Global Cases

Supporting local industries and everyday life through the worldwide provision of electric power infrastructure

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Two key business models of EPC and IPP

Sumitomo Corporation’s electric power infrastructure business overseas consists of the two business models of “EPC” and “IPP.”

“EPC” (Engineering, Procurement, and Construction) refers to businesses based on a construction work contract, where a contractor offers engineering (power plant design), procurement, and construction services to its client. It is also referred to as “full turnkey contract” because the facility is delivered ready for the client to start operation by simply turning the key.

“IPP” (Independent Power Producer) is a business model where a contractor becomes the owner of the power plant and produces power, which is sold, for instance, to local power utilities. Sometimes the IPP model includes the operation of desalination facilities for producing domestic water, powered by energy from electric power generation. These cases are referred to as IWPP (Independent Water and Power Producer).

Sumitomo Corporation pursues “societal value,” “environmental value,” and “economic value” in its EPC and IPP projects, which are the two wheels driving its electric power infrastructure business.

Site of the Az-Zour North I power generation and water production project (Kuwait)

Building social foundations through power plant construction

Sumitomo Corporation’s full-scale electric power infrastructure business abroad has started with EPCs. An EPC project typically requires five years or longer before test operation, and encompasses everything from negotiations with local governments and selection of business partners to construction of facilities. An overseas business project calls for deep understanding of local laws, culture, business practices, and national traits. Operational expertise is also required for the project to proceed smoothly. EPC projects are challenging because they require wide-ranging skills and know-how that extend beyond simply building a power generating facility.

An EPC project is concluded once a power plant has been handed over to a local government or power utility company, following the supply of equipment, its installation, completion of construction work, and subsequent warranty period. The power generating facility is expected to remain in operation for decades to come, all the while supporting local industries and everyday life.

EPC projects create excellent “societal value” conducive to enriching and improving the quality of life in emerging economy nations; “environmental value” through the construction of eco-friendly power generating facilities such as geothermal power plants; and for clients and for Sumitomo Corporation, power plant construction generates “economic value” vital for sustained business operation.

Sumitomo Corporation embarked also on IPP projects in the early 1990s, based on the strengths of its relationships of trust with power utility companies, local government organizations, and other business partners nurtured under past EPC projects. IPP projects not only create “societal value” by supporting society with electricity, but also bring “environmental value” through power generation employing geothermal, wind power, solar photovoltaic, and other renewable energy sources. The IPP model can also generate long-term, stable “economic value” through sustained electricity supply to clients.

The Kpone 340 MW gas-fired power plant helps support Ghana’s energy needs

Sumitomo Corporation’s overseas EPC and IPP projects to date, and visions for new electric power businesses

To date, Sumitomo Corporation has conducted EPC projects in Southeast Asia, West Asia, and the Middle East, providing numerous power generation facilities as a result. Sumitomo Corporation’s EPC projects worldwide have created a total capacity of 50,000 MW, a top-class achievement for a Japanese integrated trading company. IPP projects by Sumitomo Corporation are currently operated in 16 countries in Southeast Asia, Australia, the Middle East, the United States, Europe, and Africa.

In recent years, Sumitomo Corporation is increasingly focusing on the expansion of its renewable energy businesses, which in Europe has resulted in project participation in Belgium, Britain, and Spain, as well as in France, where the company has joined an offshore wind farm project. Looking forward, the company hopes to similarly expand its renewables businesses globally by deploying its wealth of business know-how to work co-productively with that of its counterparts in Japan, the United States, Asia, the Near East, Africa, and other promising markets.

Additionally, Sumitomo Corporation has launched a new organization named “Team New Frontier” for the purpose of generating new electric power businesses. The company looks forward to leveraging its abundant experience, know-how, and networks to create new business areas, and offer new added value in a world where calls for a low-carbon society, micro-grids, digitization, and other major paradigm shifts have given rise to an unprecedentedly diverse range of business opportunities in the electric power sector.

Artist’s impression of completed offshore wind farm in France
M-Kopa micro-grid energy project in Africa

Realizing sustainable growth based on the “three values”

The vision of Sumitomo Corporation’s electric power infrastructure business is to create “societal value” by providing electric power infrastructure to emerging and developing nations where electricity needs are particularly acute; to generate the “economic value” necessary for sustained business operation through long-term businesses with firm local roots; and to enhance “environmental value” by increasing the ratio of gas-fired power generation with relatively low levels of CO2 emissions, or using renewable energy sources. Toward this vision, Sumitomo Corporation will continue to drive its global electric power infrastructure business in order to contribute to the development of regions and their industries, build the foundation of comfortable and enjoyable living, and achieve harmonious human coexistence with the global environment.


May 2020

Keyword

  • Infrastructure Business
  • Asia and Oceania
  • Europe, Middle East, Africa and CIS
  • The Americas
  • Electric Power Energy
  • Environment

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