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Hydro Business Report: Regional Overview

Growing demand for electricity is driving an increase in hydro generating business – adding capacity at new plants as well as modernization of existing facilities. A summary of worldwide hydro business activity provides evidence of a healthy market positioned for continued growth in the future.

Worldwide, hydropower development is occurring at a rapid pace. More than 900 hydro projects currently under development will add as much as 200,000 mw of electrical generation capacity. Moreover, several thousand proposed projects with aggregate capacity on the order of 800,000 mw provide a reservoir of opportunity for fueling future development.

A look at hydro business activity for a recent one-year period in the regions of Africa, Asia, Europe, Latin America, and North America show 153 confirmed contracts were issued related to new construction or refurbishment of hydro plants involving a total of more than 37,200 mw. (See Figure 1.) Values were available for 62 contracts, totaling more than US$1.56 billion.


Figure 1: An analysis of hydro business activity in Africa, Asia, Europe, Latin America, and North America during the past year shows 153 confirmed contracts were issued for work related to new construction or refurbishment of existing plants. In addition, tender opportunities were announced for 311 projects.
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Contract awards of note include:

Business activity in the five regions also resulted in tender opportunities of nearly 92,000 mw. Of these tenders, about 52 percent were related to new capacity; the other 48 percent were associated with refurbishment of existing capacity.

Asia led the way with tender opportunities for new capacity. Over the past year, 113 tenders for projects totaling 17,400 mw were announced in Asia. For refurbishment-related tenders, the most active regions were North America (51 tenders for 20,465 mw) and Europe (24 tenders for 17,200 mw).

Beyond these specific confirmed contract awards and tender opportunity announcements, significant future market opportunities abound. In these five regions, initial preparations are under way for development of more than 230 additional projects totaling more than 90,000 mw. While specific tenders for work at these projects have not yet been announced, some activity occurred over the past year. Examples of such activity include: a government or developer announced its intention to pursue development; a feasibility study is ongoing or has recently been completed; or the project is in some approval or financing stage.

Of the 236 “projects to watch,” among the largest are:

The following sections of this article provide more specifics about recent hydro business activity in the regions of Africa, Asia, Europe, Latin America, and North America.

Africa

In the past year, 20 contract awards were reported for work at both new and existing projects in six countries in Africa. Two-thirds of these contracts were for projects in the Congo Republic, Democratic Republic of Congo (DRC), and Kenya. The most common types of contracts awarded were for development concessions, supply of turbines and generators, and support of control and supervisory control and data acquisition (SCADA) systems.

Contracts of note in the region include an engineering-procurement-construction contract awarded to Italy’s Salini Costruttori SpA for the 1,870-mw Gilgel Gibe 3 project in Ethopia. The US$1.75 billion project is expected to be completed by 2011. Another notable contract awarded is a development concession for the 1,000-mw Sounda project in the Congo Republic. Old Mutual Properties, a division of South African insurance giant Old Mutual, will finance construction of this project


Worldwide, hydropower development is occurring at a rapid pace. More than 900 hydro projects currently under development will add 200,000 mw of electrical generation capacity. (Photo courtesy Voith Siemens Hydro Power Generation)
Click here to enlarge image

Tender activity was reported in 14 countries in Africa, including 15 tenders for new projects with a total capacity of 8,103 mw and 13 tenders for refurbishment of existing projects with a total capacity of 4,161 mw. The DRC led countries in the region in tender activity, with seven reported tenders. The DRC and its neighboring nations in central Africa are hopeful that the victory by Joseph Kabila in recent presidential elections, and the democratic mandate he won, will mean stability and prosperity for this part of the world in the future.

Other countries in which two or more tender opportunities were reported are: Ghana, Madagascar, Morocco, and Rwanda.

Significant development activity is anticipated for the future in Africa. Only 7 percent of Africa’s realistic hydropower potential has been developed. Government leaders throughout Africa support development of this potential. During the first African Ministerial Conference on Hydropower and Sustainable Development in March 2006, leaders called for joint action to develop the continent’s hydro potential for sustainable development, water and energy security, and poverty eradication.

Over the past year, interest in development of 35 prospective projects in eight countries was announced, totaling nearly 17,000 mw. Among these, Angola announced it is looking into funding to develop six projects with a total capacity of more than 8,500 mw. In Ethiopia, the Ministry of Water Resources is performing a detailed, five-year study of seven projects with a total capacity of more than 6,000 mw. During this period, design work will be carried out on two of the projects. And, in Zimbabwe, Turbo Engineering of Russia signed a development agreement for 17 small projects.

