Transcript ifis
Impact of IFI investments in power generation in the Philippines London, September 17th 2015 Agenda 1 Introduction and summary 2 Relationship between power and economic growth 3 Analysis of impact of IFI investments 4 Conclusions & Implications for IFIs 2 What has been the GDP and employment impact of IFI investments in power generation in the Philippines? International Financial Institution (IFIs) supported the first privatisation deals and have provided substantial capital for privatisation, rehabilitation and construction of power generation plants β’ USD 923 million debt finance β’ USD 162 million equity finance β’ USD 1,085 million total finance Objective: Quantification of what would have happened to the power sector and the economy if IFIs had not provided finance? Study looks at the actual power situation against a constructed counterfactual in which these investments would not have happened 3 Agenda 1 Introduction and summary 2 Relationship between power and economic growth 3 Analysis of impact of IFI investments 4 Conclusions & Implications for IFIs 4 IFI attributable generation capacity causes economic growth through a myriad of pathways + Electricity sector output + + Electricity sector value added + C Manufacturing Electricity use - + Manufacturing output + Manufacturing value added + + IFI attributable power generation capacity - Price of electricity Non-manufact. output A D + GDP (income) and employment B - + Non-manufact. value added Overall Electricity use + + 5 Agenda 1 Introduction and summary 2 Relationship between power and economic growth Analysis of impact of IFI investments IFI attributable generation capacity 3 B IFI impact on electricity price IFI impact on manufacturing output IFI impact on GDP and employment 4 Conclusions & Implications for IFIs 6 IFI attributable price decrease can be determined from the power supply curve and actual demand profile Long-Run Marginal Cost (LRMC) of power production B 18 Excluding IFI-attributable capacity 16 Including IFI-attributable capacity LRMC (PHP / kWh) 14 Peak demand without IFI capacity 12 10 Base demand 8 6 IFI-attributable price impact 4 2 Peak demand with IFI capacity 0 0 2,000 4,000 6,000 8,000 10,000 Dependable Capacity corrected for outages (MW) 12,000 14,000 Small increase of generation capacity can have large price impact Note: supply curve takes capacity outages statistically into account 7 Load-Weighted Average Price of generation is determined by power supply curve and electricity demand Generation charge (PHP / kWh) Apr 2014 Demand (MW) 14.00 11,000 LWAP inc IFI: 6.99 LWAP ex IFI: 7.28 12.00 10,000 10.00 9,000 8.00 8,000 6.00 7,000 4.00 6,000 2.00 00:00 B 06:00 12:00 18:00 5,000 00:00 8 Effect on monthly average generation charge can be summarised in annual graph 2014 LWAP (PHP / kWh) B IFI attributable difference 14.00 100% 12.00 Annual average LWAP inc IFI: 5.30 PHP/kWh Annual average LWAP ex IFI: 5.84 PHP/kWh Difference: 80% -10.16% 10.00 60% 8.00 40% 6.00 20% 4.00 2.00 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 9 Generation supply & demand model reproduces observed behaviour of power prices B Observed and modelled monthly LWAP from for 27 months 10.00 Monthly LWAP (PHP/kWh) Malampaya outage 9.00 Meralco / WESM average Model with IFI capacity R square: 0.84 8.00 7.00 6.00 5.00 4.00 Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Jan 2015 Apr 2015 That what can be modelled is sufficiently understood Note: Outages taken into account statistically except Malampaya outage which was included explicitly 10 Agenda 1 Introduction and summary 2 Relationship between power and economic growth Analysis of impact of IFI investments IFI attributable generation capacity 3 IFI impact on electricity price C IFI impact on manufacturing output IFI impact on GDP and employment 4 Conclusions & Implications for IFIs 11 Manufacturing output change due to electricity price change depends on (i) electricity factor share and (ii) price elasticity Change of manufacturing output βπ given change of electricity use βπΈ βπ = π β C Change of electricity use βπΈ in manufacturing given change of electricity price βπ βπΈ βπ πΈ βπΈ = π β βπ βπΈ π π is the price elasticity of electricity use π is the factor share of electricity Change of