China is a paving the way for new a wave of infrastructural developments- A cue to infrastructure companies.

China has hammered out many deals in infrastructure in the 2013. It is looking for investment returns outside of China and has been very successful in increasing trade relations and investments in emerging economies. They plan to double their trade in Central and Eastern Europe in the next five years. They have a long term strategy in African continent to enhance their trade. They have also steadily increased their trade relations with Latam and the countries are in willing to co-operate for better relation and infrastructure developments. Apparently these are the next emerging business hotspots.

Chinese are pioneering the technologies of rail system and have been successful to sell it countries that are in need of rail infrastructure. Their most recent projects include connecting Mombasa to Nairobi in Africa, China will also help build the rail line between Serbia and Hungary, in Romania Chinese will also help build a high speed rail system. China has loaned USD 10 billion to develop new metro and rail systems in Argentina. The dragon country has bagged road projects in Serbia, Tanzania and it actively seeks to create a stronger and economically lucrative belt among the Central and Eastern Europeans countries. In 2013 it has signed deals worth USD 50-USD 70 billion in that region.

China has actively taken up projects in the energy sector as well. It will build some USD 1.3 billion Zungeru Power Plant in Nigeria, they are also building power plants in Morocco, investing USD 2.1 billion in Zimbabwe to develop solar power. Chinese companies are developing solar plants in Chile. China will construct dams in Argentina valued at around USD 4 billion; they will also invest to develop oil wells in Venezuela.

China has not shied away from the telecom sector amidst the transportation and energy deals. Although the investments in this sector have not made heads turn, nevertheless the interest in these geographies remained steady. Ethiopia has signed an USD 800 million deal with Chinese telecom giant ZTE to expand its mobile phone network.

Infrastructure companies may have to look at China’s advances to align their market sector and geographic spread. Slowly but steadily China will create new opportunities for business, understandably Chinese companies are benefitting from the present developments. China has set the wheel of infrastructure rolling in these geographies. These countries could be strategic game changers for the players to build the next level of developments and also establish themselves as major players in their respective sectors. Some of these countries are looking at China to make investments and fund projects. However challenges are abound including: geopolitical, demographic and financial markets. How each of the players adapts to these challenges depends on strategies that they adopt. One thing is clear that opportunities for businesses are rising and China has already tapped the markets.

Commercial vehicle manufacturers and construction equipment manufacturers can look at new developments in the markets to increase opportunities

Investment in infrastructure is an ongoing process. According Mckinsey report, global infrastructure will demand USD 57 trillion in investment by 2030. This includes all road, rail, air, sea transport along with investment in energy, telecom and building construction. Looking more closely we can relate all the infrastructure projects involve requirements for commercial vehicles and construction equipment manufacturers. This determines the need of the market and also suggests the future growth prospects for this sector. While the market is very lucrative the competition to stay ahead in the race is also very tight. Local manufacturers will have an edge to sell their products to the new infrastructure projects. However due to serious demand for more advanced and futuristic infrastructure developments from the new and upcoming economies, the specialized knowledge required to cater to the fast moving societies is also getting more popular. This is where planning consortiums come to play a very important role. They will be at the forefront in advising many municipalities and government agencies on new infrastructure developments like urban planning, airports, rail/ road connectivity between cities and countries, energy and communications.

How commercial and construction equipment manufacturers can create an eco-system to lead their market segment:
 Most of the projects where the constructions are awarded are completely funded by the governmental agencies or are on Public private partnerships, few come from private players. There are new trends arising wherein the government agencies are hiring private companies (eg Arup, Balfour Betty) to offer solutions to implement certain vital projects that can change the economic situation to benefit the city/town and in some cases even countries. These private consulting consortiums provide options and give possible solutions to make projects viable. At the same time these companies also take up construction, implementation and maintenance contracts. Vehicle manufacturers/construction equipment manufacturers can create a eco-system by entering into alliances, contracts, acquiring stakes, investment into such companies. This will give them an opportunity to understand the present demand and also future trends in the infrastructure market. They can also influence the construction suppliers to these projects to increase their market share.

Benefits of the eco-system:
Creating a mutual eco-system has many benefits to the companies and the society. Since the parties involved have high stakes in the projects the quality and standard of equipment and vehicles needed are clearly identified. Equipment and vehicle manufacturers can easily make their products available in the market. Also in case of air, sea and road transportation depending on the projects the consortiums are taking up, the new trends and the new needs for the transportations are easily identified leading to new product offerings to end customers. While the dynamics of transportation and construction industry are fast changing this may be an easier option to spot new changes in the market.