As Africa looks to develop its hydro potential, tremendous amounts of investment will be needed. World Bank energy director Jamal Saghir says donors need to increase investments in Africa energy assistance to US$4 billion a year from US$2 billion to ease chronic blackouts and extend electricity to half the population. Currently, only a fourth of the people in Sub-Saharan Africa have access to electricity.

At the African Development Bank, Roger Gaillard, lead infrastructure officer, says the model of public-private partnership can be a valuable tool to develop the vast hydropower potential in Africa. He says such a partnership combines the skills and capacities of both sectors to handle complex transactions. Under such partnerships, government sets policy, identifies need, and enforces regulations and contracts, while private sector companies compete to fulfill the identified needs. Risks are transferred to the parties best suited to manage them.

World Bank managing director Juan Jose Daboub says that he finds enormous “pent-up” demand for power sector investment. He says the best long-term solution to meet power shortages on the continent is for significantly expanded private sector investment in building more capacity.

Asia

Over the past year, 36 contract awards were reported for projects totaling more than 10,000 mw in 11 countries. Reported activity was highest in India (16 contract awards) and China (seven contract awards). Other countries in which two or more contract awards were reported include Afghanistan, Laos, and Vietnam. Most of the awards were for new projects; the most common types of contracts were for construction and supply of equipment.

Contracts of note in this region include build-own-operate-transfer (BOOT) awards for nine projects totaling nearly 200 mw in Uttaranchal State in India. Companies receiving these awards include Krishna Knitwear Technology Ltd. (two projects), Lanco Kondapalli Power Private Ltd. (three projects), Larsen & Toubro Ltd. (one project), PES Engineers Pvt. Ltd. (two projects), and Vishal Exports Overseas Ltd. (one project).

Other significant contract awards include an equipment supply contract awarded to Alstom to supply turbine-generators for the 1,200-mw Hohhot pumped-storage and the 1,200-mw Pushihe projects in China. And multiple contracts were awarded for equipment for the 615-mw Nam Ngum 2 project in Laos. Mitsui & Co. and Toshiba Corp. will supply turbine-generators and Alstom Projects India Ltd. will provide hydro-mechanical equipment.

More than 124 tender opportunities were announced in connection with more than 19,000 mw of hydro in 14 Asian countries. India led the way with 74 tender announcements, principally for development of new projects. Pakistan followed with 22 tenders, also primarily for new development. Additional countries in which multiple tender announcements were reported are Afghanistan, Bhutan, China, Fiji, Laos, Nepal, Tajikistan, and Vietnam.

Throughout the region, country leaders are seeking to reduce dependence on costly imported crude oil and to stave off climate change. And, they see additional hydropower development as one solution. In January 2007, leaders from 16 Asian nations pledged to develop alternative energy supplies, including hydropower.

Several initial steps toward development of this additional hydropower were taken in the past year. Some type of initial development activity occurred with 26 projects totaling nearly 52,000 mw in eight countries.

Of the projects in the “to watch” category, the largest is 20,000-mw Baleh in Malaysia. This project, which is currently in the planning stage, could be completed in Sarawak State on Borneo Island. Other projects to watch include nine proposed by the government of Arunachal Pradesh State, with a combined capacity of 13,800 mw. Development agreements have been signed for all these projects, five with National Hydroelectric Power Corp., two with NTPC Ltd., and two with North Eastern Electric Power Corp. Finally, Quang Nam Province in Vietnam is planning to invest US$125 million in five hydro projects.

Europe

In Europe over the past year, 27 contract awards in 13 countries were reported –19 for existing projects being refurbished and eight for new projects.

Not surprisingly, most of the contract awards were associated with refurbishment activity. Among the largest rehab projects for which contracts were awarded in Europe in the past year were the 1,269-mw Cleuson-Dixence in Switzerland and the 385.6-mw Zarnowiec pumped-storage project in Poland. At Cleuson-Dixence, VA Tech Hydro received a contract to provide three pump impellers for Arolla, one of five pumping stations associated with the project. And at Zarnowiec, CKD Blansko Strojirny of Czechoslovakia was awarded a contract to provide new runners for two of the four units at the project.

Countries in which two or more contracts were awarded for refurbishment-related work include: Austria, Finland, Germany, Italy, the Netherlands, Spain, Sweden, and the United Kingdom. The most common type of refurbishment-related contract award was for supply of turbine-generator equipment.

With regard to contract awards for new capacity, eight awards were reported for 1,900 mw. Included in this group were contracts for Landsvirkjun’s 690-mw Karahnjukar project in Iceland. The contracts include construction supervision for two diversion dams, gate equipment for one diversion dam, construction of the diversion dams and canals, and construction of access roads and trenches. Construction of the project was about 75 percent complete by the end of October 2006, and the reservoir is expected to be completely filled by mid-summer 2007. (For more information, see HRW, December 2006, page 20.)

