China Energy Industry

Foreign capital key to China power drive

Reuters news agency
January 16, 2006

Overseas power firms have long been wary of moving into China, largely due to a murky regulatory climate and inconsistent tariff scheme. But Beijing’s blueprint for market-oriented reform has aroused foreign investor interest, Reuters reports.

Hong Kong: China’s efforts to reform its fast-growing electricity industry will create a better market environment for foreign investors, whom Beijing hopes will help it to slake the country’s ever-increasing thirst for power. Overseas power firms have long been wary of moving into China, largely due to a murky regulatory climate and inconsistent tariff scheme that makes investment returns tough to predict. But Beijing’s blueprint for market-oriented reform unveiled last month has aroused foreign investor interest. “Certainly, this reform will increase studies and analysis performed by foreign investors to know what kind of opportunities may arise,” said Jean-Christophe Delvallet, China managing director of Electricite de France – the country’s biggest foreign power investor. China’s reform plan aims to foster fair competition and increase the transparency of the power regime in what is the second largest power market after the United States. Beijing will cede part of its control on tariffs to the invisible hand of the market as several nationwide power producers formed from the breakup of near-monopoly State Power Corp will compete with each other to sell part of their output. The reform plan also calls for erecting a powerful industry regulatory body to ensure a level playing field for all competitors. This is music to ears of foreign firms interested in China’s growth but wary of its unpredictability. “The most important thing is to ensure you have a very strong regulator to ensure the competition is orderly and smooth,” Delvallet said in an interview.

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