Changing the landscape of the business and creating opportunities:
Since this system is mutually beneficial to all the players in the infrastructure business, it creates new landscape for business players. The cost of inquiry is greatly reduced (in case of procurement) and costs of bringing new products in the markets are also minimized. The costs of selling and marketing are also reduced. New needs and requirements are easily identified for the construction and transportation segments. This type of ecosystem creates new opportunities for manufacturers and it changes the way business in conducted on a larger perspective. Finally the society is benefited from reduced costs and effective functioning of the larger projects.

CleanTech exports will build next generation super powers

Recent slow down has forced many countries to rethink and revamp their strategy to take their economy to the next level. Most of the countries have recognized clean energy as the new element for sustainable growth for the next two decades. Policy changes, investment targets and new trade agreements are being promoted to encourage RE and clean technologies around the world. According to Roland Berger clean energy technology will reach a total market volume of EUR 1600 billion in 2020. It will make it one of the largest industries in the world. This market has a huge potential to create jobs and can give a new push to economies.

The US government has under tremendous pressure due to sustained unemployment in the country. US has been aggressively promoting RE as the next big thing and is also encouraging investments in RE around the world. Recently US established Renewable Energy and Energy Efficiency Export Initiative. This initiative will help in financing, export promotion, trade promotion and also look into international trade barriers in this sector. It is aimed at increasing the competitiveness of U.S. renewable energy technologies and products in the international market. The Commerce Department will make a coordinated effort to increase trade related to renewable with other countries. The Overseas Private Investment Corporation (OPIC) announced that it will invest $300 million towards renewable projects in emerging markets. The Export-Import Bank launched ‘Solar Express’ earlier in 2010 to provide financing for US exports to small solar energy projects. US is pressurizing India to remove restrictions on import of solar technologies for the National Solar Mission. US aims to emerge as the production hub for clean energy technology, which it wants to export to the rest of the world.

China leads the lot in RE investments. In 2009 China led the world with an investment of $34.6 billion in clean energy technologies and US came second with an investment of $18.6 billion. China has committed to achieve 20 % of its energy needs from renewable energy sources by 2020.  It is also offering very liberal subsidies and cheap loans in this sector to contain the costs to much lower levels, which is often a concern for global players. China’s major export hub Guangdong Province will invest 10 billion yuan ($1.5 billion) in green energy development in the next five years. China accounts for more than 90 percent of world supplies of rare- earth elements which are vital for the clean tech industry. It highlights the monopoly of this country in the clean tech space and how it aims to be a sourcing super power to the rest of the world.  The recent restrictions on export of this REE could create a huge setback on the CleanTech space and would be interesting to see how and if China buckles to the world pressure.

In September 2010 the German government adopted a long-term strategy of developing its energy industry. Germany has set up Renewable Energies Export Initiative to secure exports for German companies and in order to maintain the competitiveness of its companies it aims to prevent a rapid increase in manufacturing prices. Renewable Energies Export Initiative promotes Germany renewable technology to the world.  Renewable-energy industry jobs have been rising steadily and small and medium size companies are leading the industry in this sector. Germany is a pioneer in solar technology. The German Renewable Energy Federation (BEE) is the organization that brings political groups, specialized institutes and other related organizations together for promoting and encouraging renewable energy.

France has launched a 4 year renewable energy investment program wherein funds upto  €1.35 billion will be sanctioned in the form of subsidies and will also be invested in clean technology projects. This is planned for the next 4 years. It also seeks to attract €2 billion of private investment to complement the above program.

Nordic countries have been very proactive in promoting clean technology and at the same time have been investing heavily in this sector. Norway has been a leader in investing in clean technologies. In 2009 it committed to invest $3.1 billion in clean technologies through 2014. Infact in Q1 2010 Norway attracted the highest amount of cleantech investment among the nordic countries. THINK Electric car is  born in Norway!.  Swentec, the Swedish Environmental Technology Council works to develop a comprehensive and effective structure to strengthen the Swedish cleantech industry. Sweden is investing heavily in research in many clean technologies like electric car, bio mass, etc. Sweden boasts some 3,500 clean tech companies. Denmark ventured into wind power very early on and has also dominated the wind power market. Danish Wind Energy Group promotes exports of Danish wind turbines all around the world. Denmark also plans to introduce electric vehicles on a large scale by 2011. Finland is one of the world’s leading users of bioenergy. It has established the Finnish Cleantech cluster to increase Finnish environmental business, create new jobs and venture into global markets. This cluster is considered to be one of the best in the world.  It is determined to accelerate the introduction and commercialization of new energy and environmentally friendly solutions.