Other notable contract awards in Europe were associated with construction of three pumped-storage projects in Austria totaling 1,090 mw. For the 70-mw Feldsee project, contracts included supply of a pump-turbine and digital governor by VA Tech Hydro GmbH and supply of a three-phase synchronous motor-generator and exciter by Alstom Hydro Austria GmbH. In addition, VA Tech SAT GmbH & Co. received a contract to supply three static excitation systems for the 540-mw Kopswerk 2 project. For the 480-mw Limberg 2 project, Verbund Austrian Hydro Power awarded four contracts for supply of pump-turbines, switchgear, transformers, and steel pipe.

Confirmed tender opportunities in Europe over the past year total 39 involving nearly 27,000 mw of capacity. More than 60 percent of these tenders involved project refurbishment. This work occurred throughout Europe, with Ukraine and Portugal leading the way. In the Ukraine, OJSC UkrHydroEnergy issued a call for tenders to rehabilitate six projects with a total capacity of more than 3,400 mw. These projects include 661-mw Dnipro 2, 1,050-mw Dnister, 351-mw Kakhovka, 444-mw Kaniv, 686-mw Kremenchuk, and 225-mw Kyiv pumped-storage. Equipment sought for these projects includes governors and excitation systems.

And, in Portugal, Energias de Portugal S.A. is seeking companies to perform rehab work for its 231-mw Picote project, including civil work andgenerating equipment.

In addition to refurbishment activity, Europe exhibited a market for new development, with 15 confirmed tenders for new projects totaling approximately 9,700 mw. The largest of these new projects is 8,500-mw Yuzhno-Yakutsk in Russia, with an estimated cost of US$12 billion to US$14 billion. Another new project being developed is the 600-mw Nant de Drance pumped-storage facility in Switzerland. Developers Aare-Tessin AG fur Elektrizitat (Atel) and SBB are seeking the main generating equipment, including four 150-mw variable-speed pump-turbines, asynchronous generators, and auxiliary systems.

Countries with significant tender activity over the past year – in addition to those already mentioned – include Albania, Russia, and Sweden.

Looking to the future, the opportunities for additional hydro development are promising. The European Union (EU) is pursuing an ambitious energy proposal to cut greenhouse gas emissions by at least 20 percent (from 1990 levels) by 2020. As part of this proposed Energy Policy for Europe, EU officials also will challenge industrial nations around the world to adopt a collective cut of 30 percent by 2020. One thrust of this proposed policy is to reduce the proportion of electricity generated from gas, coal, and nuclear power and increase the share of renewable energy. The executive commission of the EU is likely to propose a binding target of meeting 20 percent of EU energy needs from renewable sources by 2020, with no more than half from biofuels.

Several European utilities have made bold moves toward moving forward with new hydro development. For example, Russia’s HydroOGK, one of the world’s largest producers of hydropower, recently announced plans for a multi-billion-dollar tender to build new hydropower plants in Russia’s Far East. The plants are 8,500-mw Yuzhno-Yakutsk, as well as the Nizhnye-Zeyskaya and Nizhnye-Bureyskaya stations, which have a combined capacity of 600 mw.

Meanwhile, also in Russia, JSC Regional Power Generation Co. of Dagestan announced a development program for several hydro projects, including 200-mw Agvali, 200-mw Akhti 2, and 100-mw Gotsati.

And, Norwegian energy and aluminum group Norsk Hydro said it will study building an aluminum plant in Greenland to take advantage of that country’s hydropower capabilities. Norsk Hydro intends to assess the feasibility of building a 300,000 tons per year primary aluminum plant that would require 500 mw of new capacity.

Other potential projects to watch include six projects in Bosnia/Herzegovina, for which development concessions have been awarded.

Latin America

Reported contracts awarded over the past year in Latin America totaled 26, involving more than 6,000 mw. All but one of these awards was for new development. Countries in which the most activity occurred were Brazil and Chile. Examples of contracts awarded in these countries include turbine-generator equipment for the new 19-mw Bonafante, 26-mw Da Ilha, 28-mw Jararaca, 25-mw Monte Serrat, 30-mw Santa Fe 1, 27-mw Sao Pedro, and 27-mw Sao Simao projects in Brazil. Consulting contracts awarded for environmental and social studies and for environmental management were for the Baker 1, Baker 2, Pascua 1, and Pascua 2 projects in Chile and five small projects in Brazil.

