Government plan boostspower stocks

Companies that make electricity generation and transformer equipment saw their stocks rise yesterday, following the announcement of government plans to encourage expansion of privately run power plants.

Taian Electric Company (台安), which manufactures medium and low voltage receiving and distribution switching gears, rose 6.9 percent to NT$8.45 yesterday, while shares of power generator maker Chung Hsin Electric and Machinery (中興電工) rose 6.4 percent to NT$9.05.

Fortune Electric Company (華城電機), which designs and manufactures transformers, switchgears and distribution equipment, also benefitted from expectations of increased demand for power equipment. Its stock climbed 5.4 percent to NT$21.30.

Shares of these three companies have fallen in value by an average of 30 percent since January.

The boost to the industry came on the back of a Cabinet committee recommendation on Monday to upgrade the power distribution and transmission network of state-run Taiwan Power Company (台電), and to allow private power companies to expand their operations.

The five-and-a-half-year plan will begin next July, with the government investing NT$454.5 billion to add or expand existing substations to 312.

Also, the project will result in a total of 3,660 circuit kilometers of new or extended transmission lines. The plan is expected to create 75,733 jobs, according to the report.

Clearing the way for greater power generation by private firms and strengthening the nation's existing power distribution and transmission network is the main pillar of the government's plan to make up for the power deficit left by the cancelled Fourth Nuclear Power Plant (核四).

The committee restated what has become the mantra of the Ministry of Economic Affairs since advising cancellation of the nuclear plant -- that Taiwan's power problem isn't so much about supply, but rather transmission and distribution.

With the majority of Taiwan's generating capacity concentrated in the central and southern parts of the island, northern Taiwan must rely heavily on electricity funnelled across long distances -- placing great importance on the integrity of the nation's transmission and distribution networks.

Premier Chang Chun-hsiung (張俊雄), who approved of the plan formulated by the Cabinet's power supply committee, said the "economics ministry should work quickly to further open the independent power generation market to stabilize the island's electricity supply."

Chang also said that the government had a responsibility to protect the rights of operators of independent power plants when their construction plans are hampered by "unreasonable opposition" from local residents.

One of the major obstacles faced by independent power projects is opposition by local residents in densely populated areas, such as northern Taiwan.