Opening Remarks at the CAREC Energy Investment Forum – Wencai Zhang

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Greetings

Your Excellency, Mr. Khawaja Muhammad Asif, Minister of Water and Power, distinguished guests, ladies and gentlemen.

Need to engage the private sector in energy infrastructure

It is a great pleasure for me to be here today for the CAREC Energy Investment Forum. As you all know, energy is a key component for achieving broad based and sustainable economic development for not only the CAREC countries but the entire Asia and Pacific region. In order to ensure a secure supply of energy, a substantial amount of investments will be needed over the next 20 to 30 years. ADB did a study in 2009 on Asia's Infrastructure needs 2010-2020 � I know it is a bit dated now and we are undertaking a new study to update these forecasts. Anyway, the 2009 study shows that for Asia to keep its current rate of economic growth, Asia will need $8.3 trillion in infrastructure investments. Specific to Central Asia, about $170 billion is needed in energy, about $100 billion in transport, about $80 billion for telecommunications and about $25 billion for water and sanitation. Based on the findings of the ADB new study, the financing needs would be much larger than original estimates.

There is a significant financing gap. Even with the help of multilateral financial institutions such as the Asian Development Bank or bilateral agencies, governments will not be able to meet these financing needs. Therefore the private sector has a key role to play.

Target audience

This is why, today, we have brought together all the necessary players:

governments who set the enabling environment for investment

project developers who have the vision and capability to pull together the many parts of projects from pre-feasibility studies to financial close and construction

project financiers who bring equity, debt, and other instruments to ensure that all the risks are managed

equipment manufacturers and technology providers who can introduce the latest, most efficient and cost effective technologies

and the engineering, procurement, and construction or EPC contractors who serve as integrators, engineers and builders.

Future investment needs for electricity infrastructure in CAREC

To provide an update on the infrastructure investment needs for the region, we commissioned a special study to look at the financing needs for electricity infrastructure for the Central Asian Countries of CAREC. China and Mongolia was not included in the study as their investment needs are well documented. Mr. Constantine Yeliseyev, a Partner at PwC, the firm that carried out the study, will share with you preliminary findings of the study and some valuable insights. This is a first of its kind study to include all the countries in Central Asia. It builds on an earlier pilot study in 2011 that looked at only Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan, and a separate one for Afghanistan. I reviewed the study and found it very insightful. The study asked each of the CAREC countries, except China, what their high priority projects are for the power sector for the next seven years - between 2017 and 2023. These projects total $94 billion. In addition, the study also found that the financing gap that the private sector has to fill is expected to be at about $38 billion. Hopefully, this will give you a good idea of the investment needs, and therefore, investment opportunities in the Central Asian countries.

Enabling environment for investments

We have representatives from the governments of the CAREC countries who will share what policies, regulations, and incentives their governments have put in place to attract investors.

Success stories

We will hear from companies who have made successful investments in the region. They will share the challenges they have had to overcome and what it takes to be a successful investment.

Investment financing in CAREC

Last, we will also hear from financiers on what they look for when considering projects, especially in the CAREC countries.

What is ADB doing?

For our part, the ADB is committed to helping our member countries meet their infrastructure investments needs.

Over the years, ADB has supported power generation, transmission, and distribution projects, and energy sector reforms, in the CAREC countries. ADB also supported the regional cooperation in the energy sector. Since 2001 ADB has provided more than $2 billlion in lending and technical assistance for CAREC-related regional connectivity projects. Our assistance helped construct the Uzbekistan-Afghanistan interconnection, which was completed in 2009; the Tajikistan-Afghanistan interconnection, which was completed in 2011, and the Turkmenistan-Afghanistan interconnection is under construction and expected to be completed by 2018. These projects are part of the larger Turkmenistan�Uzbekistan�Tajikistan�Afghanistan�Pakistan or TUTAP investment program. More recently, we have been providing assistance to the Turkmenistan-Afghanistan-Pakistan or TAP power interconnection program. In the gas sector, we are also assisting the Turkmenistan-Afghanistan-Pakistan-India pipeline or TAPI. We believe such interconnections will bring greater efficiency in the energy sector and will also lead to greater regional cooperation, a key component of regional growth and development.

We also want to ensure these investments are sustainable. According to ADB's Asian Development Outlook Update, the update of our annual flagship publication launched in September, our region will need to invest an extra $300 billion annually to meet the 2 degree target for global warming. Given the demands facing Asia, in September last year, ADB's President, Takehiko Nakao, announced that ADB will double climate financing of projects that help to mitigate greenhouse gas emissions and help countries adapt to climate change�from $3 billion annually to $6 billion by 2020.

"Specific to Central Asia, about $170 billion is needed in energy, about $100 billion in transport, about $80 billion for telecommunications and about $25 billion for water and sanitation."

As countries in the region are increasingly moving to higher income level, we also add value from the knowledge that we are able to provide on global best practices and reform that will allow countries to create an environment conducive to private sector investments. A good example of this is the work we are doing in the power sector to ensure that sector governance is improved, regulators strengthened, and tariffs set to ensure greater cost recovery so that utilities are financially sound.

We have also broadened the instruments we have in our "tool kit" to assist our member countries. Our goal is to increase our private sector development to 50% of our portfolio by 2020. To do this, we have increased the headroom to support private sector investments trough equity participation, guarantees, and other instruments.

ADB has also been very active in promoting public-private partnerships or PPPs. We are working with governments and the private sector in our member countries to help them better understand how PPPs operate and to highlight their value. We are also providing assistance for policy reforms and establishing legal frameworks required for the enabling environment in which PPPs can thrive. Furthermore, ADB provides transaction advisory services for the actual PPP deals. To address the project financing issues, ADB has also established the Asia Pacific Project Preparation Facility � or AP3F. This multi-donor project preparation facility will support ADB's member countries with covering the cost of PPP project preparation.

Closing

In closing, I would like to take this opportunity to thank the Government of Pakistan, especially the Private Power and Infrastructure Board, for organizing this event with the ADB. I also want to thank the CAREC representatives, the speakers and panelists, and all the participants, especially those that have come from Europe, the Middle East and from far away.

Excellencies, ladies and gentlemen.

Today's forum is truly an opportunity for all the participants for information sharing, lessons learning, and connection building. I wish the forum a great success.

Thank you.

Source: Asian Development Bank