Electrifying Singapore - Deloitte · 2021. 7. 18. · Insights we explore data driven perspectives...
Transcript of Electrifying Singapore - Deloitte · 2021. 7. 18. · Insights we explore data driven perspectives...
Electrifying Singapore | A data driven perspective 1© 2021 Deloitte Southeast Asia Ltd
Electrifying Singapore Data Driven Perspectives on the Singapore Power Generation Market | Q1-2021
Electrifying Singapore | A data driven perspective 2© 2021 Deloitte Southeast Asia Ltd
Electrifying Singapore The Singapore power generation market has undergone an extensive transformation in recent years. The sector has been privatised and opened up to new entrants in the context of a pivot to LNG to improve national energy security. New disruptive technologies are also emerging. In this edition of Restructuring Services Insights we explore data driven perspectives on the Singapore power generation market as well as the performance levers that generation companies should explore to stay ahead of the competition.
Report Contents Page
1. Generation Capacity and Electricity Demand 3
2. Gas supply and Electricity Prices 4
3. Generator Company Market Share 5
4. Electricity Generation Merit Order Stack 6
5. Market Disruption | Renewables 7
6. A Survival Guide for Generation Companies 8
7. About Deloitte Restructuring Services 9
8. Our Expert Restructuring Partners 10
9. Notes 11
Electrifying Singapore | A data driven perspective 3© 2021 Deloitte Southeast Asia Ltd
Capacity and Demand Enticed by record high spark spreads and electricity prices, between 2010 and 2012, existing generation companies and new entrants raced to expand capacity. An additional 3.7GW came online between 2011 and 2018. Supply growth significantly exceeded demand growth (27% increase in generation capacity versus an 11% increase in peak demand) despite capacity retirements of 1.1GW in 2019.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
13,653
Gen
erat
ion
cap
acit
y (M
W)
20152010 201620122011
13,395
2013 2014 2017 2018 2019 2020*
10,818
9,931 9,917
12,43412,909
13,445 13,618
12,563 12,582
+27%
Tuas Power
Others
PacificLight
TuaSpring
Keppel
SembCorp
YTL PowerSeraya
Senoko Energy
Singapore electricity generation capacity versus peak demand
Source: Energy Market Authority
* 2020 estimate
+11%
Peak System Demand
Electrifying Singapore | A data driven perspective 4© 2021 Deloitte Southeast Asia Ltd
Gas Supply and Electricity Prices Gas imports are up and electricity prices are down. Gas imports have increased by 35% since 2012 driven by the activation of the new Singapore Liquid Natural Gas (“SLNG”) Terminal. The SLNG Terminal was built to diversify supply from existing Indonesian and Malaysian Piped Natural Gas (“PNG”) to enhance national energy security (with LNG take up encouraged by vesting contracts). The structural oversupply of gas, generally on long tenor take-or-pay contracts, has in some cases led power generation companies (“GenCo’s”) to burn gas (even in low demand / low electricity price scenarios) putting downward pressure on electricity prices.
Singapore gas imports
10,337
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
2020*
7,287
2014
KTo
e
20132010 2011 20162012 2015
9,454
2017 2018 2019
7,902
7,215
9,681
8,8969,418
9,872 9,959 10,148
Gas Volumes +35%
PNG Imports (Piped)
LNG Imports (Shipped)
0
50
100
150
200
250
2010
USE
P (S
GD
/ M
Wh
)
2011 2012 2013 20162014 2015 2017 2018 2019 2020*
-71%
Sources: Energy Market Authority, Enterprise Singapore
Uniform Singapore electricity price
* 2020 estimate
Historical USEP (SGD/MWh)
Electrifying Singapore | A data driven perspective 5© 2021 Deloitte Southeast Asia Ltd
GenCo Market Shares The “Big 3” GenCo’s have collectively conceded 30% of the market to new entrants (including Pacific Light, Keppel, Tuaspring and others) since 2005. In the absence of material demand growth, the declining market share is reflected in the “Big 3” Genco’s contraction in production volumes. A new entrant, Tuaspring (which is part of the Hyflux Group), failed to achieve viability and became subject to a formal insolvency process.
