By Marcel Tan
It is important for governments in Asia to work together on setting uniform policies around the financing of energy infrastructure. Doing so will help the region achieve a certain level of stability that is necessary for attracting capital for energy infrastructure, said Mr Gao Jifan, Chairman & CEO of Trina Solar, while speaking at the “In Focus: Energy Financing - Bridging the Gap” panel at the Singapore Energy Summit.
Within Asia, most banks prioritise reliable contracts and regulations ahead of economic substance when assessing the bankability of projects. “A stable regulatory environment is always a big factor in our region to make things work,” said Mr Luca Tonello, Deputy General Manager & Head of Project Finance Asia at SMBC.
Facilitating an environment that attracts energy infrastructure capital is an important task on a regional and global level. According to Mr Luca Tonello, the “scale of the global debt market for energy infrastructure is approximately $250 billion to $300 billion dollars a year” and it continues to evolve. For example, SMBC’s project involvement has radically shifted to solar energy and other renewables in the next six months.
AGL Energy is similarly shifting its investments. Andy Vesey, Managing Director & CEO at AGL Energy, said that AGL Energy currently contributes to the emission of 44 million tonnes of carbon dioxide each year as a result of its operation of three coal plants. That said, the company has committed to close these coal plants at the end of their useful life and not to finance the construction of new coal plants. Moving forward, they face the challenge of encouraging “the market to make good investments when there already is overcapacity, without giving great subsidies for European technology”. Renewals will need to be carried out in a managed way in order to mitigate volatility and risks to financiers.
As the types of investment – and technologies behind them – rapidly change, so will the price points of projects. This also leads to risks for financiers, as financing for energy infrastructure projects is typically between 15 and 20 years.