Supporting Local Industries and Everyday Life through the Worldwide Provision of Electric Power Infrastructure
Indonesia / Kuwait / Australia / Mozambique / Tanzania / Tunisia / Ghana
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.
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.
Project deployment in Sub-Saharan Africa
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.
Notably, Sumitomo Corporation has been ahead of other integrated trading companies in conducting electric power infrastructure projects in Sub-Saharan Africa, that is, parts of the continent that lie south of the Sahara. It was the first Japanese integrated trading company to embark on an IPP project in Ghana, and is currently constructing two power plants in Mozambique and Tanzania as the prime contractor, thereby actively involving itself in the establishment of local power plant construction plans that are the basis of the electric power policies of the respective countries.
It is said that as many as 1.1 billion people around the world have no access to electricity, of which over half, about 600 million, reside in Sub-Saharan Africa. Sumitomo Corporation believes it is making significant contributions to the development of local industries, and to the improvement of local living standards by providing electric power—one of the most important components of social infrastructure—to this region through its EPC and IPP projects.
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.
- Infrastructure Business
- Asia and Oceania
- Europe, Middle East, Africa and CIS
- Electric Power Energy