Achieving growth in a competitive marketplace
A Powergen case study

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Page 5: International power

Powergen 3 Image 3Ten years ago the concept of an international power generation business did not exist. Electricity industries throughout the world were nationally based and monopolistic. Increasingly, in recent years, electricity markets have been opened up to foreign investment as governments have sought efficient and competitive alternatives to meeting demand for new power station capacity. PowerGen’s strong background enabled it to compete in such markets. For example, it could offer:

  • broad engineering and operational experience
  • commercial and management expertise
  • a proven track record in project management
  • a robust balance sheet
  • customer focus
  • first-hand experience of the privatisation process and life in the private sector.

No project is without risk. PowerGen had to be careful in determining which project opportunities to become involved with. In particular it had to assess the critical risks, external threats and responses to its strategies. To do this, PowerGen identified a wide range of criteria that needed to be met before an international power project was pursued. It broke these down into four categories:

  1. It needed to be satisfied that country risks - i.e. political, economic, regulatory and fiscal risk - were manageable.
  2. It needed to be comfortable with the project risks. For example, in terms of fuel supply and income/cost streams.
  3. The project developer is usually a consortium. PowerGen needed to be happy with its own level of involvement in the project, both in terms of specific responsibilities and equity (shareholding) involvement. Securing the role of operation and maintenance contractor is generally a crucial factor when deciding to invest, as much of PowerGen’s expertise lies in power plant operation.
  4. It needed to ensure that financing was available for each project.

Following these criteria, PowerGen has grown in five years from not having a single megawatt of generating capacity overseas, to having a commercial interest in some 7,700 MW of generating capacity operational, under construction or committed in Germany, Portugal, Hungary, India, Indonesia, Australia and Thailand.

These projects include:

  • the acquisition of power station and mining assets near Leipzig which made PowerGen one of the first UK companies to invest in eastern Germany
  • becoming the lead project developer in a venture to build a 990 MW gas-fired plant in Portugal.
  • the development of a gas-fired power station in India which will make PowerGen the first foreign independent power project operator in India.

These and other projects have put PowerGen in the top five of international independent power project developers.

Powergen | Achieving growth in a competitive marketplace