Mergers and Acquisitions not a viable option to grow IPPs in Asia

IPPs are expected to meet more than 30% of the 250-3500GW new capacity demand in the region in the next 10 years.

Speaking at the Power and Electricity World Asia 2012, Lucas Hautvast, head of strategy, markets and sales in Thailand of International Power, GDF Suez laid down the following needed new capacity for Asia upto 2020 as well as expected IPP coverage for selected countries:

 Country                               needed capacity (GW)               % for IPP

Indonesia                                    20-30                                 40-60%
Malaysia                                     10-20                                  20%
Thailand                                      15-25                                 30-50%
Philippines                                   15-20                                  90%
Vietnam                                        15-20                              20-50%
Others                                          20-30                                 30%
Asia                                             250-350                              33%

Mr Hautvast said that around 33% or 80-120GW are expected to be met through IPPs but cautioned that growth strategy for IPPs in Asia cannot be based on M&As only as there’s just no enough options available.
“It is difficult to do merging and acquisition strategies in Asia. The problem, he said is that while there are many players coming into play, mostly from the domestic front, there is a limited number of companies looking to invest outside,” he said
“There are no exit strategies , no privatization program announced or are under review in any countries like Philippines or Singapore over last few years,” he said noting that there are just notable exceptions like India which is looking for right investment timing into thermal power and Japan which may opt to sell some nuclear facilities after the Fukushima tragedy.
According to Mr Hautvast, most US companies left the region after the Enron scandal. In the last 5-7 years however, new local companies are emerging as new players – these include those coming from China, Thailand, Malaysia and India.
“We’re not seeing them yet but it’s just a matter of time before we see competition in M&As gain ground in Asia,” he added.
In the meantime, Mr Hautvast noted that the region should find ways how to address major bottlenecks in IPP process.
“Generally, the challenge is to improve the IPP process, to ensure that there is more control over the timing of new generations coming online,” he said.