Singapore power generation market share
32%
31%
29%
27%
26%
25%
24%
26%
26%
22%
20%
19%
17%
17%
17%
17%
28%
28%
27%
25%
26%
27%
27%
25%
23%
18%
18%
18%
17%
16%
16%
15%
23%
25%
24%
24%
24%
25%
26%
24%
20%
21%
21%
21%
21%
21%
20%
21%
12%
11%
9%
11%
10%
9%
10%
9%
8%
10%
12%
10%
10%
10%
10%
12%
5%
6%
9%
9%
8%
8%
9%
13%
12%
11%
10%
12%
12%
13%
14%
5%
5%
5%
5%
6%
6%
6%
8%
9%
9%
9%
9%
9%
8%
9%
9%
10%
4%
4%
4%
4%
9%
10%
11%
11%
11%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2010
2012
2011
2005
2006
2008
2007
2009
1%2013
2014
2015
2016
2017
2018
2019
1%2020*
-30%
Senoko Energy
PacificLightYTL PowerSeraya SembCorp
KeppelTuas Power TuaSpring
Others
Source: Energy Market Authority
* 2020 estimate
Electrifying Singapore | A data driven perspective 6© 2021 Deloitte Southeast Asia Ltd
Merit Order Stack The “merit order” ranks electricity generation based on the short-run marginal costs of production and the amount of energy generated. In a perfect market system, generators with the lowest marginal costs are first to fire up to meet demand whereas the plants with the highest marginal costs are the last to be brought online during peak periods. Approximately 36% of Singapore’s (legacy) generation capacity falls outside the peak demand break and 18% falls outside the government reserve margin resulting in significant capital lock up in unproductive assets.
Singapore GenCo generator efficiency based on heat rate
4,500
11,000
10,000
6,500
7,000
11,500
5,500
10,500
7,500
8,000
8,500
9,500
10,000
8,000
5,000
0
9,000
4,000
6,000
4,000 6,000 12,0002,000
Hea
t ra
te (
BTU
/KW
h)
Capacity (MW)
Peak demand break
More efficient Less efficient
EMA reserve margin
YTL PowerSerayaSenoko Energy
KeppelTuas Power
SembCorp
PacificLight
Tuaspring
Source: Energy Market Authority and Deloitte Research
* 2020 estimate …excludes generation capacity of Waste-to-energy plants and auto-producers
Recently retired capacity
Electrifying Singapore | A data driven perspective 7© 2021 Deloitte Southeast Asia Ltd
Market Disruption The renewable energy sector in Singapore is evolving. Solar energy is the most viable renewable energy option and the Singapore Government has introduced various policies to encourage the adoption of solar energy. Solar generation capacity at mid-day is currently equivalent to ~5% of electricity demand. Continued accelerated growth is expected with a national target of 1.5GW solar deployment by 2025. Increased “clean” solar output is expected to directly impact existing gas-fired power generation sources. The Singapore Government is also unveiling plans for the national conversion to electric vehicles.
Projected renewable energy consumption
Sources: The Economist Intelligence Unit, Energy Market Authority, British Petroleum Company Limited
Solar generation capacity and number of solar photovoltaic systems
725 707 721 734 743 754 764 775 786 797
49 66 86113
140
0
100
200
300
400
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600
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1,000
899
763
2018
kto
e
2013741
2021F2016
1529
2017 2019
33
2020 2022F 2023F
721737776
802831
862
2024F 2025F
937
Solar Combustible renewables & waste
4
153
353
388
0
500
1,000
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4,000
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2014
MW
p
2010 201620132011 2012 2015 2017 2018 2019 2020*
6 10
# Solar P
V in
stallation
s
1533
59
126
208
+44%
# Grid connected Solar PV Installations Capacity
* 2020 estimate
Electrifying Singapore | A data driven perspective 8© 2021 Deloitte Southeast Asia Ltd
GenCo Survival GuideGenCo’s need to acknowledge the extent of the challenges and take fast and meaningful action in order to survive and thrive. Our expert Value Creation and Restructuring Services teams combine Restructuring and M&A skillsets with private equity techniques to drive rapid earnings uplift and cash generation …fast! Please contact any of our Deloitte Partners on page 10 to learn more
Illustrative Value Levers (not exhaustive)
Illustrative
Turnaround Levers
Performance
Levers
Capital Levers
Revenue
COGS
Overheads
Finance Costs
Capital
Structure
Capacity
Capital
Expenditure
Working Capital
Retail
Wholesale
Trading
Gas Contract(s)
FTE
Rent
Discretionary
Interest
Debt
Equity
Efficiency
Maintenance
Growth
Receivables
Payables
Inventory
Adjust marketing / pricing strategy
Renegotiation of corporate contracts
Adjust risk + liquidity tolerances
Restructure tenor/ volume / priceResell in Global marketsRedirect / swap to stagger deliveries
Rationalise the cost base to reset your operating model for the new business + market reality
Explore options to refinance / reschedule / restructure existing debt facilities to re-align servicing with business cash flows
Assess M&A / capital raising options
Redeploy assets in new marketsDivest to unlock inefficient capital Mothball to ‘wait + see’
Defer / renegotiate service contracts
Cash focus > earnings focus
Accelerate collections efforts
Renegotiate payment terms
Reduce fuel holding time / costs
Electrifying Singapore | A data driven perspective 9© 2021 Deloitte Southeast Asia Ltd
Deloitte Restructuring Services We work with clients to improve outcomes across the stress spectrum ranging from companies seeking to turnaround short term underperformance to those in deep financial distress requiring crisis management. We are actively helping businesses in Singapore and Southeast Asia to turnaround, transform and grow their businesses and to successfully navigate the financial impact of Covid-19. We have deep experience assisting to restructure and turnaround businesses the power generation sector.
