Wednesday, January 16, 2008 3 new 82-mw coal plants to address impending power woes in Cebu, CNP grid By Liberty A. Pinili Of Sun.Star Cebu
A newly formed consortium announced it will be able to operate three new power plants with total capacity of 246 megawatts (mw) in the early part of 2010.
“We want to be able to start ahead of any competitor,” said Jesus Alcordo, president of Global Business Power Corp., a member of the Cebu Power Corp., which will own and operate the proposed new capacity power plants in Toledo City, Cebu.
The groundbreaking of the project, to be located within the existing Toledo City power complex of Global Power, is set sometime this month. It has an estimated cost of $400 million to $450 million.
Aside from Global Power, a subsidiary of Metropolitan Bank and Trust Co. (Metrobank), Cebu Power Corp. is composed of the Aboitiz Power Corp. (AP), Formosa Heavy Industries and the Garcia-led Vivant Corp.
Consortium officials said in a press briefing Monday night that the three new 82-megawatt coal-fired power plants will address the impending power crisis in Cebu and the rest of the Cebu-Bohol-Negros-Panay grid.
* Aside from Metro Cebu, the future plants are meant to address the needs of the Atlas Consolidated Mining Corp. and the expansion of the Balamban industrial park.
* Consortium officials also assured that the plants will be “environmentally sound” as these will use “clean coal technology.”
* Alcordo and Erramon Aboitiz of AP and Aboitiz Equity Ventures (AEV) assured that the power rates from the plants will be competitive.
* Aboitiz said AP’s involvement in the Cebu Power Corp. will not sway Veco’s assessment of future power supply agreements. He said power supply agreements of Veco, controlled by the Aboitiz Group, will still be evaluated by the Energy Regulatory Commission (ERC).
* The plants will be built with the equity from consortium members and bank borrowings. Alcordo and Aboitiz said with pricing stability in mind, they are inclined to borrow in peso.
Red alert status
Edicio Satina, project manager of the Toledo expansion project, said the power supply situation in the Cebu-Bohol-Negros-Panay grid reached “red alert” status last year.
Citing data from the National Transmission Commission (Transco), Satina said that at 6 p.m. on Oct. 8, 2007, the Visayas grid had a system shortage of 27 MW – supply stood at 1,049 MW compared to actual demand of 1,076 MW.
In Cebu at that time, there was a shortage of 283 MW, with demand at 474 against generation supply of 191.
Satina said the situation during the peak period in Cebu was worse as it had to activate costly diesel-powered plants in Naga to meet the demand.
He pointed out, though, that Cebu is an importer of power, particularly from Leyte, which is why its supply status is more vulnerable.
He said the situation could get worse as demand is expected to grow once the Atlas mine reopens and with the expansion of the Western Cebu Industrial Park in Balamban.
Aboitiz said that to avoid shortages, which more often than not lead to brownouts, Cebu needs new capacity generation power plants on the island.
He cited the blackout that occurred in May 2006 when an earthquake hit Leyte, causing damage on a power plant there. Leyte supplies about 360 mws to Cebu, Negros and Panay and about 40 mws to 45 mws to Bohol through submarine cables.
Supplying Veco
Asked if AP’s involvement in the future power plants would affect the way the Visayan Electric Co. (Veco) evaluates its future supply contracts, Aboitiz said Veco’s power purchases are regulated by the ERC.
He said Veco’s power rates – which are partly dependent on the cost of power it buys from power producers –- need to be reviewed and approved by the ERC.
“We’re talking with Veco about its future supply,” he said, adding that Veco’s existing power supply agreements with the National Power Corp. and independent power producers (IPPs) are enough to cover the distribution utility’s requirements “past 2010.”
Still, Aboitiz assured that under the Electric Power Industry Reform Act (Epira), companies are allowed to have cross ownership in the distribution and generation sectors.
“The ultimate test is price competitiveness,” he said.
Alcordo said all power supply agreements and rate adjustments pass through a series of public hearings.
Enough funding
Aboitiz said the project’s financial backing is assured as members of the consortium are willing to put in equity.
“The shareholders will put their balance sheets on the line (for the project),” he said.
He said the project will be funded with 30 percent equity while the remaining 70 percent of the cost will be financed through bank loans. In such case, the consortium members would be putting in $150 million in equity, he added.
Alcordo said many banks are interested to finance the project.
He said the consortium is more inclined to borrow in peso to ensure stable pricing.
Aboitiz agreed that the consortium’s main consideration in deciding whether or not to borrow in peso or dollar would be price stability.
‘Clean coal technology’
Amid earlier opposition against coal power plants, Alcordo said the future facilities in Toledo will use “clean coal technology” that involves the use of circulating fluidized bed (CFB).
He said the CFB technology ensures that sulfur oxide and nitrogen oxide emissions are below World Bank standards.
A group called Cebu Alliance for Renewable Energy (Care) opposed the establishment of two coal-fired power plants in Naga that are reportedly designed based on the same technology. Korean Electric Philippines Corp. and Salcon Power are building two 100-mw coal-fired power plants in Naga.
Alcordo said the same technology is being used by power plants of Formosa Heavy Industries in Taiwan and the United States, “where emissions are always below standards (tolerable limits).”
Alcordo also said the future plants in Toledo will support local coal miners even though the local variety has low energy value.
