Short Circuits: The Trials Of Constructing Power Plants In Asia

The fast-growing economies of Asia are thirsty for fresh supplies of electricity, and leading power companies such as General Electric and Enron are eager to win contracts to build the needed new generating plants. But the task of approving the projects is complicated by the rough-and-tumble politics of expanding democracy. Here are profiles of two battles over power plants in Taiwan and India.


But will it ever get built?

Over the past 16 years, Taiwan's proposed fourth nuclear power plant has suffered many deaths and rebirths. In late May, the controversial $6 billion project experienced its most abbreviated cycle of reincarnation. On May 24, opposition legislators killed the budget for the plant, known in Taiwan as "No.4." Unbowed, the government announced the very next day that the project was alive. It awarded a $1.8 billion contract to build two reactors for the plant to a consortium led by General Electric Co.

If critics have learned anything since the government first proposed the power plant in 1980, it's that nothing about No.4 is final. While the government claims to have the project back on track, court challenges, street protests, and political fighting are certain. And Taiwan's ruling Kuomintang (KMT), which has a dismal record in the 1990s for completing high-profile infrastructure deals, is weaker than ever. Last December's elections left it with a bare majority in the legislature. So for GE, which teamed up with Hitachi-Shimizu, Toshiba, and Black & Veatch, the victory may prove short-lived.

Taiwanese President Lee Teng-hui is betting that this time will be different. Having just won a resounding victory in presidential elections, Lee is pushing to build No.4. With the memory of China's military exercises still fresh in their minds, Lee and members of his government need foreign friends more than ever. Giving a plum deal to a group of American and Japanese companies can't hurt Taiwan's image at a time when relations with Beijing are still uncertain.

GE's Power division certainly needs the win. It put in bids much lower than those of rivals Westinghouse Electric Corp. and ABB Asea Brown Boveri. GE was "surprisingly aggressive," says Chuck Martin, president of Westinghouse's Taiwan division. Only a handful of other plants are open for bids in Asia, and few countries elsewhere are building nuclear anymore. Making the deal more critical is that such plants represent about 25% of GE Power's $6 billion business, with most of the revenue coming from servicing and refueling.

Taiwan Power Co. says it needs the plant just as much as the foreigners who won the bid. Planners fear that economic growth, now around 6%, may be choked off without fresh sources of electricity. Taiwan's cushion of reserve power is about 5%, compared with the 20% to 25% that most developed countries like to maintain. Taipower already is forced to use rolling brownouts during summer's peak usage hours to manage the load. "Our power needs will double in 10 years," says Tony Liu, a Taipower spokesman.

LOOPHOLE. Taipower is counting on No.4 to meet some of that demand, with the rest coming from additional coal, gas, and hydroelectric plants. The government will employ a seldom used constitutional loophole to override the legislature's veto of No.4's budget. But nuke critics, a key part of the opposition Democratic Progressive Party (DPP), vow to keep fighting. Delays could create more problems: Under the contract, work must begin by September. "This will go on forever," vows DPP legislator Shen Fu-shong. "The KMT should recognize they have already failed."

One reason for the opposition's strength is Taipower's poor reputation for service and safety. The company doesn't have a place to store nuclear waste from the island's three plants. In late April, aboriginal Yamei people on Lanyu Island, off the southeastern tip of Taiwan, surrounded the harbor when a Taipower vessel arrived to deliver low-level waste to a dump site, forcing the ship to return to Taiwan. Also in April, critics howled when operators at the No.3 nuclear plant near a popular beach resort allowed radioactive steam to vent into a containment building for an hour. Government officials said there was no danger of meltdown.

With no coal, gas, or oil reserves of its own and with no way to import electricity, Taiwan's options are limited. The island's one terminal for importing liquid natural gas is at the southern port of Kaohsiung, but there is no pipeline to get the gas to Taipei in the north. The northern part of the island also lacks a deep-water harbor for unloading coal. Taipower wants to build a natural-gas power facility near Taipei but may not be able to obtain the land. The environmental lobby also opposes such fossil-fuel plants.

Taiwanese authorities have struggled to complete a long list of infrastructure projects--such as Taipei's long-delayed rapid-transit system--in the face of problems ranging from ineptitude to corruption. The government, which has never been shy about using big-ticket infrastructure deals to make progress overseas, wants to ensure that this project goes smoothly. The Taiwanese opposition is just as determined. That means that the perils will continue for Taiwan's death-defying No.4 project.

Before it's here, it's on the Bloomberg Terminal.