Taiwan Infrastructure Report Q3 2012

BMI View: We believe that construction activity in Taiwan could remain relatively lacklustre in 2012 and have revised down our construction forecasts for 2012 and 2013, from 5.5% and 8.1% to 4.4% and 7.3% respectively. This pessimistic outlook is primarily due to Taiwan's sizeable trade exposure to China and Europe, as both countries are expected to see a significant slowdown in economic development. However, over the medium term, we expect Taiwan's construction sector to grow at a relatively robust pace as the victory by the previous incumbent, the KMT, is likely to lead to a continuation of infrastructure projects that facilitate greater economic integration with China, as well as greater nonresidential investment from Chinese companies. Key developments include:

In March 2012, Chinese shipping company COSCO, along with Japan's Kawasaki Kisen Kaisha, was in discussions regarding the acquisition of a stake in Terminal 6 at the Southern Port of Kaohsiung in Taiwan. This represents the first cross-strait investment across the Taiwan Strait and could boost container services at the port as vessels from COSCO are more likely to call at a port that it also operates. COSCO is expected to reach a deal for the stake in H112.

In December 2011, the Chinese government has announced that it is to continue with its plan to build a new nuclear power plant at New Taipei City in Taiwan, reports Taiwan Today. Construction of the No. 4 Longmen facility is nearly complete but controversy surrounds the project after a series of incidents at the site during pre-operation tests, including blackouts and fires. Green Citizens' Alliance Secretary General Tsui Shu-hsin said that his organisation opposed the government's decision and called for the project to be halted immediately until a full safety review had been completed.

In August 2011, a consortium consisting of Japan-based Mitsubishi Heavy Industries, Mitsubishi Corporation and Taiwan-based CTCI Corporation, jointly won a contract to develop a coal-based power facility worth more than JPY200bn (US$2.6bn) in Taiwan. The project, awarded by state-owned utility Taiwan Power Company (Taipower), will involve the construction of three modern coal-fired generators with a combined capacity of 2,400 megawatts (MW). The project, which involves the construction of three 800MW generators, should have already be in the construction phase would is due to play a major role in driving activity for the energy and utilities infrastructure sector in 2012.