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Power market competition has benefited consumers

Gencos told to look ahead though oversupply may have dented profits

[SINGAPORE] Consumers are benefiting from today's one-third cheaper wholesale electricity prices compared to three years ago, thanks to market competition arising from the numerous generation additions, said the Energy Market Authority's chief executive Chee Hong Tat.

But while this market situation may have put gencos momentarily on the back foot, they must still ensure that the lights stay on in Singapore, he stressed.

Speaking at the opening of the newest power plant here, the S$1.2 billion PacificLight Power (PLP) facility on Jurong Island yesterday, he said that this oversupply of electricity versus demand is likely to continue for the next couple of years. While this has impacted gencos' profits, they should not get overly concerned, but adopt a longer-term perspective in assessing their return on investments, he stressed.

"The gencos are still doing alright judging from their latest financial statements for FY2013. They continue to make healthy profits, albeit less than they earned in 2011 and 2012 when prices were higher."

This is just the nature of capital intensive industries, with their up and down market cycles, said Mr Chee.

"Another important point is that Singapore's electricity sector is still a growing market, as sustained economic growth will continue to increase our energy demand," he added.

As market competition intensifies over the next few years, the EMA chief disclosed that he has obtained a written commitment from all the gencos that "they will continue to maintain a high level of operational reliability and perform proper maintenance of their facilities . . . and support manpower development efforts in the power sector."

His remarks follow recent expansions by the big three gencos here, all foreign-owned - Senoko Energy, PowerSeraya and Tuas Power - as well as by local players like Sembcorp and Keppel Corporation to capitalise on liquefied natural gas feedstock supplies with the new Singapore LNG terminal. This has boosted total gas-fired capacity here to over 9,000 megawatts, way above electricity demand here of about 6,600MW.

This is the market situation which newbie PacificLight Power - 70 per cent owned by FPM Power Holdings and 30 per cent by Malaysia's Petronas - is fully aware that it has to contend with.

PLP, which started commercial operations in February, intends to compete by capitalising on its highly-efficient, state-of-the-art plant, using the latest available technology, its chief executive Yu Tat Ming told BT. The genco is essentially a Philippines-Malaysia joint venture between majority partner FPM Power (in turn a JV of First Pacific Company and Meralco PowerGen) and Malaysia's national energy company Petronas.

"Our immediate target is to improve our market reach," he said, adding that "we are continuing to build up our retail portfolio and also hope to do some spot deals". Over the last few months, it has already managed to sell over 60 per cent of its dispatchable electricity output, and aims to up this to 85-90 per cent, with the remainder 10-15 per cent accounted for by spot deals.

Starting off with an 800MW combined cycle gas turbine facility - which represents just 6.2 per cent of the total generating capacity in Singapore - "we are also on the lookout for further opportunities down the road to expand our capacity, both in Singapore, and also in the region", added Mr Yu.

At the plant opening, Meralco president Oscar Reyes said that the PLP plant is Singapore's first to be completely fuelled by LNG, which is a key part of Singapore's plan to diversify its energy resources and reduce its reliance on piped natural gas.

This point was also noted by EMA's Mr Chee, who said that PLP's entry into the Singapore market has benefited consumers "as it adds to the diversity of our generation sector and enhances competition in our electricity market".