2013-12-25 22:32:58 - Fast Market Research recommends "Philippines Power Report Q1 2014" from Business Monitor International, now available
The Philippines had a brutal reminder of its vulnerability to natural disasters in November 2013, when Typhoon Haiyan hit the country. Responsible for at least 10,000 deaths and affecting the lives of nearly 10% of the country's population, the storm destroyed power transmission and distribution networks on the islands of Samar and Leyte, leaving residents cut off from the grid. While the Philippines had other power priorities prior to the storm, it now has to repair the damage that Haiyan has left behind before it can address those. Elsewhere, the quarter has seen a number of new power projects announced, including thermal and renewable energy investments. And while the introduction Retail Competition and Open Access - which came into force
in mid-2013 - was widely expected to help raise competition among utilities and lower prices, Manila's Meralco has gone against the tide, announcing electricity rate increases in November 2013.
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We forecast electricity generation in the Philippines to grow by 3.8% in 2013, to reach 73.0 terawatt hours (TWh). Electricity generated by gas-fired power stations will be responsible for the majority of this growth, and natural gas will outperform the market as a whole, climbing by 5.5% over 2013. Oil-fired power stations will see their contribution to electricity generation decline slightly, by just under 0.1% in 2013. We forecast hydroelectric power to represent 13.4% of total electricity generation, although a lack of rain has been affecting electricity production.
We have lowered our short-term forecasts this quarter, in light of the impact of typhoon Haiyan in November 2013. As such, we now forecast that between 2013 and 2022, growth in electricity generation to average 3.9% per annum, underpinned by a similar annual average increase in electricity consumption (4.2%). We highlight that the country's power situation will remain tenuous for the foreseeable future, but if a guaranteed supply was put into question a few months ago because of a gap between increases in consumption and the pace at which new capacity came one line, this issue is now overshadowed by other concerns. The typhoon destroyed power infrastructure, particularly in the province of Leyte, and this needs reconstructing.
Key trends and developments in the Philippines' electricity market:
* Typhoon Haiyan caused havoc in the Philippines in November 2013. The latest situational report from the National Disaster Risk Reduction and Management body estimates that 9.6mn people were affected by the supertyphoon, with damage reported across 41 provinces. Leyte and Samar islands were totally cut off from the electricity grid, with the National Grid Corporation of the Philippines estimating it could take up to six weeks to restore the connection.
* In September 2013, Aboitiz Power Corporation announced that it plans to bid to construct a 300MW coal-fired power plant in Toledo City, worth US$750mn; meanwhile, Meraclo announced in October 2013 that it had partnered with Thailand's Electricity Generating Public Company to set up a 460MW coal/fired power plant in Muaban, Quezon.
* San Miguel entered into an agreement with South Korea's Korean Water Resources in September 2013 to operate and maintain the 218 Angat hydropower plant in the Bulacan province, Luzon.
Thanks partly to the forecast steady rise in net power generation, which falls slightly short of the underlying demand trend, we do not expect the Philippines to develop a significant power supply shortfall during our 10-year forecast period, with some scope for a limited generation surplus. We note, however, that in order to avoid any shortages or an import requirement, investment commitments need to be met in full. We expect better technology and more efficient distribution lines to result in an overall trend of lower transmission and distribution losses (from 11.0% in 2013 to 9.1% in 2022).
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