manufacturing output given change of electricity price (price elasticity of output) βπ = π β π β Determined from WB Enterprise Survey βπ βπ π Determined from literature Determined from supply & demand model 12 Factor share of electricity in manufacturing sector is substantial and rages from 0.15 to 0.40 WB Enterprise Survey: factor share of electricity Ξ΅ C for different manufacturing subsectors 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1% more electricity use causes economic output of food sector to increase by 0.36% Fuel (USD) Capital (USD) Labour (# FTE) Material cost (USD) Electricity (kWh) Note: Factor shares determined using lognormal regression on Cobb Douglas prod function: π = π΄ β πΏπΌ πΎπ½ ππΎ πΉ πΏ πΈ π 13 60% of electricity price-related increase of manufacturing output is due to importance of the food and beverage sectors C Output increase 1.60% Food Beverage 1.40% Electronics 1.20% 1.00% Paper & various Garments & Textiles Chemicals & Plastics 0.80% Non-Met. Minerals 0.60% 0.40% 0.20% 0.00% 0 1,000 2,000 3,000 4,000 Size of sector (PHP billion) 5,000 6,000 7,000 8,000 9,000 Size of sector (PHP million) Note: Electricity price elasticity of -0.75 assumed and IFI-attributable price decrease of 5.57 PHP/kWh (2014 results) 14 Agenda 1 Introduction and summary 2 Relationship between power and economic growth Analysis of impact of IFI investments IFI attributable generation capacity 3 IFI impact on electricity price IFI impact on manufacturing output D 4 IFI impact on GDP and employment Conclusions & Implications for IFIs 15 The spillover effects of more manufacturing output can be quantified using the Social Account Matrix for the Philippines Investments Export Taxes Household consum β¦ Utilities β¦ Manufacturing C Manufacturing B Manufacturing A To Agriculture From D Agriculture Manufacturing A YA+ΞYA Manufacturing B YB+ΞYB Manufacturing C β¦ INDUSTRY STRUCTURE CONSUMPTION YB+ΞYB Yu - ΞYu Utilities β¦ Households Taxes SOCIAL TRANSFERS INCOMES Imports Dividends / savings Yu - ΞYu YC+ΞYC YB+ΞYB YA+ΞYA Note: RAS method is often used to update IO tables and SAM to reflect new sector totals. RAS method will be used to rebalance SAM to reflect the increase of manufacturing output, ΞY, the output increase of the other sectors can be determined 16 IFI investments in power generation have increased GDP by some 0.21% to 0.32% β¦ 2013 0.21% 2014 0.30% 2015 0.32% 2016 0.23% Ξ Agriculture: 0.38% 0.54% 0.58% 0.40% Ξ Industry: 0.28% 0.40% 0.43% 0.30% Ξ Manufacturing: 1.10% 1.57% 1.67% 1.17% Ξ Electricity: -5.31% -7.53% -8.04% -5.61% Ξ Other: 0.07% 0.10% 0.11% 0.08% 0.15% 0.21% 0.22% 0.15% 0.23% 0.20% 0.21% 0.32% 0.28% 0.29% 0.34% 0.30% 0.31% 0.24% 0.21% 0.22% Ξ GDP: Ξ Services: Ξ Household income: Ξ Profits & Savings: Ξ Taxes: D This means a permanent GDP shift of some USD 594 β USD 901 million 17 β¦ and created some 72,000 to 109,000 jobs D 2013 72,234 2014 102,523 2015 109,452 2016 76,407 Ξ Agriculture: 37,738 53,565 57,185 39,919 Ξ Industry: 26,555 37,692 40,240 28,089 26,224 37,223 39,739 27,739 - - - - 331 469 501 350 7,940 11,267 12,028 8,399 Ξ Employment: Ξ Manufacturing: Ξ Electricity: Ξ Other: Ξ Services: This is equivalent to 0.20% - 0.30% of the labour force 18 Results can be captured in some key metrics D 1 MW power generation addition: β’ GDP increase of 1.9m USD (±0.4m) β’ 226 jobs (± 50) 1% power generation capacity addition (relative to installed base) β’ GDP increase of 254m USD (± 50m) β’ GDP increase of 0.09% (± 0.02%) β’ 31,000 jobs (± 7,000) USD 1m IFI investments in power generation: β’ GDP increase of 0.68m USD (± 0.15m) β’ 83 jobs (± 17) 19 Agenda 1 Introduction and summary 2 Relationship between power and economic growth 3 Analysis of impact of IFI investments 4 Conclusions & Implications for IFIs 20 Conclusions Attribution to IFIs of generation capacity 400 MW (2.9% of total) Effect of IFI attrib. capacity on power price 3.9% to 6.0% lower increase of end-user tariffs Effect of IFI attrib. price decrease on econ. output 0.8% β 1.3% manufacturing output increase Effect of IFI attrib. GDP: 0.2% - 0.3% output on GDP and employment Jobs: 72k β 110k 21 Steward Redqueen B.V. Kinderhuissingel 4A/B 2013 AS Haarlem, Nederland Tel: +31 (0)23 553 0400 www.stewardredqueen.com - [email protected]