No concept better typifies the investment game than risk and reward. The idea of big bets paying fat returns is not hard to grasp. Nowhere is this relationship more strained than in the Asian power sector. Regional tiger economies have an insatiable demand for electricity. The numbers are various but US$250 billion over the next five years seems reasonable. Balking at the bill, most governments want to tap private capital. International companies are desperate to help, but face an obstacle. Profound disagreement between Asian governments and independent power producers over acceptable profits has left many deals in the bureaucratic quagmire. Few markets have been more hyped yet have so publicly failed to deliver. Hopewell Holdings pioneered build-operate-transfer projects in Southern China and the Philippines. Since then, wrangling over rates of return has stymied most large-scale private sector initiatives. A new realism characterises negotiations as power shortages give incentive to compromise. With the number of firms chasing deals, growing benchmark rates of return and operating contracts seem close at hand. We might be a long way from contracts typical in Japan and the United States, where lock-tight power purchase agreements see firms fund projects with debt levels of 90 per cent plus - but the deadlock seems to be broken. With Consolidated Electric Power Asia (Cepa) now privately owned, other firms look set to tap investor enthusiasm with public share offerings. Asian players have an advantage in their ability to negotiate directly with government officials. Power supply agreements with state electricity bodies are crucial to the profitability of independent power projects. Deutsche Morgan Grenfell (DMG) highlights Cepa's problem, with its Philippines Pagbilao plant making a cautionary tale. Having finished on time, the company was denied an early completion bonus because government-built transmission facilities were not finished. Much of Cepa's attraction came from its ability to win early generation bonuses and the stock suffered in the aftermath. Its experience is instructive for other reasons. Management spent much of its time chasing new deals as the engine of shareholder growth. By using a standard 660 megawatt power station, economies of scale were achieved and construction risk minimised. Like locally listed infrastructure firms working on the mainland, share price momentum was dictated by the ability to deliver fresh deals. Risk in this environment is less about building than securing legally enforceable contracts. Guarantees of equity returns are chased by most operators, but reluctant governments mean they are rarely forthcoming. DMG argues that despite banks' reluctance to extend non-recourse loans to projects without guarantees, many are slowly moving that way. If Asia is to hit its big targets, financing is going to be the crucial issue. There is no shortage of firms wanting to build. In developed markets, bond financing has taken much of the pain out of the process. Companies often securitise projects' highly predictable cash flows, providing funding for new projects. Despite the best efforts of rating agencies' capital markets, financing has largely been ruled out by issues of contract risk. It appears there is still scope for projects funded from company balance sheets.