Energy Forum The World Bank March Sarah Slusser, Senior Vice President The AES Corporation

Transcription

1 Energy Forum 2004 The World Bank March 2004 Sarah Slusser, Senior Vice President The AES Corporation 1

2 Today s Discussion Who is AES? What is the landscape for the electricity sector in emerging markets today? How can the World Bank help? 2

3 Unique Global Electric Power Franchise $8.4 Billion in Sales 74% Outside U.S. $6.0 Billion Equity Market Capitalization 116 Plants and 17 Distribution Companies Attractive Investment Fundamentals Long-Term Contracts Generation Franchise Positions Utilities Little Exposure to U.S. Merchant Market Geographically Diverse Portfolio Improving Credit Statistics Double-Digit EPS Growth Outlook Strong Operating Model Focus on Disciplined Development AES Today Snapshot 3

4 AES Today Global Reach AES Sales By Geographic Segment North America 26% Caribbean 18% Europe/Africa 11% Asia 6% South America 39% 2003 Sales $8.4 Billion in 27 Countries 4

5 Global Need for Power Global Need for New Capacity is Great AES Can Build on Existing Global Footprint Demand Growth in Developing Countries Wide Opportunities for AES in Changing Sector Investors Retreating to Home Markets Privatizations Operating Partnerships 5

6 Global Need for Power is Primarily in Emerging Markets 6

7 Electricity is Fundamental to Development Critical for successful economic and social development Stimulates/supports economic growth Consumption increases faster than GDP per capita growth in non-oecd countries Efficiency, effectiveness, health and education benefits 7

8 What we believe Wires is a natural monopoly that must be regulated All parts of the business are best operated in private ownership Transitions must be carefully structured Pure competition is not a sustainable model anywhere 8

9 The Context is Critical You cannot successfully privatize in a broken system Fix first, sell second and let the fixers purchase Macroeconomics dominate Regulations need to follow and be enforced The Rule of Law is essential to success 9

10 Suggestions based on Lessons Learned Long term contracts are good Invest first in loss reduction and Distco/Transco support Enforce the law Political support is key -- including bill paying by governments Invest last in new generation Use local fuels when available 10

11 Role for the World Bank Strengthening of institutions integrating the Bank s power sector policy and transactions with overall country policy Development and support of local financial markets Sticking with us through both good and bad times Rethink of power sector structuring and policies: No rushed privatization (eg management contracts) Careful staging of power sector restructuring and liberalizing Unbundling can be a recipe for disaster In many markets, Integrated Utilities are both more sustainable and better shaped to make necessary investments (collections, resilience to shocks) Promoting sector rules that create adequate price signaling (not necessarily market based) for new investment Environmental standards, policies and incentives (eg renewables) 11

12 Thank You. 12

13 Global Hydropower: - meeting the sustainability imperative The Hon Peter Rae AO Chairman, Hydro Tasmania Board Member, International Hydropower Association Energy Week 2004 The World Bank 8-12 March 2004

14 The Development Imperative Over 1 billion people without adequate water supply Growing incidence of water shortages 1.6 billion with no reliable electricity supply Global warming and climate change Population growth Fossil fuel depletion

15 The Development Imperative Water, Energy, Health, Agriculture and Biodiversity (WEHAB): five key areas in which progress is possible with the resources and technologies at our disposal today. Kofi Annan, UN Secretary-General, World Summit on Sustainable Development, Johannesburg 2002 We recognise the role of hydropower as one of the renewable and clean energy sources, and that its potential should be realized in an environmentally sustainable and socially equitable manner. Ministerial Declaration of 170 Countries, World Water Forum, Kyoto 2003

16 Renewables: an escape from poverty Water: supplying communities and industries Energy: from clean, renewable sources Health: clean water and sanitation Agriculture: improved irrigation Biodiversity: maintaining biodiversity through appropriate management

17 Global Hydropower Status Hydropower contributes 19% of world s electricity Pivotal role in development in many regions of world Hydro capacity in operation: GW (2740TWh/yr) Hydro capacity planned: 289 GW in 105 countries Wide range of project types and services allows flexibility and adaptability Technical/economic potential is vast in developing countries where extra capacity is urgently required

18 Global Hydropower Potential 69% 75% 22% 7% 33% 49% = % developed Source: World Atlas of Hydropower & Dams, 2002 World s realistic potential developed: 33 % Realistic potential production: >8000 TWh/y Developed countries have gained largely from benefits of hydropower Developing countries need opportunity to achieve the same benefits

19 Hydropower Benefits Economic: regional and industrial development Long operating life, independent of fuel market Environmental: Greenhouse gas emission reductions Social: alleviating poverty; multiple use benefits Improvements to health and safety Technology and Innovation: synergies with other technologies While benefits significant, clear recognition of social and environmental concerns and the need to address these An industry embracing sustainability and moving forward

