John shares insights on what industry players can learn from the pandemic.
John Yeap, formerly the Head of Energy for Asia for Pinsent Masons and currently a senior Consultant with the highly respected UK Energy and Infrastructure law firm, has been a familiar and well recognised name in Asia's power industry for three decades. A regular speaker and contributor to various energy and power events across the region, he has been recognised for designing and documenting some of the most bespoke energy transactions across the region.
In an interview with Asian Power magazine, John further shares his insights on APAC’s renewables, and what industry players can learn from the pandemic.
Which particular markets or sectors are your main focus? Can you share with us your work experience or any backstory that has contributed to your professional career?
I work with clients in delivering their power and energy investments across the Asia Pacific region, and beyond. Countries covered range from those in Asia Pacific through to the Indian subcontinent, Middle East and Sub-Sahara Africa.
My start in this area of specialism dates back to the early 90s. This was the time when BOT and IPPs started to appear in the Asia Pac region. Prior to this, much like the rest of the world until then, the generation and supply of electricity was generally considered a utility level activity, with close to no private sector involvement. There were some exceptions to this such as in HK where the power sector has always been privately owned, but generally the generation, transmission and retail of electricity to consumers was the responsibility of government owned utilities.
The introduction of IPPs in the region in the 90s created investment opportunities for the private sector, and all these investment opportunities required legal structuring and negotiations. After a couple of years advising clients on their investments, the opportunity to take on an in-house legal role at CLP Group as its Commercial Legal Counsel presented itself. The role involved working with the CLP team developing IPP projects outside of Hong Kong. This was a huge opportunity as I had by then realised the electricity sector is such a complex business that my understanding of the sector’s risks and drivers, not just in terms of legal issues but also commercial and technical, will not be sufficiently comprehensive without some time spent within the industry.
I returned to the legal industry after some years with CLP Group and I have been able to leverage what I had learnt about the power industry in the support of my clients, particularly when they require novel design structures for their transactions.
Tell us about the biggest trends you've observed from Asia Pacific's energy sector for the past six or 12 months.
It will not be any surprise that what I see is what everyone else is seeing, namely the global trend is to move away from fossil fuel and that is the case in Asia Pacific as well. Countries that have championed coal fired projects now see the renewables sector as the future, with gas as the transition fuel. Battery storage has also become relevant in the few markets where the economics of storage makes sense.
Based on a recent report, Asia Pacific is said to become a powerhouse of renewable energy. What do you think are the factors boosting the region as a global powerhouse of renewables?
During the decade when solar power was taking off across the temperate climate of Europe, many of us in Asia noted the irony that our tropical weather had yet to see the development of solar power. The reasons are several but a key consideration was of course the cost of PV panels at that time which created affordability issues in much of Asia. Today, solar has been a success story for many Asian countries. However, lagging investments in the grid and the management of intermittency will limit the sector, together with land constraints in several countries in the region.
Whilst we are blessed with higher solar irradiance, our proximity to the equator also means the scope for wind power is more limited. However, for countries with higher latitudes, we are seeing wind as a viable energy course. Offshore wind is also a growing area, with Taiwan leading the way in the region, on top of Mainland China’s own offshore wind industry. Vietnam’s long coast line also lends well to nearshore wind farms, and the development of floating offshore wind technologies means the deep waters off Japan are also potential sources of wind power.
What are the challenges in investing in the region’s power sector?
As Asia is not a homogenous region, the challenges will be country specific. Regulatory certainty and a level playing field continues to be a challenge in certain countries. Regulatory certainty is particularly a challenge for renewables in that in many countries in the region the regulatory framework is still evolving. The renewables sector also has challenges in certain jurisdictions in relation to securing sites for grid connections that are best suited for grid connectivity and intermittency management. Furthermore, the limited domestic capital markets also present capital raising challenges for much of the region with a limited number of exceptions.
Crisis presents opportunities, they say. Where are the opportunities for industry players in the region in the middle and post-pandemic era?
It is not immediately apparently what specific opportunities may arise from the current crisis, though if history is a guide for the future, we are likely to see potential distressed asset sales if liquidity challenges lead some investors to rationalise their current portfolio. However, what I think we can say is that whilst the crisis arising from CV-19 is unprecedented in recent times, we know Asia has experienced significant economic shocks on several occasions over the past two to three decades. This would include the impact of the Asian Financial Crisis of 1997, SARS in 2003 and the Global Financial Crisis of 2008. With each of these events, lessons were learnt that has enabled the energy sector to be more resilient against the next crisis. For instance, the AFC 1997 exposed the risks associated with un-hedged forex, and that is a lesson that has led to project structuring to limit such risks. The Asia energy sector will therefore come through this crisis more resilient and prepared for dealing with the challenges of the future, and perhaps with greater focus and emphasis on transitioning towards new energy sources.
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