With European economy still in wait and watch mode and crisis in hand and US not fully out of the woods, as I mentioned in my last blog that the big buzz might not last. However top economies for the next decade would emerge due their presence and dominance in the CleanTech sector.

The Buzz around Renewable Energy – Is it real?

Renewable energy is seen as the next big thing that the whole world is betting on. Billions of investments are expected to go in this sector over the next 20 years. In 2009 investment in core clean energy was down 7% to USD162billion from $173 in 2008. This was attributed to global recession. According to a recent report Ernst and Young reported that Q3 US venture capital (VC) investment in CleanTech companies fell 55% compared to Q3 2009. Bloomberg reported that global wind installations have declined compared to 2009. Financial crisis around the world may hamper its exponential growth. Many developed countries across the world are adopting austerity plans mainly to avoid financial crisis. The cuts in subsidies and feed-in tariffs will decrease the pace of investment in the sun rise sector.

Here are some more indicators:

Spain has been a world leader in Renewable energy and it has announced that will slash subsidies for wind and solar power. Estonia recently announced renewable energy is getting unreasonable support and is planning to reduce the subsidies which are too high. Germany, France, Italy and the Czech Republic have all announced a cut in their over generous subsidies for RE. Also it is fair to note that The French Government announced that it will hold all plans for new solar projects to control the speculative investment in this area. China has delayed the Energy Stimulus Plan indefinitely because of the global price fluctuations especially with respect to PV technology. India is not very far away from all the chaos related to RE. The projects under solar mission are being delayed because it is felt that the costs in the bidding process are underestimated and it could haunt the companies implementing the project. In the US renewable projects and jobs associated with them are threatened if investment grants are not extended. (The grant program was a part of 2008 economic stimulus package that was created to encourage investments in renewable energy.)

Companies are also re-evaluating their strategies to hold the sliding profits. Vestas has already announced to cut jobs due to falling demand. US based Solyndra, manufacturers of PV systems, reportedly will close down a manufacturing unit. China reported that 40% of Wind power turbine output capacity is idle, reason being slower growth in wind farm construction and many players entering in this space. Huaneng  Renewables Corporation, the wind power unit of China Huaneng Group, cancelled its USD1.3 billion Hong Kong IPO due unfavorable market conditions. Elsewhere solar power plants have been put on hold mainly due to financing difficulties.

It appears the funding and investments should start getting mobilized in the later part of 2011. Also this is the time for the investors to really strategies their investments to justify the ROI.  Also all the glitter around this sector will have to tone down for investors to be more realistic.

India’s future looks sweet without sugar

Have you observed the increase in ads for artificial sweeteners and sugar free products in the recent past endorsed by celebrities and celebrity chefs?  It was about 9 years back when I first saw sugar free Coke and Pepsi in the US, I could not comprehend the fact: why these medicine like tasting sodas and other sugar free products have so much shelf space.

But it appears that India is heading to be a huge market story for sugar substitutes and sugarless products. India’s love for sweets is as popular as its love for Gold! and in a report WHO has termed India would become the diabetes capital by 2050 with growing diabetics from 41 million now to an estimated 80 million by 2030. Alarmingly high juvenile diabetics of over 1 million people would have to live sugarless future. Urban population becoming health conscious due to their vulnerability for lifestyle diseases compounds the market demand.  

Presently the Indian market is at nascent stage with two brands; Sugar free and Sugar free Natura controlling over 80% of market has seen significant new entrants in recent months. Apart from being in the infancy stage this market also poses challenges, like the high price of tabletop sugar substitutes, educating the semi-urban, rural population to introduce the concept of artificial sugar, and most importantly the growing popularity of Stevia. Stevia is the plant whose leaf extract is termed 300% sweeter than natural sugar is gaining popularity worldwide. Stevia in India is already popular in the unorganized sector for its medicinal value also.

With MNC food and confectionery companies flooding the Indian market and health conscious customers, the alternate sugar market is here to stay.