Electrifying Singapore - Data Driven Perspectives on the Singapore Power Generation Market | Q1-2021 - Deloitte
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Electrifying Singapore Data Driven Perspectives on the Singapore Power Generation Market | Q1-2021 © 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 1
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 © 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 2
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.
Singapore electricity generation capacity versus peak demand
16,000
15,000
+27%
14,000 13,618 13,653
13,395 13,445
12,909
13,000 12,563 12,582
12,434
12,000
11,000 10,818
9,931 9,917
Generation capacity (MW)
10,000
9,000
8,000 +11%
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Others Keppel YTL PowerSeraya
TuaSpring SembCorp Senoko Energy
PacificLight Tuas Power Peak System Demand
* 2020 estimate
Source: Energy Market Authority
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 3Gas 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 LNG Imports (Shipped)
PNG Imports (Piped)
12,000 Gas Volumes +35%
11,000
10,148 10,337
9,872 9,959
10,000 9,454 9,681
9,418
8,896
9,000
7,902
8,000
7,215 7,287
7,000
KToe
6,000
5,000
4,000
3,000
2,000
1,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
Uniform Singapore electricity price
250
-71%
200
USEP (SGD / MWh)
150
100
50
Historical USEP (SGD/MWh)
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
* 2020 estimate
Sources: Energy Market Authority, Enterprise Singapore
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 4GenCo 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
-30%
2005 32% 28% 23% 12% 5%
2006 31% 28% 25% 11% 5%
2007 29% 27% 24% 9% 6% 5%
2008 27% 25% 24% 11% 9% 5%
2009 26% 26% 24% 10% 9% 5%
2010 25% 27% 25% 9% 8% 6%
2011 24% 27% 26% 10% 8% 6%
2012 26% 25% 24% 9% 9% 6%
2013 26% 23% 20% 8% 13% 1% 9%
2014 22% 18% 21% 10% 12% 8% 9%
2015 20% 18% 21% 12% 11% 9% 10%
2016 19% 18% 21% 10% 10% 9% 4% 9%
2017 17% 17% 21% 10% 12% 9% 4% 10%
2018 17% 16% 21% 10% 12% 9% 4% 11%
2019 17% 16% 20% 10% 13% 9% 4% 11%
2020* 17% 15% 21% 12% 14% 8% 1% 11%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Senoko Energy Tuas Power Keppel TuaSpring
YTL PowerSeraya SembCorp PacificLight Others
* 2020 estimate
Source: Energy Market Authority
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 5Merit 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
Recently
retired capacity
More efficient Less efficient
11,500
11,000
10,500
10,000
EMA reserve margin
9,500
9,000
Heat rate (BTU/KWh)
8,500 Peak demand break
8,000
7,500
7,000
6,500
6,000
5,500
5,000
4,500
4,000
0 2,000 4,000 6,000 8,000 10,000 12,000
Capacity (MW)
Senoko Energy YTL PowerSeraya SembCorp Tuaspring
Tuas Power Keppel PacificLight
* 2020 estimate …excludes generation capacity of Waste-to-energy plants and auto-producers
Source: Energy Market Authority and Deloitte Research
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 6Market 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
1,000
937
899
900 862
831 140
802 113
800 763 776 66 86
737 721 741
33 49
13 20 29
700 15
600
ktoe
500
400 764 775 786 797
725 721 734 743 754
707
300
200
100
0
2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Solar Combustible renewables & waste
Solar generation capacity and number of solar photovoltaic systems
400 388 4,500
353
350 4,000
3,500
300
# Solar PV installations
+44% 3,000
250
208 2,500
MWp
200
153 2,000
150 126 1,500
100
1,000
59
50 33 500
10 15
4 6
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*
# Grid connected Solar PV Installations Capacity
* 2020 estimate
Sources: The Economist Intelligence Unit, Energy Market Authority, British Petroleum Company Limited
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 7GenCo Survival Guide
GenCo’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)
Retail Adjust marketing / pricing strategy
Revenue Wholesale Renegotiation of corporate contracts
Trading Adjust risk + liquidity tolerances
Restructure tenor/ volume / price
COGS Gas Contract(s) Resell in Global markets
Redirect / swap to stagger deliveries
Performance
Levers
FTE
Rationalise the cost base to reset your
Overheads Rent operating model for the new business +
market reality
Discretionary
Finance Costs Interest
Explore options to refinance / reschedule /
restructure existing debt facilities to re-align
Illustrative servicing with business cash flows
Turnaround
Levers Debt
Capital
Structure
Equity Assess M&A / capital raising options
Redeploy assets in new markets
Capacity Efficiency Divest to unlock inefficient capital
Mothball to ‘wait + see’
Capital Levers
Maintenance Defer / renegotiate service contracts
Capital
Expenditure
Growth Cash focus > earnings focus
Receivables Accelerate collections efforts
Working Capital Payables Renegotiate payment terms
Inventory Reduce fuel holding time / costs
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 8Deloitte 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.
Deloitte Restructuring Services
M&A Opportunity
Portfolio Lead
Advisory Services
Turnaround &
Value Creation
Accelerated M&A
Company performance/health
Special
Situations
Financial
Advisory
Restructuring
Advisory Distressed M&A
Contingency
Planning
Formal
Insolvency
Management Level of influence Creditors
Time
• 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
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 9Key Contacts
Andrew Grimmett Matt Becker Author
SEA Restructuring Leader SEA Turnaround Leader
T:+65 6530 5555 T: +65 8332 1977
E: agrimmett@deloitte.com E: mbecker@deloitte.com
Richmond Ang Justin Lim
SEA Debt Advisory & Singapore Restructuring Partner
Restructuring Leader T:+ 65 6216 3269
T:+65 6216 3303 E: juslim@deloitte.com
E: rang@deloitte.com
Wei Cheong Tan Kamolwan Chunhagsikarn (Minnie)
Singapore Restructuring Partner Thailand Restructuring Partner
T:+65 6531 5046 T: +66 2034 0162
E: wtan@deloitte.com E: kchunhagsikarn@deloitte.com
Siew Kiat Khoo Chi-Nang Kong
Malaysia Restructuring Leader Portfolio Lead Advisory Services Leader
T: +60 3 7610 8861 T: +65 6800 2270
E: skkhoo@deloitte.com E: cnkong@deloitte.com
Soo Earn Keoy Edy Wirawan
SEA Financial Advisory Leader Indonesia Financial Advisory Leader
T: +65 6216 3238 T: +62 21 5081 9200
E: skeoy@deloitte.com E: ewirawan@deloitte.com
Phong Le Aye Cho
Vietnam Financial Advisory Leader Myanmar Financial Advisory Leader
T: +84 28 3521 4080 T: +951 230 7365
E: phongle@deloitte.com E: aycho@deloitte.com
Global Contacts | Navigating the Financial Impact of Covid-19
Andrew Grimstone Jiak See Ng
Global Restructuring Services Leader APAC Financial Advisory Leader
T: +44 20 7007 2998 T: +65 6531 5088
E: agrimstone@deloitte.co.uk E: jsng@deloitte.com
© 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 10Notes © 2021 Deloitte Southeast Asia Ltd Electrifying Singapore | A data driven perspective 11
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