A competitive wholesale electricity market combined with strong economic growth creates strong power sector investment opportunities. The Philippines’ Luzon-Visayas market (WESM) is a compelling example of this situation. However, there are intrinsic risks in that market that could have a major impact on revenues from such investments. In particular, the end of Malampaya gas could represent a major change to market fundamentals within the lifetime of current and future new investments. Other uncertainties, such as fuel prices, competing new build and expansions of the market to include new regions must also be considered. These risks and opportunities need to be quantified to ensure that investments fit the investors’ risk appetite. We demonstrate analysis of these risks and opportunities using market modelling combined with scenario analysis techniques to quantify the impact on these risks for potential investors, and present indicative results of such analysis for the Philippines market, in terms of indicators including market prices, plant revenue, and fuel mix.
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