Latin America remains a region with strong opportunities for new hydro development and construction. In the past year, 54 tender opportunities were announced involving 8,800 mw of capacity in 16 countries. Several of these countries had a significant amount of tender activity:

Hydro project development activity in Latin America is expected to remain strong -- with 142 projects in the “to watch” category with a total capacity of more than 15,000 mw. These prospective projects are in eight countries. These include Guatemala, where studies are under way to develop 80 projects with a total capacity of more than 2,700 mw, and Chile, where 35 projects are proposed for development.

Brazil is another hotbed of future activity. For example, in the past year, public hearings were conducted in seven communities on the potential social and environmental effects of the 2,700-mw Garabi project. In addition, Brazil’s electricity regulator, Agencia Nacional de Energia Eletrica (ANEEL) approved feasibility studies for a package of six Teles Pires projects totaling 3,697 mw. In January 2007, Brazil’s president unveiled a plan to speed economic growth in the country by investing US$237 billion in long-delayed infrastructure projects, including power plants. This proposal calls for the central government to provide US$31.8 billion for investments over four years, with the remaining US$204.7 million coming from state-run companies and the private sector, which the government hopes to woo with tax breaks.

In Central America, the Inter-American Development Bank (IADB) is urging countries to advance an ambitious series of “mega-infrastructure” projects, including hydropower, to stimulate social change throughout the region. Hydro projects IADB identified as energy projects of national scope include 67-mw El Chapparal in El Salvador, 1,700-mw Copalar in Nicaragua, El Diquis in Costa Rica, and a system in Honduras that could include 20-mw El Tablon, 172-mw Jicatuyo, 100-mw Piedras Amarillas, and 58-mw Aguas de la Reinas. IADB has set a goal of approving US$12 billion in financing over the next five years for critical infrastructure projects in Latin America and the Caribbean.

North America

In the past year, 44 contract awards were reported for work at both new and existing projects in the United States and Canada. Of these awards, 64 percent were for refurbishment of projects in the United States. The next highest category, at 24 percent, was for awards for new project development in Canada.

The most common types of contracts awarded in North America were for: equipment (e.g., governors, protective relays, and unit controls) for refurbishment; and studies (e.g., feasibility, environmental assessment, ice dynamics, sedimentation) for new projects.

Contracts of note in the region include an award to Alstom Power to upgrade the four generators at Grand River Dam Authority’s 108-mw Robert S. Kerr Dam powerhouse on Grand River in Oklahoma. The US$72 million modernization is expected to increase output by 15 percent and lower maintenance costs.

Another notable contract awarded is to complete engineering studies, site surveys, geotechnical investigations, a construction schedule, and capital cost estimates for the 36-mw Island Pond project in Newfoundland, Canada. This project is being developed by Newfoundland and Labrador Hydro.

Significant tender activity was reported in North America, including 15 tenders for new projects with a total capacity of 4,080 mw and 51 tenders for refurbishment of existing projects with a total capacity of 20,465 mw. Most of the announced tender opportunities in the United States were for refurbishment of existing projects, and most of the tender opportunities in Canada were for development of new projects.

Significant future development activity is anticipated for this region, based on the number of “projects to watch.” Over the past year, interest in development of 13 prospective projects in the United States was announced, totaling 4,422 mw.

The primary focuses of this new development are on tidal energy and pumped-storage projects. Six of the 13 prospective projects are tidal energy plants. The largest of these is 600-mw Deception Pass in Washington, which is undergoing a feasibility study. In addition, five pumped-storage projects are proposed in the United States, including 1,250-mw Ford Canyon on the Arizona River in Colorado, also undergoing a feasibility study.

In Canada, interest was announced in development of 23 prospective projects with a total capacity of 2,734 mw. These projects are spread throughout the country, in at least five provinces.

One example is in the province of Manitoba, where utility Manitoba Hydro is considering development of the 1,250-mw Conawapa project on the Nelson River. This project, predicted to cost US$4.3 billion, will be part of a larger joint venture to provide electricity from hydropower project to Ontario. As part of an agreement between the two provinces that was signed in 2005, Conawapa will be built to help supply at least 1,500 mw of hydropower to energy-hungry Ontario.

Another example is in British Columbia, where private developer Run of River Power Inc. is applying for environmental permits for eight projects on the Pitt River: 16.4-mw Boise Creek, 19.6-mw Bucklin Creek, 16.4-mw Corbold Creek, 12.7-mw Homer Creek, 18.2-mw Pinecone Creek, 10.5-mw Shale Creek, 12.1-mw Steve Creek, and 14.8-mw ZZ Creek. Field studies were completed in October 2006, with a finding of no significant constraints to development. s

This article was compiled by the editorial staff of HRW. Sources of information for the article include the annual strategic hydro industry overview, Vantage Point: Worldwide Hydro 2007, and the Internet news service, HydroNews.net. HRW, Vantage Point, and HydroNews.net are all produced by HCI Publications.


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