PSIREN

In June 2004, the Philippines signed a memorandum of understanding with the Korean Government to foster cooperation between two countries in the field of energy, to promote the development and initialization of clean coal technology. When Korea’s state-owned utility KEPCO set its sights from the domestic market to the world electricity market, the Philippines was the first stop with the acquisition of 650MW Malaya Thermal Plant in 1995. After the Malaya project, KEPCO bagged another contract in 1996 for the construction and operation of a 1,271MW Ilijan Gas Combined-Cycle which was the largest private power generation project in the country at the time, and completed in June 2002. KEPCO is now one of the 10 largest corporations in the Philippines, and is responsible for approximately 13% of the country's installed generation capacity. It operates Ilijan plant in Batangas through KEILCO (till 2010), and Malaya plant in Rizal through KEPHILCO (till 2022). In 2007, KEPCO acquired controlling interests in Salcon Power which operates the power plants in the Visayas.

1,270MW Ilijan Natural Gas – Under BOT-ECA until 2022, the 1,270MW Ilijan Natural Gas Combined Cycle in Batangas is operated by KEPCO Ilijan Corp (KEILCO) and fueled mainly by domestic natural gas, produced off Palawan Island in southern Philippines. Ilijan began commercial operation in May 2002. In November 2000, JBIC provided a US$153M loan to KEILCO, which had joint equity stake of KEPCO, Mitsubishi Corp, Southern Energy Inc (a U.S. corporation), and Kyushu Electric Power Co; this is the first major investment in overseas IPP projects of Kyushu Electric. The JBIC financing was significant in two aspects: (a) it was in support of a Japanese power utility who expands its operations in overseas power business; (b) the participation of Japanese, U.S. and Korean firms and the arrangement in which U.S. and Korean export-import banks joined JBIC in providing financial support for a joint venture undertaken by Japanese and Korean power utilities in a third country, hence promoting international collaboration and a business alliance of Japan and Korea. JBIC had earlier provided a loan to finance the construction of a 53-km transmission line that links Ilijan and the existing transmission network in Luzon, and guaranteed a syndicate loan extended by Japanese private financial institutions to finance the construction of a pipeline for natural gas fuel for the project. Team Energy (Tokyo Electric Power-Marubeni consortium) holds 20% equity in Ilijan.

146MW Panay I & III & 22MW Bohol Diesel – SPC Power Corp (Salcon Power) gave the highest offer of US$5.86M for the three diesel power plants in November 2008. SPC opted to pay the full purchase price. The plants were turned over to subsidiary Salcon Island Power Corporation (SIPC) in March 2009 despite a deferment sought through a TRO by local officials. Upon orders of the Office of the President, NPC will continue to subsidize the electricity generated by the plants and supply fuel to SIPC at a subsidized rate, an agreement reached with local government officials purportedly to prevent a possible power shortage on the island and postpone higher electricity rates expected with the privatization.

200MW Naga Coal-Fired – KEPCO Philippines Holdings (a wholly-owned subsidiary of KEPCO) bought Salcon Pte’s shares and went into joint venture with SPC (KSPC) for the construction and operation of a 200MW coal power plant in Cebu. KSPC is developing the Visayas Base Load Power Project which involves the construction and operation of a 200MW coal-fired power plant in Naga (Cebu) that will provide base load power to the Visayas grid. It was conceptualized under a new scheme of a merchant power plant, on a build–own–operate basis, characterized by the execution of power sales contracts with distribution utilities and electric cooperatives, instead of purchase power agreements with NPC. Under this concept, the generating company is responsible for the whole construction, operation, and maintenance of the plant, including fuel supply — without any Philippine government guarantees. ADB is set to approve a US$120M loan to KSPC for the project. Construction commenced in December 2007; once completed, the plant will supply power to six electric cooperatives that have signed sales contracts for 120MW of power.

KEPCO’s overseas operations – After the Philippines, KEPCO is aggressively pursuing new markets in such areas as China, the Middle East and Africa. In 2003, KEPCO concluded a joint-venture agreement with the government of Wuzhi in China for the construction of a power plant, establishing a foothold into the Chinese market. In 2005, KEPCO bagged a contract for the O&M of an 870MW combined-cycle thermal plant in Lebanon. In 2006, KEPCO bagged a contract in Nigeria for the construction and operation of a 2,250MW gas power plant and a 1,200km-long gas pipeline as well as oil drilling rights. In addition, KEPCO is on the lookout for CDM projects wherein additional profits are generated through the acquisition of CO2 emission credits by advancing into the new and renewable energy business including wind power projects; KEPCO is expected to become the largest foreign wind power generator in China. KEPCO is also diversifying its business to the transmission-distribution sector aside from the power generation business, through transmission-distribution projects in Myanmar and Libya. While pursuing continuous growth in the Northeast Asian market, KEPCO plans to use Lebanon and Nigeria as its bases in the Middle East and Africa. It shall also continue pursuing the CDM business and construction and operation of nuclear power plants; thus generating new profits and growing as a world-class KEPCO.

