Real assets: Empowered by Asian energy demand

RealAssetAsiaEnergyDemandAbstract
Funding for fulfilling demand across the Asian energy supply chain can’t be met by governments alone

Continued high growth in energy demand in the Asia Pacific ex Japan region, fuelled by strong population and middle class growth rates, should bring opportunities for listed real asset utilities.

Significant shift in global energy balance toward Asia Pacific

Since 2000, energy demand (including electricity, oil and natural gas) has ballooned in Asia. According to statistics from the International Energy Agency (IEA), Chinese energy demand is now higher than that of the US, where in 2000 it was less than half1.

Such growth rates are also reaffirmed by other industry sources. According to the annual BP Statistical Review of World Energy, the 20-year growth rates in electricity generation (a proxy for demand) has been 6.8% p.a. in Asia Pacific ex Japan (to 2017). This is ~13x faster than what we have seen in the US, and 8x faster than in Europe 2.

Growth in electricity generation (20 years through 2017, % p.a.)

Electricity access still has room to grow

While many developed countries in the Asia Pacific region have 100% access to electricity (e.g. Australia, New Zealand, Singapore, Hong Kong), not all emerging countries do3

Level of electrification (%)

Indeed, in India, the World Bank estimates that as many as 178 million people still lacked access to the power grid in 20184.

The trend remains positive. By 2030, it is expected that even small developing countries like Myanmar, Laos and Cambodia will be largely electrified5.

In our view, increased connections to gas and power grids, combined with high population growth rates and rising income levels, will lead to continued significant growth in demand for energy across the region. The IEA expects that by 2040, China alone will use almost twice the energy of the US6.

Electric growth in the Philippines

A key country which highlights the growth potential of power demand in the region is the Philippines. The country has seen rapid economic development and population growth over the last 20 years, resulting in robust power generation growth of 4.2% p.a., significantly exceeding developed markets such as the US and Europe mentioned earlier8.

The stellar growth rates do not appear to be slowing, with Manila Electric Company, a Philippine power distributor, reporting a 5%9 growth in power sales for the year ending June 2019 for the main Luzon grid in the Philippines.

Given a sizeable portion of the Philippine population are still not yet connected to the power grid, further robust growth can be expected.

Investment needed to avoid blackouts

The strength in regional demand requires a large investment by governments and corporations to help satisfy this demand.

Failure to invest and expand generation capacity in high growth markets could lead to power outages, “load shedding” and blackouts. Examples of intermittent power outages have been seen in the Philippines this year10.

Power outages have even been seen in developed markets such as Australia, after a period of low investment appetite for new generation capacity due to government policy uncertainty. A significant event occurred in South Australia in 201611 when supply was interrupted by storm damage.

India has mammoth energy requirements

Meeting incremental demand requirements across Asia is no mean feat, especially in large and rapidly growing markets like India. Growth rates can hide the size of the challenge.

For example, assuming India’s power generation and population continues to grow at the ~5% p.a. rate of the last 20 years12, the yearly capacity requirement (based on its peak demand) is an additional 8000 MW per year. That is around the size of adding four Hoover Dams to the system every year.

Significant opportunity for real asset owners

As a result of the strong demand, the investment requirement throughout Asia is significant. The IEA estimates a required spend of US$2.7 trillion out to 2040 to satisfy energy requirements13.

This spend can and should provide many opportunities for listed real asset companies to participate. Funding for fulfilling the demand across the energy supply chain can’t be met by governments alone. Indeed, the IEA suggests that “mobilising investment on this scale will require significant participation from the private sector and international financial institutions” 14.

Investing across the energy spectrum

In the Martin Currie Asia Pacific Real income strategy, we are gaining exposure to a range of exciting energy markets across the region, with a total portfolio allocation of ~25% to the utilities sector15.

Examples of such names includes Manila Electric, a dominant power distributor located the most populous region in the Philippines, while in India we are getting attractive power generation exposure via NHPC, the largest hydrological power producer in the country. Recently we also purchased Aboitiz Power, one of the leading integrated generation and distribution companies in the Philippines. This gives us exposure to an attractive pipeline of growth projects, and we see the company as well placed for the tightening generation market over the next few years.

While demand growth is expected to be somewhat lower in developed Asia Pacific countries due to existing high levels of electrification, the growth opportunity is much higher than other developed regions. For example, companies such as AGL Energy and Ausnet Services (Australia), CLP Holdings (Hong Kong) and Contact Energy (New Zealand) also offer attractive exposures to rising power demand supported by notable levels of population growth. We also have exposure to energy through oil and natural gas pipeline companies APA Group (Australia) and Petronas Gas (Malaysia).

We continue to monitor the market for opportunities that leverage the power demand trend, and we believe the most exciting prospects globally rest in the Asia Pacific region.



The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were, or will prove to be, profitable.

1Source: IEA; World Energy Outlook 2018. All rights reserved.
2Source: BP; Statistical Review of World Energy 2018
3Source: World Bank; Sustainable Energy for All ( SE4ALL ) database from the SE4ALL Global Tracking Framework led jointly by the World Bank, International Energy Agency, and the Energy Sector Management Assistance Program, License: Creative Commons Attribution CC BY 4.0,
4Source: World Bank; Zhang, Fan. 2019. In the Dark: How Much Do Power Sector Distortions Cost South Asia? South Asia Development Forum. Washington, DC: World Bank. doi:10.1596/978-1-4648-1154-8. License: Creative: Commons Attribution CC BY 3.0 IGO,
5Source: IEA; Southeast Asia Energy Outlook 2017. All rights reserved.
6Source: IEA; World Energy Outlook 2018. See above
7Source: United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019, Online Edition. License: Creative Commons Attribution CC BY 3.0 IGO,
8Source: BP; as per above
9Source: Manila Electric Company; June 2019 Financial and Operating results.
10Source: Senate of the Philippines; April 13, 2019 press release.
11Source: AEMO, Black System South Australia 28 September 2016.
12Source: BP; as per above
13Source: IEA; Southeast Asia Energy Outlook 2017. See above
14Source: IEA; Southeast Asia Energy Outlook 2017. See above
15Source: Martin Currie Australia; as at 31 August 2019. Based on a representative Martin Currie Asia Pacific Real Income account


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The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were or will prove to be profitable.

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