• Turnaround & Value Creation Services for underperforming businesses using M&A, restructuring and private equity techniques to deliver performance improvement …fast
• Portfolio Lead Advisory Services deleveraging and loan portfolio sale transactions acting sell-side / buy-side and providing strategic advisory to maximize value from non-core assets
• Financial Restructuring business reviews and options assessment to establish a foundation to assist stakeholder negotiations in corporate refinancing, restructuring and M&A situations
• Special Situations Advisory accelerated capital raising, M&A, debt advisory and structuring assistance in complex cross border multi-stakeholder special situations
• Contingency Planning before and during complex restructurings, supporting with options analysis and “plan B” scenarios to drive a consensual deal or provide a bridge into insolvency
• Formal Insolvency where a consensual restructuring is not possible; we can provide assistance to debtors and creditors through formal corporate insolvency processes
Deloitte Restructuring Services
Contingency
Planning
Turnaround &
Value Creation
Com
pany p
erf
orm
ance/h
ealth
Time
Financial
Restructuring
Advisory
Formal
Insolvency
M&A Opportunity
Distressed M&A
Level of influenceManagement Creditors
Portfolio Lead
Advisory Services
Accelerated M&A
Special
Situations
Advisory
Electrifying Singapore | A data driven perspective 10© 2021 Deloitte Southeast Asia Ltd
Key Contacts
Matt Becker AuthorSEA Turnaround Leader T: +65 8332 1977E: [email protected]
Richmond AngSEA Debt Advisory & Restructuring LeaderT:+65 6216 3303 E: [email protected]
Andrew GrimmettSEA Restructuring Leader T:+65 6530 5555 E: [email protected]
Chi-Nang Kong Portfolio Lead Advisory Services LeaderT: +65 6800 2270E: [email protected]
Soo Earn Keoy SEA Financial Advisory Leader T: +65 6216 3238E: [email protected]
Edy WirawanIndonesia Financial Advisory LeaderT: +62 21 5081 9200E: [email protected]
Siew Kiat Khoo Malaysia Restructuring Leader T: +60 3 7610 8861 E: [email protected]
Aye Cho Myanmar Financial Advisory LeaderT: +951 230 7365E: [email protected]
Phong LeVietnam Financial Advisory LeaderT: +84 28 3521 4080E: [email protected]
Global Contacts | Navigating the Financial Impact of Covid-19
Jiak See Ng APAC Financial Advisory Leader T: +65 6531 5088 E: [email protected]
Andrew Grimstone Global Restructuring Services Leader T: +44 20 7007 2998E: [email protected]
Wei Cheong Tan Singapore Restructuring Partner T:+65 6531 5046E: [email protected]
Kamolwan Chunhagsikarn (Minnie) Thailand Restructuring Partner T: +66 2034 0162E: [email protected]
Justin LimSingapore Restructuring Partner T:+ 65 6216 3269 E: [email protected]
Electrifying Singapore | A data driven perspective 11© 2021 Deloitte Southeast Asia Ltd
Notes
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© 2021 Deloitte Southeast Asia Ltd