This market research report is continuously expanded, with new categories of information and more extensive detail. It is a substantial document of 458 pages containing overall analysis of the transmission and distribution systems, chapters dealing with each of 183 individual countries and the detailed statistical tables of line lengths and system capacity. Capital expenditure and market sizes for 8 categories of T&D equipment and business service are sized and forecast for each year from 2007 to 2012. 114 network maps are contained within the report as well as a series of tables detailing the international interconnections which are enhancing access to generating capacity for many countries and optimising use of surplus capacity. The Power Pools now emerging around the world are outlined. This new emphasis, assembling the network maps, information about the Power Pools and details of interconnections, enables a more comprehensive understanding of the process of interlinking national power systems globally. The tables in the Excel database include further analysis of voltage levels in individual countries. A detailed analysis of global transmission and distribution networks which total 5.8 million km in transmission lines and 61 million km of distribution lines is contained. The electricity market research report also examines this country by country and projects growth annually until 2012.

A voltage analysis is provided where possible. The report also looks at markets for transmission and distribution equipment examining total capital expenditure and sizes individual markets for 8 categories of equipment and business service. The markets are defined in 2 categories:

A broader market of $92 billion for all products in 2007, equipment and services, with total capex of $154 billion including installation costs and a smaller more concentrated market for high tech products and added-value services excluding cables and lines, which is estimated at $62 billion in 2007 (a substantial increase on $54 billion in 2006). This transmission and distribution market research report contains a detailed section for each country examining the T&D industry, its structure, its size and the entities involved in it, up-dated to 2007.
1. Executive Summary
The years 2006 and 2007 have been significant for the world T&D industry and it may well be that in the future they will be seen as milestones in the industry's history. Two important things happened. Firstly, the industry is dominated by a handful of large companies, each of which has a strong presence in the mature, traditional markets in the industrialised countries. Investment in the T&D segment of the electrical industry has been sluggish for some years because of new and increasing competitive cost pressures due to market liberalisation. The industrialised countries are all faced with the problem of aging infrastructural assets to some degree or another, and this has reached such a point that late in 2005 operators and regulators changed tack and higher levels of capital expenditure investment have been sanctioned, on average rising 24% to 30% and to be continued for some years. At the same time, for different reasons, detailed elsewhere in this report there has been a huge surge in authorised T&D investment in China and promise of more in India. The industry leaders have long been present in China but are now intensifying their efforts there and some are even talking about a shift in the centre of gravity of their activities from Europe and the US to China.

Market Size and the Market Leaders
The ABS estimate of the total T&D equipment market in 2007 is US$90.5 billion (in 2007 $) for the eight segments, including products and systems. Total capital expenditure including labour and all other finance and construction elements is US$154.6 billion.

The estimate for the higher technology market of transformers, switchgear, insulators, utility automation and power systems, excluding three product groups of cables, lines and towers is US$62 billion compared with $54 billion in 2006.

This represents a real surge since 2005 and 2006 and a continuation is promised for some years. Large increases have been reported by all vendors in the T&D market, some in double digits. At the same time there have been increases in transmission capital expenditure allocations in all of the large mature countries for replacement of aging assets. In China a very large budget ($153 billion including some smaller regional power grids) has been allocated over the five years of the 11th Five-Year Plan (2006-2010) to the two large grid companies, the State Power Corporation and Southern Power Grid Corporation and Southern China Power Grid. The combined T&D capital expenditure of five major countries (France, Germany, UK, USA, China and India) increased 10.9% from $59.7 billion in 2006 to $65.2 billion in 2007.

Two points must be made. Capital expenditure figures published by the European utilities are expressed in euros and these account for 23% of the global total, although a small amount is expressed in national currencies. There has been a fall in the average value of the dollar against the euro between 2006 and 2007 and similarly for most of the national currencies. Also some important markets have experienced higher than average inflation; India 6.3%, Russia 6.4%, Vietnam 8.1%. For these reasons the real growth is lower and we predict a real growth of 4.1% globally in T&D capital expenditure over the next five years.

ABS charts capital expenditure data published by the utilities and in 2007 this accounts for 79% of the global total of investment. The remaining 21% has been modelled on this base.

The estimate of the size of the T&D market depends on the definition used. Up until recent years, the definition has consisted of six product-based categories; power and distribution transformers, switchgear, HV insulated cables, OH bare lines, insulators and fittings and EHV towers. An important trend in the T&D market, which is in line with other industrial markets, is that manufacturers are aiming to increase their business in add-on services, thus adding value to pure product sales and increasing profitability. We will see greater business shares for added-value higher technology and add-on services, but there are still large markets, in the industrialised countries as well as in the developing ones, with installed bases of intermediate technology plant which needs servicing and replacement.

