Tap into power plant services in emerging markets

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A recent report by the energy research arm of business consultants Frost and Sullivan says power plant services are a steadily growing market, and the fastest growing regions of China, India and South East Asia will account for almost quarter of the market by 2017.

[caption id="attachment_56616" align="alignright" width="240" caption="Korea Electric Power Co. provides power services to others and runs plants of its own"] [/caption]

That's good news for investors looking for a steady winner among their investments.

According to the company's " World Power Plant Services Markets " report, power plant services earned revenues of $27.40 billion in 2011. This is expected to reach $35.41 billion in 2017. The key drivers of this growth in emerging markets are increasing electricity demand along with industry privatization, which is leading to the outsourcing of services.


The fastest-growing regions are China, India and the Association of Southeast Asian Nations (ASEAN). Their combined share will rise from 18.1% in 2010 to 23.4% in 2017.

"Global growth in electricity demand is a key driver behind the growth of the power plant services market," Frost & Sullivan Industry Director Harald Thaler said. "As electricity demand rises, new generating capacities are added to the system, which in turn, require servicing."

The services market is expected to grow 4.2% between 2010 and 2017, while world electricity demand growth will be 2.7% over that same period. Major contributory factors are greater outsourcing, and the increasing use of gas-fired technology, where reliance on the equipment providers for servicing is high.

"Geographically, the balance of power in the power plant services market will gradually shift towards the emerging economies, as they progressively liberalise not only their power but also their gas markets," said Thaler. "Such trends will allow for a much greater penetration of modern gas-fired plants which attract higher outsourced maintenance spend."

Investors looking for buys in the power services field should look at companies like the Korea Electric Power Corporation ( KEP , quote ), which runs its own plants in Korea and provides operations and maintenance services to other power plants throughout Asia.

Kepco has slipped in recent months due to government controls on electricity prices, but it is investing almost $2 billion on more profitable overseas projects . Forbes considers the stock to be oversold , so it may be overdue a turnaround.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , International , Stocks

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