Asia power plant growth seen steadier than U.S.

Asia power plant growth seen steadier than U.S.

Cameron Dueck, Reuters, Singapore

The pace of power plant construction in Asia could slow in some areas in 2002 as the economic slowdown hits electricity demand, but activity should remain steadier than in the U.S. market, industry experts say.

Any fall in new plants being built will not be as sharp as in the United States and parts of Europe, which are stepping back from a period of explosive growth in the late 1990s, they said.

Asian growth slowed after the 1997 financial crisis, while the United States saw a rapid increase in generation capacity.

"We will see some slowdown in new (Asian) capacity construction, but nothing substantial," said Alice Hui, head of Asian utilities research at UBS Warburg in Hong Kong.

But there are signs of more conservative investment by state utilities tightening their belts.

Malaysia's state utility Tenaga Nasional Bhd recently cut its capital expenditure forecast by 26 percent for the year ending August 31, 2002, citing slower electricity demand growth.

The company deferred some new projects by one to two years.

Korea Electric Power Corp (KEPCO) has taken similar steps, predicting that capital expenditures in 2002 would be down five percent from 2001 levels due to slower demand.

Some power equipment manufacturers are also expecting sales in Asia to slow this year compared with 2001.

"As soon as there was a hint of recessionary pain in the U.S., Asia slowed down," said a sales director for a major power plant equipment maker.

"We see pockets of activity, but by that we mean one to two plants in a country over the next year."

Others, however, were more optimistic, expecting ongoing economic and social development to drive growth in electricity demand in Asia.

Edward Thiessen, country manager in Thailand for French power generation equipment manufacturer Alstom Power, said some countries -- Malaysia and Thailand -- were seeing strong per capita demand growth due to industrialization, which would continue even as economies go through a rough patch.

"We're still likely to meet our budget, which is much the same as last year. There are still deals out there, and our sales department is pretty busy," Thiessen said.

"The economies are not booming here, but they're better than they were in 1997, and we see steady growth for the next few years," he said.

Nicholas Robson, managing director of capital risk at Jardine Lloyd Thompson Risk Solutions Asia in Singapore, agreed that the steady urbanization and development in Asia will continue to boost demand for power in the foreseeable future.

Robson, who arranges financial risk insurance for large infrastructure projects such as power plants, sees no significant slowdown in new plant construction due to the economic malaise.

"The outlook for the back end of 2002 and beyond looks more positive than it has been for several years," Robson said.