Cambodia’s Energy Blue Print
Q&A: H.E. KEO ROTTANAK, Director of EDC
Construction & Property Magazine was recently privileged to be granted an exclusive interview with HE Keo Rottanak, Director of EDC and Advisor to Samdech Prime Minister Hun Sen. He spoke about the successes and challenges faced by the power generation sector and the impact of the booming construction and property industries.
DEVELOPING GENERATION CAPACITY
The effort that the Cambodian government has been making over the last 6 years in particular has been providing a lot of fruit.
Expansion of supply has been increased and we have been able to address for the first time the issue of the rural urban gap in the power sector. We have enough supply to provide power to anyone that is connected to the national grid 24hrs a day. The grid is still not complete, in particular around the Tonle Sap. We still have a missing link between Kompong Cham, Kompong Thom and Siem Reap. We are connected from Battambang to Siem Reap with 1.5KV to take power from Thailand but that is not enough and we are upgrading to a 30KV line. The intention is to have the 230KV transmission line around the Tonle Sap as soon as possible.
CAUSES OF POWER CUTS
The only cuts we make are interruptions to enable our engineers to upgrade or expand the lines.
Around the city, it also happens because of accidents. Sometimes construction companies do not pay enough attention to safety and cement cranes can touch the lines and trip the whole city or half the city unintentionally. But this is also part of EDC’s responsibility to educate our customers.
THE CHALLENGE OF URBAN PLANNING
We are put in a very awkward position, which may not be unique as different parts of the world have similar problems. In my personal view, in the absence of sound urban planning, construction seems to be mushrooming all over the place and it adds significant pressure to the utility provider like EDC. For example, some cables and conductors that we laid underground used to be on the roadside but now the road has expanded and they are in the middle of the road. We have no room to expand more lines to the cities because there is no right of way. In more developed economies, there are clear demarcations of rights of way because this is where the utility and telecommunications infrastructure would be laid. Here we don’t have it; people often build their houses or apartments with their doorsteps right on the road. That is challenging for EDC to meet the demands of the city; not because of a lack of funding but increasingly we find it difficult to find the right of way to coordinate the construction of the electrical infrastructure that the people would love to have. It just takes longer and is more costly for the utility to do so.
It is an issue of planning but also of the legal framework.
BALANCING NEEDS AND TIME FRAMES
I would like to emphasize that typically it takes about 8 to 10 years to realize a generation project. The fruits that we start to enjoy now are the result of the good work of the Prime Minister and the government over the last 10 years. A lot of people take it for granted. One of the problems that we have is the expectations about power supply and environmental protection. Ideally we need to balance our needs for electricity development and environmental protection; if we don’t develop hydropower, if we don’t use some coal, what other fuels do we have? If we don’t decide to do something now, it take 8-10 years to develop. It takes time for effort to coordinate the technical development, the financing, and of course the construction.
CHANGING TARIFFS
Every association and vested interest would like cheaper power. At the macro planning level we balance with EAC, the regulatory body, and the tariffs are set by EAC not EDC. In our view, supply has to be sufficient, reliable, and cost effective. The tariffs we are charging the industrial and commercial sector, which construction falls into, have been better over the last 8 months. This sector has seen a US$2 cents reduction per KW/hr without them even knowing it. For this category of customer the tariffs are floating so when the generation costs come down, the tariffs applied to the industrial sectors automatically come down, and this trend will continue. What the Prime Minister hinted in October is that in the long run ,because of the consistent investment by the Royal Government, everyone can expect to see the power tariffs come down. Because of the small scale of our power generation and economy, we have not had the ability to subsidize. The reverse trend is happening in Vietnam and Thailand, as they have been heavily subsidized and they find increasingly that subsidies are not sustainable. We have had higher tariffs but are now able to reverse the trend as our domestic capacity increases through the development of our resources. If you compare Cambodia to non-subsidized countries like Singapore, Hong Kong, Australia and even parts of the US, our prices are not that far apart. If we want a good free market system, the costs of the output should reflect the cost of the input. It is a strong distinction to make and, given the scale and what we can offer, we should be very proud. If the government were forced to subsidize power generation, this money would come from the taxpayers and impact spending on education and health. It is a value judgment – are Cambodians prepared to accept reductions in education and health in order to subsidize the power sector? I don’t think so.
ASEAN INTEGRATION
There are two groups of ASEAN countries; land-based and island based. Cambodia, Laos, Vietnam, Myanmar and Thailand can easily be connected. Everyone can share the economic gain but it is difficult to realize quickly because each country has its own complexity for historical, political, legal, development, and technical reasons so it will take time.
At the technical level we have been talking a lot. When I chaired the HAAPO council hosted in Phnom Penh, we agreed to set up a working group to explore different issues like technical harmonization and double taxation so we can provide input on the enormous challenges. In that context, Cambodia must increasingly be self-sustaining so we can meet the domestic demand and provide the basis for economic development so industries, including construction, can benefit more.
PRIVATIZING EDC?
The issue of ECC joining the stock market has been discussed many times at the very highest levels. It is not a case of if, but of when. The government is still rightly concerned about first being able to get good value for our assets, and secondly having the opportunity to access concessional lending while we still can.
EDC maintains an internal cross-subsidization system. For example, in Svay Rieng we sell electricity for 650 riel for 1 KW/Hr – that is below generation costs and we cannot even break even let alone make profit. If EDC were to be privatized now, those provincial utility branches will have to raise costs and the government is not ready to do that, so it will keep EDC the same as it is now until so there are no adverse impacts to our consumers or the potential of raising social problems.
If EDC is not fully prepared to go to the stock market, investors may come and buy the stock too cheaply and devalue our assets by buying them at a discount. Secondly social issues are at the forefront of my agenda. Under my leadership, the urban and rural tariff gap must be addressed and must be if not the same, then extremely close.
Where ever customers need us, we should be able to provide for their needs but that needs a lot of investment. Between now and 2022, EDC foresees investing anywhere between US$900 million and US$1 billion plus just in transmission and distribution alone. The government, through EDC, only invests in transmission and distribution directly. Generation has been liberalized long ago; hydro and coal is all BOO or BOT because we don’t to crowd out private investment in areas where they play a better role.
CONFIDENCE FOR THE CONSTRUCTION INDUSTRY
A message to the construction industry as a major player in the Cambodian economy is that they should have increased confidence in the reliability and abundance of supply, and that costs will only be coming down, especially after 2018.
The only thing I request is that major construction projects should let us know. They can’t build a whole city and then ask, ‘where is the power?’ It sounds simple but it happens a lot. We need to plan ahead and prioritize our investments so any major projects should let us know in advance so we can join together to find the solution.
Coal-fired power plant 100MW in Preah Sihanouk Province
Coal-fired power plant 100MW in Preah Sihanouk Province
Kamchay Hydropower Plant in Kampot Province
Kamchay Hydropower Plant in Kampot Province
- Video Advertisement -
