Singapore Update

1
Singapore Update

• Presented by Dave Carlson
• Chief Executive Officer
• 30 October

2
Agenda

• Background
• Key features of the NEMS
• Price determination
• The move to gas
• Benefits
• Issues and challenges
• Market power
• Vertical integration
• Retail competition
• Fuel supply

3
Background
4
Singapores Market

• Wholesale market
• Mandatory gross pool
• Locational marginal pricing
• Half-hourly pricing and dispatch
• Co-optimisation of energy and ancillary products
• Daily settlement
• Five active generators
• Retail market
• Industrial and commercial customers are
  contestable
• Five active retailers
• Householders supplied by utility that also owns
  td assets

5
Wholesale Prices

• Comfortable supply cushion
• Peak demand 5,475MW with 3.58 growth p.a.
• Installed capacity 10,104MW
• Transmission system unconstrained during normal
  operations
• Prices generally influenced by
• Load profile
• Fuel costs (HSFO)
• Unplanned equipment outages
• Gas supply issues

6
The move to gas
Market Share by Plant Type 2003/05
2003
2004
2005
80
70
60
50
40
30
20
10
0
CCGT
ST
ST Incineration
7
Electricity interconnectionwith Malaysia
Natural gas pipeline From Malaysia
Location Map of NEMS Generators
Senoko Power
(Pipeline expected to Be operational in 2005
Tuas Power
Power Seraya
Represents incineration plants operated By the
National Environment Agency
SembCorp
Natural gas pipeline from West Natuna
Natural gas pipeline from Sumatra (Asamera)
8
Benefits
9
Benefits

• Net benefit of S128.6m in first 2 years of
  operation (PwC study)
• Singapores electricity price competitiveness
  ranking improved from 41st/48 in 2001 to 29th/47
  in 2005 (IMD- International Competitiveness
  Ranking)
• Electricity prices respond to market fundamentals
• Competition has cushioned impact of recent high
  oil prices on electricity prices

10
Influence of fuel prices
11
Issues and Challenges
12
Market Power

• Concentrated market with three major generators
  holding 85 market share
• Regulator concerned that these generators could
  potentially exercise market power to influence
  prices
• Introduced vesting contracts
• Mandatory hedge contract for generators
• Cover approx 65 of load priced set at LRMC of
  most efficient plant in the power system
• LRMC reset quarterly reflects fuel costs
• Vesting quantity reduced as market becomes less
  concentrated
• Dampened wholesale settlement prices

13
Vertical Integration

• All major generators have affiliated retail
  companies
• Vertical integration and vesting contracts mean
  that all market participants are nearly perfectly
  hedged
• This limits the need for a hedge contract market
• As a result, there is very limited bilateral
  contracting between spot market participants

14
Retail Competition

• Retail contestability introduced in phases based
  on consumption level
• Nearly 75 of the market is open
• Contestable consumers can chose to buy from a
  retailer, directly from the market or indirectly
  from SP Services
• Non-contestable consumers are supplied by SP
  Services at a regulated (un-subsidised) tariff
• Government has decided to defer making the
  remaining (domestic) customers contestable

15
Fuel Supply

• Singapore is highly reliant on piped natural gas
  for electricity production
• In June 2004 Singapore experienced a partial
  power black out due to a disruption in piped gas
  supply
• Fuel risks are being mitigated by
• Gas generation units have dual-fuel capability
  and access to two sources of piped gas
• Government has made a decision to import LNG from
  2012 to diversify supply options and develop a
  storage capability

16
Privitisation

• The three largest Gentailers are government
  owned
• Privitisation of these assets is under
  consideration, with media reports suggesting that
  sale may be imminent
• Ownership changes are likely to change market
  dynamics

17
Conclusion

• The market is
• working well prices respond to changes in
  demand and supply conditions and reflect changes
  in input costs
• 3 ½ years old and generally supported by the
  industry
• well positioned for future development and
  evolution