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 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


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


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)


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


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


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

500

600

700

800

900

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

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0

50

100

150

200

250

300

350

400

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


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


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


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]

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electrifying singapore - deloitte · 2021. 7. 18. · insights we explore data driven perspectives...

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