Activities

The Electricity Market in emerging countries

In most emerging markets with the notable exception of China, the power producing capacity has not kept pace with economic growth. Therefore in most of these countries there are shortage and unmet demands. Except for very small plants (less than 5 MW), hydropower plants are a cost effective way to produce electricity. They can compete with other conventional sources of power (nuclear and fossil fuels). Therefore Velcan Energy generally does not need any special sort of subsidy or feed in tarriff like the new sources of renewable power (wind and solar mostly). Nevertheless in some places it is justified that hydro power gets carbon credits as it replaces carbon intensive electricity and has a longer time to market than fossil fuel power plants.

We are therefore usually not dependent on change of regulation of government feed-in tarriffs. We sell our electricity on a commercial basis, either to big national players, still very often state owned, or to Industrial consumers. We never enter the retail and distribution market. In most of the countries we operate under a concessional regime. This means that we develop the projects, build the power plants, operate them for the duration of the concession and then transfer its ownership to the State. Concession duration are usually between 25 to 40 years.

Business Model

Our business model is based primarily on the sale of electricity. The electricity we produce is sold to local electricity companies or manufacturers under long-term contracts. On average over the life span of a power station, this type of revenues accounts for at least 95% of total sales. Whenever possible we try to generate carbon credits alongside electricity but it is always a very minor part of our revenues (less than 5% over the life time of a power plant).