In targeting a market it is necessary to decide what the ‘addressable' market is. One area which most manufacturers decide not to deal with is that of wires and cables. In recent years, the wire and cables industry has had many problems attributed to by declining markets, increased competition and production over-capacity. There have been many closures and mergers and each of the big three T&D companies has exited this sector, except for ABB's remaining business in high end cables. However, it remains a vital component of the T&D business, which could not exist without it. New cable groups are emerging and they occupy a large slice of the T&D market, equal to over one quarter of total expenditure. Another segment which they have mostly exited, not included in the current report estimates but worth $7 billion, is metering.

The T&D industry is dominated by five companies, four European and one American. Three major international players dominate the global HV and MV T&D market; ABB, Siemens PTD (including VA Tech), and Areva T&D (previously the T&D interests of Alstom). Depending on how tightly the market is defined these together controlled approximately 30-50% of the world market in 2006.

A fourth company, Schneider....

Sample Profile: Philippines

Electricity demand in the Philippines is expected to grow by around 9% per year to the end of the decade, necessitating as much as 10,000 MW of new installed electric capacity. Current contracts will provide about half that amount, with the remainder expected to be filled once the market deregulates.

ESI Structure and liberalisation
The national state-owned utility, Napocor has been unbundled and its assets have been transferred to separate generation and transmission companies.

NAPOCOR is a non-profit organisation responsible for construction and eventual operation of all power generation facilities in the Philippines and for the establishment of island power grids and integrated transmission networks.

EPIRA (Electric Power Industry Reform Act (EPIRA) of 2001) required NAPOCOR to break up its vertically integrated assets into smaller sub-sectors of generation, transmission, distribution and supply in order to prepare for eventual privatisation. The result will be a system in which privatised generators will sell directly to private distribution companies.

The government has designated two new entities designed solely for the eventual privatisation of state assets. These two concerns, the National Transmission Corporation (TransCo) and the Power Sector Assets and Liabilities Management (PSALM) Corporation, have assumed the state's high voltage transmission infrastructure, and power plants, respectively.

According to deregulation laws, no single potential buyer will be allowed to own more than 30% of the Philippines' generating assets. The government also will sell off its share of MERALCO, a vital distribution utility on the island of Luzon that serves Manila and the immediate surrounding area by buying power from various IPPs.

NAPOCOR will need to transfer its existing power purchase obligations to private distributors, and also to renegotiate high priced contracts. The cost savings lie in the fact that private distributors will likely be unwilling to enter into agreements that are above market rates. There are other financial incentives for the government as well. Napocor's US$23 billion in debt and US$9 billion in power purchase agreements are unsustainable, and the government must already contribute US$300 million per year to keep NAPOCOR afloat.

In order to make the sale of NAPOCOR more attractive to investors, the government has absorbed a significant amount of NAPOCOR's debt. In addition, the US$9 billion in power purchase agreements with IPPs also will be sold off.

Transmission grids
The transmission system has been transferred to an independent company, Transco, which is to be privatised. Privatisation of Transco has been delayed, though, due to the fact that three bidding rounds in 2003 and 2004 failed to yield an acceptable proposal. In October 2004, the Philippine government announced that it would make modifications to the process, based on bidding a non-negotiable set of terms and conditions, and make another attempt later this year.

The Philippines is an archipelago of more than 7100 islands in South East Asia. The country is divided into three major island groups. The Luzon group, including Palawan, is the largest, representing about 35% of the total land area of the country. The Mindanao group in the South is the second largest and includes the islands of Sulu and Tawi-Tawi. The Visayas is the third major island group, and includes Cebu, Bohol, Panay, Samar, Negros and Leyte.

The Philippine power system consists of three major island grids, namely Luzon, Visayas and Mindanao; there are also several small island grids. The Luzon grid is the largest, accounting for 75% of total generation and installed capacity. The Visayas grid comprises the islands of Cebu, Leyte, Negros, Panay, Samar and (soon) Bohol. Together they amount to around 10% of total generation and installed capacity. The Mindanao grid accounts for about 15% of total generation and installed capacity.

Luzon, which includes the capital Manila, has about 75% of national electricity demand. Prices are such that industrial and commercial customers subsidise residential customers, and the Luzon grid subsidises those of the Visayas and Mindanao.

The Philippines, due to its geography, has problems linking all of its larger islands together into one grid and ensuring availability of electric power in rural areas. The government had set a target date of 2006 for full electrification, and was also taking steps to link together the country's three major power grids (Luzon, Visayas, and Mindanao). Where it is not economical to link small islands' grids into the national grid, separate local systems are being established around small generating plants.

The main island of Luzon is interconnected to the Visayas grid through a double circuit 350 kV DC link which now allows transport of about 480 MW of geothermal energy from the Visayas. Another submarine HVDC link with a capacity of 500 MW was planned to be in place by 2004 between the Visayas and the hydro dominated Mindanao grid. In addition, there are also small isolated island grids, predominantly located in the Visayas region, which are served by small diesel generators.