NOTES:
http://www.kepco.co.kr/eng/business/overseas.html

Korea Electric Company (KECO) was established in 1961 through the merger of three regional electric companies to form a single national electric power company. In 1982, KECO was renamed KEPCO and became a wholly government-owned corporation. In 1989, KEPCO stocks were listed on the Korea Stock Exchange, and the government sold 21% of shares to the public. In April 2001, the power generation business of KEPCO was spun off into six power generation subsidiaries; competition was introduced to the power generation industry. http://www.kepco.co.kr/eng/about/overview/history.html

http://www.mhi.co.jp/en/power/news/sec1/2002_sep_02.html

http://www.jbic.go.jp/en/about/press/2000/1110-01/index.htm

The other bidders for the plants were Therma Power-Visayas (a Philippine corporation owned by the Aboitiz Power Corp), and Trans-Asia Oil and Energy Development Corp of the Philippine Investment Management Inc (PHINMA). The Panay Diesel Power Plant facility consists of the 36.5MW Panay 1 and the 110MW Panay 3. Panay 1 was commissioned in 1979, while Panay 3, which is also known as the Pinamucan Diesel Power Plant, was relocated from its Batangas site after the expiration of the BOT contract with Enron Power Development Corp in 2003. The plant was transferred to its present location to prevent a potential near-term power shortage and to provide voltage stabilization in the island of Panay. The Panay 1 and 3 diesel plants are the only land-based facilities of NPC in the island; they are peaking plants that provide ancillary services such as backup power, load following, system frequency, and voltage regulation. The Bohol Diesel Power Plant, NPC's first diesel plant in the country's Jewel Island, was originally constructed together with the 1.2MW Loboc hydro plant to provide electricity to nearby towns. Consisting of four 5.5MW identical generating units, the Bohol facility continues to operate as a peaking and voltage-regulating plant. http://www.psalm.gov.ph/news/archives%202008/NewsItem20080043.htm; http://www.psalm.gov.ph/news/NewsItem20080076static.html; http://www.psalm.gov.ph/news/archives%202008/NewsItem20080063static.html; http://www.psalm.gov.ph/news/archives%202008/NewsItem20080063static.html

PSALM received a Temporary Restraining Order (TRO) seeking to defer the bidding for the Bohol plant upon the petition of Tagbilaran Mayor Dan Neri Lim. The TRO was issued by Judge Venancio Amila of the Regional Trial Court of Bohol. Citing Sec. 78 of EPIRA which provides that only the Supreme Court may enjoin the implementation of the provisions of the EPIRA, the PSALM Board decided to proceed with the bidding; the bidders were properly informed of the TRO. PSALM had contemplated further legal action to preserve the integrity of the government’s power privatization program.

Consumers have been warned to expect higher electricity rates when the power plants are privatized; Local government officials and consumer groups have earlier called for the deferment of the transfer of the Panay plants to SIPC over concerns that this will aggravate the power shortage in the region or result to higher power rates. SIPC will charge electric cooperatives the current NPC rates until the WESM starts its operations in Visayas. The NPC subsidy will also take effect until a new power supply agreement will be reached by SIPC and electric distributors on the island and until the Energy Regulatory Commission approves new power rates. IN: NPC subsidy to ensure low rate despite takeover, Nestor P. Burgos Jr. http://www.thenewstoday.info/2009/03/20/npc.subsidy.to.ensure.low.rate.d...

Salcon management warns workers' union: strike will endanger tight power supply in Cebu, March 20, 2008 http://www.sunstar.com.ph/static/ceb/2008/03/20/news/salcon.management.w...

http://www.adb.org/Projects/project.asp?id=43906; http://www.adb.org/Documents/Environment/PHI/43906/43906-PHI-SEIA.pdf; http://www.adb.org/Documents/IPSAs/PHI/43906-PHI-IPSA.pdf

KEPCO starts construction of 200-MW plant, 13 December 2007 http://www.philippine-builder.com/news/top-stories/108-kepco-starts-cons...

http://www.kepco.co.kr/eng/business/overseas.html

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FROM:
Korea Electric Power (KEPCO) in Philippine Power Sector
By Violeta P. Corral, PSIRU-Asia www.psiru.org, July 2009