CETIC ranks very high in the list of
top Chinese Import and Export companies
as well as in the listing of top contractors
in the world. Can you introduce us your
company in Cambodia and how it has developed
since it was established here?
CETIC is a state-owned company, which belongs
to the State Grid Corporation of China.
Our company was registered around 20 years
ago and as time goes by our company has
changed at the same pace as the reforms
and opening of China. CETIC is one of the
first major companies in the construction
business in China. We ranked the 147th position
of Engineering New-Record (ENR).
We started to study the situation in Cambodia
since 1998. At that time, we found out that
the Cambodian government wanted to build
a project, basically in the form of a BOT
(Build-Operate-Transfer) contract. The project
is called the Kirirom I Hydropower Station.
This project was actually completed in 1968
by the Yugoslavian government, but due to
the civil war, this project was destroyed.
When Samdech Hun Sen became Prime Minister
of the country, Cambodia started to open
to the world and started to get investment
from other countries. China has historically
good relations with Cambodia, so when we
heard about this rehabilitation project,
we sent CETIC staff to Cambodia to gather
more information.
At that time there were 17 companies from
China and other countries willing to bid
for this project. We also considered it
a really attractive investment. First, because
we have experience in the construction of
power stations and secondly because, as
a rehabilitation project, everything is
done, so the investment can be easily controlled.
The only problem was that after a civil
war and thirty years without maintenance,
almost everything was destroyed. Indeed
our company has never invested in BOT basis
before. The investment management is more
competitive compared to ordinary contracting
project. It is not only the building but
the financing process as well. BOT, BOO
and BOOT projects are ways of doing business
in nowadays market. Our company got to understand
that the best way to get in the market and
to get more profit is to be the investor
as well as the builder.
Can you give us some facts & figures
about the Kirirom I project?
On July 8th, 2000, CETIC signed the IA
(Implementation Agreement) and the PPA (Power
Purchase Agreement) with the MIME (Minister
of Industry, Mines and Energy) and EDC (Electricité
du Cambodge). According to the contract
we were supposed to invest 24 million USD
for the project. Being a rehabilitation
project, it was easier for us to build it.
The main concern for us is the commercial
management as this is the first BOT project
for us. Nevertheless we are strongly supported
by the Cambodian government and also got
a loan from Chinese Banks. After one year
we finished the project's construction phase.
The second phase is to operate it.
The project at Kirirom I comprises one
power plant with 2×6 MW capacity turbine
units, and the dam which has been rebuilt.
The dam and the power plant are connected
by a six kilometers long penstock and we
have also built a transmission line of 115
Kv. with a length of 120 Km to connect Kirirom
with Phnom Penh. In the middle of the line,
there is a substation built in Kompong Speu.
This project has been accomplished in one
year, 14 months before the end of the contract.
Last year we started to operate it though
the PPA contract starts in July 28, 2003.
During the first year we have produced something
like 30 GWH, which upon sale to the EDC
(Electricité du Cambodge) meant a
total of 2 million USD for last year. This
project will be operated by CETIC for 30
years still. So far we consider the conditions
quite fine. We have an agreement with the
EDC, the payment is being conducted properly
and according to our experience in terms
of risk (management, finance, construction,
insurance, etc
) this operation is
considered very stable and risks can be
controlled. Until now, there has been no
problem with payment, and as you will understand,
for an investor, the payment is quite important.
We have a good and smooth relationship
with the MIME (Ministry of Industry, Mines
& Energy) and EDC. We hope that this
will last a long time. According to our
calculations, within 10 or 12 years we can
refundour investment back. We just hope
the political situation will keep being
stable, then everything will be just fine.
You mentioned several kinds of potential
risks, do you have any kind of partnership
policy to reduce those risks?
We are a construction company, if we had
to bring in all the people you need to operate
this plant it could become an expensive
operation for us. So we found a Chinese
hydropower station company to come here
to operate this power plant. It can be seen
as a sub-contractor or sub-operator. By
doing so, we can concentrate in the development
of the business instead of the operational
side, and it is good for us to avoid operation
risks, as well.
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What about the future of CETIC in Cambodia.
We heard you might be interested into bidding
for the Kirirom III project?
From the experiences of the first BOT project,
we have learned the risky points and solutions
these kinds of undertakings bring along.
We are very happy to get support from the
Cambodian government who has offered us
the sole bid opportunity to develop Kirirom
III. The site is around 30 Km. from Kirirom
I; near Road No. 4, which implies good conditions
for construction. The main difference from
Kirirom I is that in this project we will
have to start from zero. We have already
started studies and drawn maps of the area.
We have formally expressed our desire to
the MIME to build Kirirom III on a BOT basis.
We are scheduled to start in July or August
this year. First we will have to get the
feasibility studies from the design institute.
Once all the studies are made, we will have
to submit the report to our parent company
in China. The next step will be to negotiate
with MIME and the EDC for the IA and the
PPA.
Can you give us an idea of the magnitude
of this future project of Kirirom III?
We have not received the feasibility report
yet, but according to our experience, this
project will be slightly bigger than Kirirom
I, we believe it will be an 18 MW capacity
power plant. We estimate the investment
around the 36 million USD. We also consider
that just one transmission line to Phnom
Penh it will not be enough, so we are studying
the possibilities to construct a second
transmission line towards Sihanoukville.
Those are our plans, but it is not decided
yet. We have already reported to our parent
company and we have support from them. 70%
of the investment will come from Chinese
banks because the Chinese government supports
companies who want to develop themselves
oversea to aid developing country. Kirirom
I is the first successful BOT project in
power systems of China. It's small but a
very typical project. Our Prime Minister
Mr. Wen Jiabao has even met with the Cambodian
Prime Minister, Mr. Hun Sen. The later has
expressed his strong willingness to develop
Kirirom III by CETIC and he wishes the Chinese
Government to support CETIC in its endeavors
to achieve the completion of this second
project. With those two projects a total
of 56 million USD will be invested by our
company in Cambodia, it is not so easy for
a company like ours to achieve that, so
support from the governments is very important
to us.
Can you tell us also about your professional
background and what do you want to achieve
here in Cambodia as General Manager of CETIC?
MR. OU - General Manager
My major is not power or electrical studies,
but finance management. I stayed at the
parent company in Beijing as a CPA (Certified
Public Accountant) for many years. Since
1996 I worked in Israel for four and half
years. In 2000, I returned to China and
started to work in the finance department.
Last year, I was appointed to be the assistant
to the General Manager of Engineering and
Construction department of CETIC. I assistant
him to manage some business, and I learned
a lot from work. I actually started here
in January 2003, I think the former General
Manager has achieved a high contribution
and left us a good chance to have a good
business here. For the future our priority
is to operate successfully Kirirom I as
it is our first project. Having completed
the first phase and now starting the second
phase, we have some worries about the political
stability of the country, but I do believe
the situation will be under control. In
the last few years Cambodia has developed
a lot. 20 years ago China was in a similar
situation and I am confident Cambodia will
improve as we have. Now we are still in
the risky period, we have a 24 million USD
investment to recover, but we have confidence
in the Cambodian government and our management.
MR.WONG - Deputy General Manager
My major is hydropower, after my graduation
at the university I worked in the design
institute, I have worked in Africa also
Southern-eastern Asia such as Philippines
and other countries. Now I have been assigned
in Cambodia and I will do my best to assist
the General Manager to carry on the operation
at Kirirom I as a successful one. CETIC
has other fields of expertise and The more
the country open itself, the more opportunities
we will encounter.
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