« back to results for ""
Below is a cache of http://www.ppiaf.org/documents/gridlines/21Power.pdf. It's a snapshot of the page taken as our search engine crawled the Web.
The web site itself may have changed. You can check the current page or check for previous versions at the Internet Archive. Yahoo! is not affiliated with the authors of this page or responsible for its content.
GRID LINES
GRID
LINES
Sharing knowledge, experiences, and innovations in public-private partnerships in infrastructure
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY
Helping to eliminate poverty and achieve sustainable development
through public-private partnerships in infrastructure
noTE no. 21 MaY 2007
P
rivate activity in electricity in developing
countries has stabilized at modest levels
since 2001. The main focus remains green-
field power plants, particularly those with contrac-
tual arrangements that protect investors from sector
risks. Long-term guarantees of regulatory perfor-
mance and leases and management contracts
have encouraged some private activity in distri-
bution. Attracting significantly more investment
will require greater commercial viability, including
cost-reflective tariffs, better collection ratios, well-
targeted and sustainable subsidies, and improved
quality and reliability of service. In most countries,
a move toward cost-reflective tariffs will not be
politically feasible unless it goes hand in hand with
visible improvements in quality of service.
Investment commitments for electricity projects
with private participation in developing countries
(hereafter, simply investment) have stabilized at
modest levels.
1
After a sharp drop from relatively
high levels in the mid-1990s, annual investment
has remained within a band between US$11
billion and US$16 billion since 2001 (figure 1).
The number of projects reflects a similar trend. The
average annual number in 200105 was 55, less
than half the average of 115 in 19952000. The
average project size also declined, from US$360
million in 1997 to US$166 million in 2002, but
then recovered to US$258 million in 2005.
More balance among regions
Investment became somewhat more evenly distrib-
uted among regions in recent years. The two most
active regions, East Asia and Latin America, saw
their share decline from 76 percent in 19902000
to 65 percent in 200105 (see figure 1). Their
share of projects dropped from 66 percent to 56
percent. Driving the shift toward greater balance
was a decline in private activity in East Asia and
Latin America and an increase in Eastern Europe
and South Asia in 200405.
Private activity also became more evenly distrib-
uted between IDA countrieseligible to borrow
from the International Development Association
and non-IDA countries. IDA countries share of
projects rose from 22 percent in the 1990s to 28
percent in 200105, while their share of investment
remained around 1819 percent in both periods
as a result of low levels in 200103 (US$1.72.7
billion). But investment in IDA countries rose to
US$5 billion in 2004 and US$4 billion in 2005,
levels similar to those of the late 1990s.
Country distribution shifting
Around 100 countries had private participa-
tion in their electricity sector between 1990 and
2005. Of these, 20 opened the sector to private
investment after 2000. And of these, 12 involved
the private sector in distributionalmost all of
them countries in Eastern Europe and Central
Asia (Armenia, Azerbaijan, Bulgaria, the Slovak
Republic, and Ukraine) or Sub-Saharan Africa
(Lesotho, Madagascar, Rwanda, and Uganda).
Private activity in electricity remained concen-
trated in a few countries. The top 10 countries by
Private participation in electricity
The challenge of achieving commercial viability and
improving services
Bernard Tenenbaum and Ada Karina Izaguirre
Bernard Tenenbaum is a lead energy specialist in the World
Banks Energy, Transport, and Water Department, and Ada
Karina Izaguirre is an infrastructure specialist in the Banks
Finance, Economics, and Urban Development Department.
This note was developed in partnership by the two
departments, both in the Banks Sustainable Development
Vice Presidency. The note is a product of the Private
Participation in Infrastructure (PPI) Project Database, a
joint initiative of PPIAF and the World Banks Infrastructure
Economics and Finance Department. 
investment accounted for 72 percent of the total
in 200105, just 3 percentage points less than in
19902000. But the top 10 countries changed,
with 4 new ones (Mexico, Bulgaria, Poland, and
the Slovak Republic) joining the group.
New investors emerging
The concentration of activity among private
sponsors has changed little: the top 10 sponsors
accounted for 40 percent of investment in both
200105 and 19902001. But the composition
of this group has changed markedly, with only 5
sponsors appearing among the top 10 in both peri-
ods. Emerging market firms have become more
prominent: 3 were among the top 10 in 200105,
up from only 1 in 19902001.
Indeed, while many global sponsors were with-
drawing from developing countries, regional and
local investors became more active in 200105.
In East Asia, Malaysian Malakoff, Japanese J-
Power, Singaporean Asia Power, and Thai Banpu
were among the most active, whether measured
by investment or number of projects. Similarly,
in Latin America regional companies were among
the most activesuch players as Brazilian Alusa,
CPFL Energia, and Votorantim. The Czech CEZ
Group started to expand in Eastern Europe in
2005, while the Russian Unified Energy System
has focused on Central Asia. Indian sponsors
Reliance ADA Group, Torrent Group, and Tata
Enterprises were also active in South Asia.
Generation plants still predominant
After dropping from a peak of US$28 billion in
1996 to US$7 billion in 2002, annual invest-
ment in stand-alone power plants (referred to as
independent power projects, or IPPs) has recov-
ered somewhat. In 200305 it remained between
US$11 billion and US$14 billion (figure 2).
IPPs accounted for the largest share of private
activity in electricity, 77 percent of the total invest-
ment in 200105. IPP investments in greenfield
(new) power projects accounted for 80 percent of
the total in generation, and divestitures of exist-
ing plants for most of the rest. The dominance of
greenfield power projects is not new. This form of
private investment has been dominant in devel-
oping countries for more than 15 years, except
for a few years in the late 1990s when Brazil
privatized 26 distribution companies. Indeed, the
dominance of IPP greenfield investment expanded
from just three regions (East Asia, South Asia, and
Sub-Saharan Africa) in 19902000 to all but one
(Eastern Europe and Central Asia) in 200105.
Investors generally prefer greenfield projects struc-
tured as enclave projects, protecting them from
many sector risks. In IDA countries more than
90 percent of private investment in electricity in
19902005 was in greenfield projects. In coun-
tries where public sector enterprises are buyers
of IPP power, investors are generally protected
from underlying economic problems in the sector
through tightly written, long-term power purchase
agreements, often supported by government
payment guarantees and credit enhancements
(letters of credit, escrow accounts, liquidity facili-
ties, tax holidays).
Electricity is not the only infrastructure sector
where this type of private investment predomi-
nates. Similar arrangements have emerged in
water and sanitation, where greenfield water
and sewage treatment plants that sell to a single
customer through government-supported take
or pay agreements now dominate private invest-
ment (Marin and Izaguirre 2006).
Investment in distribution lagging
Annual investment in distribution fluctuated
between US$1.5 billion and US$3 billion since
2001. The segments share of total investment in
electricity dropped from 29 percent in the 1990s
to 19 percent in 200105. There was a parallel
decline in the average annual number of transac-
tions, from 19 in 19952000 to 9 in 200105.
Distribution is inherently riskier for investors
because it involves selling to thousands of custom-
ers who purchase at prices that are highly visible
and politically contentious. Moreover, future
prices are set under regulatory regimes that are
often unclear or not credible. Indeed, distribu-
tion projects are more likely th