Velcan Energy is a
listed Independent Power Producer (IPP) which develops, finances and
operates hydro power concessions in emerging markets.
Hydroelectricity has been exploited profitably
for more than a hundred years in developed countries. However, most of
the growth in installed capacity in the past decades has come from
Emerging economies. China has led the way and now has an installed
capacity of more than 220 GW MW and is set to reach 430 GW by 2020.
Brazil generates close to 80% of its electricity from hydroelectricity.
Other countries are also significantly investing in this source of
cheap and reliable power.
Hydropower is capital intensive but does not
need subsidies to compete with fossil fuel in the long run. This
capital intensity has prompted many emerging countries to develop hydro
power using concessions under the BOOT (Build Own Operate Transfer)
Velcan Energy started its operations by working
in India and Brazil in 2005. It built its first hydropower facility,
the Rodeio Bonito power plant (15 MW) between 2007 and 2009. It has
exploited this concession very profitably since 2010.
Velcan Energy targets markets that have not been
entirely developed and geographical locations where unknown sites can
still be discovered. This allows Velcan Energy to use the full extent
of its technical and commercial abilities to capture superior returns.
Building and exploiting hydroelectrical
facilities is a long cycle activity. It takes several years of
administrative procedure and technical studies before a project is
ready for construction. During this development phase, risk factors are
assessed and any one of them may jeopardize the project. Such risks can
be geological, hydrological or administrative. Identifying and
assessing the most risky factor of a project is a critical factor of
success in this industry. This allows to direct resources to more
Another success factor is to select projects
that have potential for size upgrade. It is critical to select the good
projects from the start as from initial surveying to commissioning
projects can take six to nine years to complete.
Finally, having a diversified portfolio of
projects, both in size and geographical locations allows the company to
reduce overall risk. This is the best hedge against technical and
administrative hurdles. If one project or country becomes less
interesting, development money can be funnelled to another part of the
Throughout its history, Velcan Energy has been
able to retain on average projects which have had a high “hit ratio”.
The potential generation capacity of projects that have been retained
has often been revised upwards during development.
Furthermore, Velcan Energy endeavours to bring
the cleanest energy with the least possible disruption to local
population and the environment.
Velcan Energy’s technical and commercial acumen
gives the company a definite advantage in this promising business.
However, in order to offset the inherent risk in the development
process. Velcan Energy expanded its operations to two further
countries, Laos and Indonesia in 2009 and 2010.
Today, therefore, Velcan Energy has operations
in four countries with significant hydroelectric potential and economic
growth trajectory. Development of the Indian concessions continues and
the planned capacity has been increased from 200MW to 571MW.
Furthermore, development work is progressing satisfactorily in
Indonesia on a number of projects ranging from 7 to 80MW capacity.
Finally, in May 2014, Velcan Energy signed Project Development
Agreements with the Lao PDR Government which secured the rights to two
concessions of 52 and 41 MW capacity respectively..
The current portfolio of exclusive concessions of Velcan Energy is 860 MW.
The daily life of the teams often means going to
remote places and living an adventurous life. But at a Corporate level,
the company is managed in a conservative style with shareholder value