>>
... and ...
Message 16118471
<<July 24th, 2001
I know I am in the wrong business pawning power stations and haggling over manufacturing plants>>
… it sure looks like tomorrow will be as good a day as was yesterday :0)
feer.com
POWER
China's Huge Appetite
The cost of China's power requirements is estimated at $108 billion over the next five years. But before foreign investors rush to take advantage of the opportunity, they should consider both the structural weaknesses of the industry and the regulatory risks involved
By Kimberly Song/HONG KONG
Issue cover-dated December 18, 2003
CHINA'S HIGH-SPEED economic engine is requiring a lot more power than central planners imagined. Power shortages have hit 19 provinces, affecting big cities like Shanghai and Guangzhou. Factories are being forced to move production to nights and weekends, while office and shopping complexes are cutting back on heating and switching to power-saving light bulbs. By aggressively rationing electricity and controlling demand to prevent spikes, China is hoping to avoid the kind of massive, costly blackouts that affected millions of people in the northeastern United States and in Canada in August.
Some estimate that China generates about 10% less electricity than it needs--a shortage of about 40 gigawatts, enough power to run all of Australia. China's power requirements will entail an investment of the order of some $108 billion over the next five years, according to the State Power Corp. The country needs many more power plants but also a sturdier and wider-reaching transmission grid. Indeed, the world's second-largest and fastest-growing power market is ripe with opportunities to entice any investor. However, major regulatory risks could in fact keep many independent power producers, or IPPs, at bay.
American and European power-generating companies that once poured millions of dollars into power investments in China a decade ago are scarce this time around. Projects like the Meizhou Wan power plant in Fujian province, a $700 million investment in which the provincial government reneged on a 20-year power-purchase agreement, leaving a consortium of foreign investors stranded, are not easily forgotten, say executives. Still, regional Asian generating companies, like Hong Kong's CLP Holdings, continue to invest in China. Currently, there are 39 joint-venture power investments in China representing just 8.5% of the country's total installed capacity, says state media.
So it's largely up to China's own power producers, dominated by five big players, to meet the country's power needs. But that's a tall order. "It's far from clear how the five generating companies are going to secure that kind of funding," says Jaap Kalkman, a partner at McKinsey & Co., a management consultancy, who does advisory work in China.
While IPPs get the majority of their funding through bank loans, some have gone to the capital markets to fund new power stations. Chinese generating companies listed on Hong Kong's stock exchange have seen their share prices surge this year as eager investors have sought to tap into China's growing demand for electricity. Shares in Huaneng Power International, the country's largest IPP, have jumped 87% so far this year. Beijing Datang Power has risen 87% and Huadian Power International has gained 55%.
Initial public offerings have also garnered much attention. Yangtze Electric Power, operator of the Three Gorges Dam--the world's largest hydroelectric-power facility--raised about $700 million from its November 18 IPO. Its shares soared 45% on its first day of trading in Shanghai. China Resources Power also made an IPO in that month, raising about $330 million in Hong Kong. This month, China Power Investment, one of China's five largest IPPs, is expected to issue domestic bonds worth up to 3 billion renminbi ($363 million) to build four new power stations.
The China power story will certainly keep investors interested--demand for power is far outpacing supply. As the global economy recovered and China started booming, a forecast the government made in 2000 for annual average power-demand growth of 6% over the next five years quickly proved too conservative. In the first six months of this year, demand skyrocketed 17% from a year earlier. Power demand is now expected to rise 15% next year and 11% in 2005, says the State Grid Corp. Experts expect the demand-supply imbalance to last far into 2005.
The numbers are impressive, but they don't tell the whole story. Investing in China's power sector is a risky proposition because the regulatory framework governing the generation, transmission and distribution of power is poorly developed and is still in the process of being formulated. The entire sector is going through a massive transformation from being a state-run bureaucracy to a competitive market-driven industry. The rules of how the new game is going to be played are still in the works.
DRAMATIC CHANGES
China began to reform its power sector in the early 1990s, but dramatic changes have come more recently. Electricity was once the sole preserve of one government ministry. But the break-up last year of the State Power Corp. of China, formerly the Ministry of Electric Power, spawned two separate transmission and distribution systems and four nationwide IPPs. The State Electricity Regulatory Commission was also created to oversee the industry.
These reforms are much more than just changing nameplates, says Scott Roberts, an analyst for Cambridge Energy Research Associates in Beijing. "Unwinding the generating assets and clarifying who owns what takes a lot of complicated negotiating," he says, adding that in some instances a local power plant can have up to 10 different stakeholders--different layers of the government, a commercial bank and private investors--all laying claim to the same assets.
Having restructured the industry into individual companies, the next step for the government is to introduce competition. On December 9, it released a tariff-reform plan that outlines a three-stage effort to ultimately allow market forces to determine electricity prices. For starters, the country's northeast region will throw open up to 15% of its on-grid electricity to competitive bidding in the first quarter of next year. But while China suffers widespread power shortages, industry experts expect such "power pooling" measures to be limited.
"We welcome power pooling," says an executive at Beijing Datang.
"Right now, with fixed tariffs, we are not benefiting from our competitive advantage." The company recently introduced a bidding process for construction contractors and worked with designers to optimize plant design to reduce construction time by several months and shave costs by about 20%.
While power generators are becoming increasingly competitive, some industry experts worry that China's two main grid companies--still 100% owned by the state--will not shed their bureaucratic ways and will leave China's inefficient transmission network underinvested.
One of China's major problems "boils down to bottlenecks in the transmission and distribution networks--though generating capacity has been available," says David Yip, an analyst at Merrill Lynch in Hong Kong. "The funding shortfalls have partly been a consequence of an excessive focus on generation, where the bulk of investment has gone at the expense of transmission and distribution networks."
The recent spate of shortages, which have been felt most acutely in the eastern part of the country, where heavy industry, construction and the consumer sector are all booming, could have been partially alleviated by the power surpluses in the west, if the grid was interconnected. The southern city of Guangzhou, for example, typically has power-reserve margins of less than 5%. Western provinces such as Inner Mongolia and Yunnan, by contrast, have reserve margins as high as 30%. The government is building transmission lines to bring western supply to meet eastern demand, but industry observers say there is a risk that not enough is being done.
Also at issue for the government is to diversify China's fuel mix. About three-quarters of the country's electricity comes from burning coal, which has a huge environmental impact. New legislation that took effect in July increased the surcharges power companies must pay for harmful emissions in an effort to encourage companies to refit coal-fired generators.
Indeed, China is looking to other sources of energy. The government aims to increase the share of natural gas as a fuel from 3% to about 7% by 2015. It is currently building liquefied-natural-gas terminals on the east coast to handle imported gas and a 4,000-kilometre-long natural gas pipeline to bring fuel from the western province of Xinjiang to Shanghai's doorstep.
China also recently announced plans to build an $8 billion nuclear power plant in the southern province of Guangdong in 2006. The plant, expected to be the largest in China, will have a generating capacity of 6 gigawatts. Upon completion in 2009, the $25 billion Three Gorges hydroelectric-power facility is expected to produce up to 18 gigawatts of power.
In addition to using new sources of energy, "China will be much better off if it figures out ways to integrate energy efficiency into the growth that's occurring now," says Peter Bradford, former chairman of the New York Public Service Commission, who is currently serving as a consultant to the Chinese government.
China's energy sector is "an extremely interesting sector to watch," says Kalkman at McKinsey. "Because of deregulation and extreme growth in power demand, you will see China go through in the next five years the kind of development that took the U.S. and Europe 30 years."
Kathy Chen contributed to this article |