20 Hydropower and Sustainable Development Hydropower is a central player in the Symphony of Renewables Key role in enabling other technologies synergy between water and wind and other intermittent renewables synergy with thermal plant and performance optimisation Additions to existing water infrastructure Remote area power supply (RAPS) Linking of RAPs and desalination Small and large scale UNEP is no longer concerned by the small or the large, but the well planned and well managed. Dr. Klaus Töpfer, Dams & Development Forum, Geneva, September 2003 UNEP: United Nations Environment Program

21 Hydro Tasmania - Overview Generates 60% of Australia s renewable energy Global leader in renewable energy developments Electricity trader Global consultant 27 hydropower stations (2,260 MW) 2 wind farms commissioned Further 450 MW wind planned over next five years Driven by Vision: To be Tasmania s world renowned renewable energy business = power stations

22 Hydro Tasmania s Global Outreach Hydro Tasmania Renewable Energy Generators Australia Chairman: Peter Rae World Wind Energy Assoc. Vice President: Peter Rae IHA Board Members: P Rae and R Gill IHA Envt Committee President A Scanlon Member UNEP DDP Forum and Project Steering Committee Renewable and Sustainable Energy ROUNDTABLE Chairman: Peter Rae REEEP UNFCCC GNESD

23 Evolution of a sustainable business Primary focus last century on hydropower engineering New century focus on social, environmental and political Led to shift in organisational culture and operations to embrace sustainability Blue Planet Prize winner Franklin Dam protests 1970 s-80s

24 World Commission on Dams Dams and Development A New Framework for Decision-Making Dams and Development report released in 2000 Number of environmental and social concerns raised by WCD Hydropower industry accepts Core Values and Strategic Priorities IHA has developed Sustainability Guidelines that will ensure Core Values of WCD report are delivered

25 The Hydropower Paradox Hydro offers highly valuable benefits of poverty alleviation; greenhouse reduction; flexibility and reliability. Negative impacts of relocation and Environmental change Full credit for hydropower benefits not always given Contentious projects have discredited hydropower s image Resulted in a slowing in new hydro developments The challenge is to head off negativity through sustainably developed projects

26 Hydropower Concerns Globally, several projects have been the subject of disputes and resistance, mostly as a result of: Inadequate legal and institutional frameworks Inadequate environmental and social impact assessments in development Inadequate monitoring programs Opposition where significant social or environmental issues perceived, such as resettlement or compensation issues.

27 Addressing Hydropower Concerns To ensure future successful developments, social and environmental sustainability must be ensured. Directly affected people need to be treated equitably and share in benefits. Hydropower projects need to recognise entitlements and share benefits with directly affected people. Resettlement (when required) must be conducted fairly and equitably. Vulnerable groups must be integrated. Some environmental change is inevitable. That change must be well managed. Impacts can be avoided, mitigated or compensated.

28 Hydropower: a new era in sustainability IHA Sustainability Guidelines IHA Sustainability Guidelines developed by Hydro Tasmania in conjunction with Hydro Quebec Extensive consultation process (World Bank, UNEP DDP and WWF) Widespread support Formal adoption in Nov 2003 IHA members are committed to the principles of social responsibility, economic development and environmental protection contained in the IHA s Sustainability Guidelines.

29 Hydropower: a new era in sustainability IHA Compliance Protocol A Compliance Protocol is being developed to measure the performance of projects against the requirements of the Guidelines objectively Other IHA sustainability initiatives Continuous Improvement Encouraging good practice and rewarding excellence IHA awards its Blue Planet Prize based on environmental, social, technical and economic aspects of projects

30 1240 MW Salto Caxias Scheme, Brazil IHA Blue Planet Prize Winner, 2003 Community-led social redevelopment 600 families gaining new homes, schools, clinics and employment, in addition to clean water and power King River Hydro Development, Tasmania, Australia IHA Blue Planet Prize Winner, 2001

31 Renewables: a new era in sustainability Position hydropower as a key component of the Symphony of Renewables Supportive frameworks for all renewables: legal and regulatory for market efficiency and reduced corruption Qualification of sustainably developed and managed hydro for market incentives Government s need to create attractive environment for private investment and sustainable development

32 Hydropower and the World Bank World Bank Group (WBG) has clear commitment to Millennium Development Goals WBG recognises that hydropower is a future major contributor to global energy supply Protection of the Environment is a core component of the Bank s energy strategy Extractive Industries Review (2004) findings support investment in renewables However risk profile of hydro acting as deterrent WBG can adopt a proactive leadership attitude by moving from risk-adverse approach to an effective business model Acknowledge that sustainability, not size, is paramount issue Broad adoption of the IHA Sustainability Guidelines as a tool will give investors confidence that only good projects developed

33 Summary The WBG has a major role to play in influencing the development of future sustainable hydropower and other renewable energy projects to meet WSSD goals Hydropower has a key role to play in future energy and water supply, and sustainable development The IHA Sustainability Guidelines are a fundamental tool in ensuring positive outcomes are maximised and that negative effects are avoided from hydropower projects The Guidelines will assist the WBG meet its commitment to protect the environment through energy supply investment Hydro Tasmania is a global leader in the provision of innovative solutions for sustainable energy and water management, and honoured to be given the opportunity to participate in the planning which the WBG is undertaking