Friday, February 15, 2008 Work starts on Naga plants
NEARLY two years after the project broke ground, the construction of two 100-megawatt (MW) coal-fired power plants in Naga City, Cebu commenced yesterday.
The coal power generations plants are being proposed by the consortium of Salcon Power Corp. (SPC) and Korea Electric Power Corp. (Kepco). The consortium, known as Kepco-SPC (KSPC), proposed the project in 2003 yet with the original target completion in 2008.
SPC senior vice president and chief operating officer Antonio Corpuz said the delay in the construction of the plants was caused by government bureaucratic requirements, not financial difficulties.
The first 100 MW plant is expected to become fully operational in February 2011 while the second one will be in May of the same year.
Although Corpuz could not give the project cost at present prices, he admitted that the delay raised the estimated expenses of the two plants. In 2005, SPC officials said the consortium will invest $270 million.
Costs
KSPC executive vice president Alfredo Henares said aside from higher fuel costs, growth in global demand for power also caused contractors to increase rates.
Corpuz said, though, the present cost of building the two plants would have been higher had it not been tempered by the strong peso and the lowering of interest rates by banks.
Cebu Gov. Gwendolyn Garcia said the power plants will “fuel” further economic growth in the province.
In her speech during the excavation ceremony of the project in Naga yesterday, Garcia said she is glad that the consortium pursued the project despite “stumbling block after stumbling block” that came in the proponents’ way.
Kepco president and chief executive officer Lee Won-Gul said the company had promised President Arroyo, who visited Korea in June 2003, that it will “by all means, pursue the Cebu project, despite any obstacles.”
“Upon completion of the power plants (in the next) three years, enough amount of high quality electricity will be provided to Cebu and the other regions in the Visayas.
Cebu Power Core Group chief Carlos Co said by 2011, power supply in the province will stabilize but “not necessarily at lower rates.”
He said in an interview that power from the new plants will probably be around P4 to P4.20 per kilowatthour (kph), compared to the National Power Corp.’s current P3.40 per kph.
Jobs
KSPC president Lee Kang Won, in his speech, said about 440 to 980 people will be employed during the construction of the plants. Local residents will be given priority in the hiring, he added.
Aside from taxes to the local government, KSPC also promised to conduct community development programs.
Yesterday, the consortium launched the barangay electrification program, a joint project of KSPC, Capitol and Cebu Electric Cooperative. The barangay electrification program covers 81 sitios in 20 towns and one city in Cebu Province.
Corpuz, in a separate interview, said aside from the time needed to comply with government requirements the consortium could not bid out the project to contractors as KSPC must secure power purchase agreements with distribution utilities.
“We need to have 70 percent of the capacity covered by purchase agreements otherwise no contractor will accept it,” he said.
KSPC has initial agreements with seven distribution utilities in Cebu and Negros. The agreements still need to be evaluated and approved by the Energy Regulator Commission (ERC).
Aside from having to conduct separate negotiations with different distribution utilities, Kepco also had to hold separate public hearings. “Each of those distribution utilities has different markets. We have to have a public hearing in each area,” Henares said.
The Visayan Electric Company (Veco), however, has not signed up.
“Veco will be the one that will benefit most if they sign up,” Henares said. “We are in talks with them from time to time.”
Officials of Aboitiz Equity Venture (AEV), the holding company of Veco and other Aboitiz-controlled firms, had said they wanted more plants with smaller generation capacity to avoid huge shortage when one source bogs down.
Recently, Aboitiz Power Corp. joined a consortium that is building three coal power plants with a total capacity of 246 MW in Sangi, Toledo City.
“These plants (KSPC project) will not compete with the one in Toledo. They would complement each other,” Corpuz said.
He said that when the new plants in Toledo and the KSPC project become operational in 2010 and 2011, the old power plants of the National Power Corp. (Napocor) will probably undergo rehabilitation or will be phased out as they are already inefficient.
“When that happens, about 200 MW would be taken out (from the Napocor’s Naga Power Complex),” he added.
Corpuz said that this early, only 40 percent of KSPC plant’s total capacity is already covered by power purchase agreements.
The rest, he said, will probably be bought by large individual consumers under an open access market system.
SPC also plans to participate in the Wholesale Electricity Spot Market in the Visayas. (LAP)