Distribution is performed by 27 private and municipality owned utilities, and also by 119 rural electricity cooperatives.

MERALCO (Manila Electric Company) is the largest distribution utility in the Philippines and holds the franchise for 9,328 km2 covering Metro Manila, ten other cities and 101 municipalities. The company distributes 755 of national electricity sales. In 1992 MERALCO's service area produced 73% of the country's GDP. Between 1983 and 1987 its area of responsibility doubled. In 1979 under martial law MERALCO sold its generating facilities to NAPOCOR except for the Rockwell Station. In 1992 the company re-entered the generation business, initiating power generating projects for the production of 1,200 MW. In 1992 the company was privatised. Meralco is state-owned and scheduled for privatisation.

Other major private utilities are the Angeles Electric Corporation, San Fernando Electric Light and Power Company and the Philippines Power Development Company in Luzon; the Visayan Electric Company and the Panayan Electric Company in the Visayas; the Davao Electric Light and Power Company and the Cagayan Electric Power and Light Company in Mindanao. Power distribution in the rest of the country is carried out by small private and municipal utilities and by 119 electric power cooperatives.

The NEA (National Electrification Administration) is responsible for rural electrification and oversees the 118 electric power cooperatives.

Plans exist to reduce system losses to single digit levels by 2010.

Electric Power Industry Reform Act (EPIRA)
The most significant event in the Philippine energy industry in recent years was the Electric Power Industry Reform Act (EPIRA) of 2001. After seven years of congressional debate and litigation, the Act came into force on June 26, 2001. The act has three main objectives:

- To develop indigenous resources.
- To cut the high cost of electric power in the Philippines.
- To encourage foreign investment.

- Passage of the Act set into motion the deregulation of the power industry and the break-up and eventual privatisation of state-owned enterprises.

Wholesale market
The Wholesale Electricity Spot Market (WESM) allows suppliers and buyers to trade electricity as a commodity. As a spot market, electricity is traded in real time. And as a wholesale market, it is open to distributors, directly connected customers, large users and eventually, supply aggregators.

Singapore
The statutory authority is the Electricity Department of the Public Utilities Board (PUB). The PUB services all electricity, gas and water needs in Singapore through a single grid. In 1995 the PUB was privatised and the power section was hived off into Singapore Power (SP). The company inherited assets of approximately US$6.4 billion, spread over seven subsidiaries. Two are responsible for power generation, one for T&D of electricity, another for sales and service and a fifth for the distribution of gas. Two other subsidiaries are in charge of the company's foreign investment projects.

Transmission and distribution
There is one electricity transmission licensee in Singapore, SP Power Assets, which appointed SP PowerGrid, also a member of the Singapore Power Group, to manage its assets. SP PowerGrid operates the HV transmission and LV distribution networks in Singapore. There are four main divisions in the company:

- Network Development. This division is tasked with long and short-term development planning for the grid and support facilities. It prepares electricity supply schemes, handles substation requirements and provides consultancy services to developers, architects and engineers on electricity supplies for new developments.
- Network Management. This division is charged with all aspects of operating and maintaining the distribution network. It runs a 24 hour service and operations centre to attend to faults, supply interruptions and restoration of supplies. The division manages the Energy Management System (EMS) and Supervisory Control and data Acquisition (SCADA) system. It also manages the Integrated Automated Mapping and Facilities Management System which supplies on-line information to the public.
- Energy Management operates the 24 hour Power System Control Centre which monitors and controls the generation and transmission network.
- Sales, customer service and billing.

A 66 kV underground electricity transmission system was introduced in 1965 and a 230 kV system in 1976, followed by a Power System Control Centre in 1979. Transmission and sub-transmission is at 230 kV and 66 kV. Primary distribution is at 22 kV and secondary distribution is at 6.6 kV and 230/400 volts.

Three other 230 kV substations were to be built at MacAllister, Marina South and Woodleigh and they were targeted for completion in 1998, 2001 and 2003 respectively. Transformer capacity totals 32,532 MVA. There are 6,880 substations.

Interconnections
A 230 kV interconnection was commissioned in 1986 with Malaysia between the Senoko Power Station in Singapore and the Sultan Iskander Power in Malaysia. A 2.6 km undersea tunnel was commissioned in 1991 between the mainland of Singapore and the island of Pulau Seraya.

The previous edition of this report identified a number of important factors which we believed to be shaping the direction of transmission and distribution globally and which would have significant impacts on the market in the coming years. These predictions have proved accurate and the present report reveals a large surge in capital expenditure in T&D in 2006/07 and the coming years. The most important finding of this edition of the ABS T&D Report is the significantly increased levels of capital expenditure on T&D in 2006 and 2007 and the prediction that this optimistic outlook will continue for another five years.