What utilities ought to know before doing business overseas.
Charles W. Thurston writes on international finance, infrastructure and technology from Willow, New York.
Electric utilities and other power developers are re-configuring their formulas for measuring the host of dynamic risks associated with making large investments outside of their home countries. Even if there is a cyclical predictability to some of these risks-like the prices of basic commodities-other risks are largely unforeseen: that the United States would suffer a massive terrorist attack, that a company the size of Enron would fail, or that California regulators could get deregulation so wrong.
Foreign investments likely will be considered risky business as long as there are still projects to be done in a utility's home market that are considered to be economically viable. But as markets like the United States or the United Kingdom mature, and as regions like North America and the European Union exhibit slower electricity demand growth rates, higher growth-if more volatile-foreign markets seem appealing. In a good year, while gross domestic product is up 2 percent or 3 percent in the U.S., it may be up 7 percent or more in a fast-growing country in Asia or Latin America.