Frequent failures in overseas public investments are necessary steps toward opening new markets

Angat Dam, located 58 kilometers northeast of Manila, Philippines, supplies 98 percent of the tap water for the Manila metropolitan area and generates electricity for approximately 700,000 people. Originally built by Japan in 1967, the facility was put up for international competitive bidding in 2010 as part of the Philippine government's public infrastructure privatization policy, with Korea Water Resources Corporation (K-water) winning the bid. This marked the first case of the Philippines selling a multipurpose dam facility to a foreign investor and also the first instance of a South Korean company acquiring operational rights for an overseas hydropower plant.

After more than half a century without significant facility upgrades, Angat Dam had become severely outdated. Built with analog technology, it was incapable of maximizing power generation. K-water embarked on a facility improvement project and, in 2021, secured financing from the banking sector to modernize the power generation system to replace generators. With just six out of nine generators having been replaced, power output increased compared to previous levels. By optimizing electricity generation during peak-price hours and addressing the issue of 'non-productive water discharge'—where water was released without generating electricity—efficiency was significantly improved. As a result, Angat Dam's hydropower plant revenue grew from 31.9 billion won in 2020 to 54.7 billion won last year, marking its first-ever profit.

K-water has invested approximately 100 billion won in hydropower facility shares. With operational rights secured for up to 50 years, substantial future returns are expected. Moreover, beyond profits and dividends, additional benefits have emerged. K-water has identified new business opportunities related to hydropower facility remodeling. There are 135 multipurpose dams in the Philippines that need upgrades. Furthermore, the global market offers vast opportunities, as the U.S., Brazil, Canada, Russia, India, and Norway all have numerous hydropower plants requiring modernization.

In reality, overseas public infrastructure investments frequently fail. Most projects require long-term investments before yielding returns, often resulting in extended payback periods. Every year, during government audits, state-owned enterprises are criticized for their early-stage optimism, with accusations of recklessly spending public funds on international ventures. In the case of Angat Dam, the project initially recorded operating deficits, let alone earning dividends, for several years.

However, overcoming such challenges is crucial for unlocking new markets. K-water did not initially set out to focus on hydropower remodeling projects. As South Korea's domestic water resources market saturated, the company sought overseas expansion and, in the late 2000s, attempted to build a dam in Pakistan. However, the extensive time required for approvals, securing investments, construction, and operations made the project unfeasible. While searching for a more viable alternative, K-water discovered the new market of hydropower plant remodeling.

Recently, K-water has also taken on the challenge of the water supply and sewage project for New Clark City, a new urban development being positioned as the "second Manila." The city spans 94.5 square kilometers and aims to accommodate a population of 1.2 million. Hopes are high for another success story.