Xu Guosheng Zhaoheng Hydropower

Transcription

1 Xu Guosheng Zhaoheng Hydropower China Renewable Energy Investment Opportunity: Focus on Hydropower MACQUARIE ASIA INFRASTRUCTURE CONFERENCE 8 9 DECEMBER 2008, MACAU

2 Energy from Heaven Wind Energy Strong focus on a global basis Solar Energy Bright outlook High hopes and great optimism on its potential Hydro Energy Clean & renewable energy with minimal CO2 emission Asset durability with proven and matured technology Minimal operational and maintenance expenses Worldwide installed capacity: Wind Power 76GW, Hydropower 800GW 2

3 Government Policy - Conservation of Energy & Reduction of Emissions Coal-fired generation currently forms 83% of the country s total electricity generation, a major concern for sustainability of the environment 3

4 Advantages of Hydroelectricity Generation Hydroelectricity power plants benefit from dispatch priority and full purchase from the grid operators ahead of many other forms of power generation, reducing demand risk The State Council has established a priority dispatch order based on the power generation fuel source 1. Wind power, solar power and run-of-the-river hydroelectricity 2. Hydroelectricity plants with reservoirs and waste-to-energy 3. Nuclear power 4. Co-generation (Combined heat and electricity) 5. Natural gas and coal gas 6. Coal-fired generation (High efficiency coal plants have priority) 7. Fuel oil 4

5 Hydroelectricity: Investment Merits Coal-fired generation amounts to over 80% of China s total generation, forming the benchmark for on-grid electricity tariffs Hydro power plants have clear upside potential from tariff increases Average on-grid tariff for hydropower is about 60-70% of coal-fired power; wind power is about 130% Extra revenue stream from CDM (Clean Development Mechanism) Hydro power is an attractive infrastructure investment opportunity Clean and renewable energy with strong government incentives Low operating expenses (no fuel cost risks) underpinning high EBITDA margins (about 85%) Sustainable asset with a long operating life (several hydro plants worldwide have been operating over 100 years) 5

6 Promotion of Private Sector Investment Private and foreign enterprises only contribute to 6% of China s total power generation. Private sector will gain more market shares due to its higher efficiency Chinese government is encouraging private sector and foreign investment into hydropower 6

7 Unprecedented Opportunity Hydro power has been fully developed in developed countries such as the USA, Japan, Canada and across Europe, with total installed capacity worldwide exceeding 800 GW China has the most abundant hydro power resources in the world, however by the end of 2007, only 145 GW, or 22%, has been exploited The Chinese government plans for 300 GW of installed capacity by 2020, which requires trillions of RMB in capital investment The Chinese Government plans to invest 1.12 trillion RMB in electricity grids by 2010 Hydropower investment is popular in China, but still not well known to international investors No precedents of foreign investment in large hydro power plants to date. However small and medium sized hydro power plants should continue to be an attractive sector for private sector and international investors 7

8 Hydropower During Economic Downturn Electricity demand usually decreases during economic downtown, however, the offtake of clean energy is guaranteed by the government Hydro electricity tariff is expected to increase in the future Hydropower industry can benefit from decreasing interest rate Hydropower has strong investment merits: Steady cash flow On-grid tariff increase potential High EBITDA margin Controllable operating costs Sustainable assets 8

9 Thank you