Enron casts shadow on push for reforms

PUBLISHED : Wednesday, 06 March, 2002, 12:00am
UPDATED : Friday, 28 October, 2016, 9:17am

Asian governments daunted by the demise of United States energy trader Enron have been urged to push ahead with power-sector reform to help their economies.

Countries such as Japan and Singapore have delayed reforming electricity markets while they evaluate if Enron will have any effects on the process.

However, lawyer James Douglass, head of the newly formed Asian energy group at Linklaters & Alliance, said governments should return to the reform trail.

Regional deregulation could see US$300 billion worth of power assets privatised by 2005, he said.

'Enron is definitely on everyone's mind. I think it hurts confidence more than anything,' Mr Douglass said.

'Enron's case shows the risks of buying power assets in an unpredictable and often volatile wholesale market. It also shows the need for stronger accounting standards and corporate governance.'

Enron filed for bankruptcy protection, the biggest of its kind in US history, in December last year under the weight of US$16.8 billion debts.

Mr Douglass believed Asian countries must reform their economies to make them more competitive and energy reform should be a large part of that.

'This is a painful process,' he said. 'But it is necessary if you look at statistics that some 20 per cent of the potential economic output of some urban cities in China was lost as a result of the effect of dirty energy use on people's health.'

In addition, power reform would open the markets to foreign competition, which hopefully would bring more affordable tariffs and raise efficiency, Mr Douglass said.

Countries including China, Singapore, Japan, South Korea, the Philippines, India and Thailand have lifted the curtain on power reform in the past year.

They could offer for sale as much as 700,000 megawatts in total capacity in the next three years, Mr Douglass said.

He believed power assets to be sold in China and Japan could account for 80 per cent of the estimated US$300 billion of assets for sale across Asia.