Firms move to augment power shortage in South

POWER industry players are taking steps to augment the electricity supply in Mindanao.

A German-backed consortium operating a coal-fired power plant on the island is looking at expanding its capacity amid the region’s power crisis.

Jerome Solvedilla, Steag State Power Inc. corporate communications officer, said the company may expand its 232-megawatt coal plant by another 100 megawatts.

“The shareholders of Steag are exploring possibilities of capacity expansion in light of increasing power demand in Mindanao,” he said.

Germany’s fifth largest power generator, Evonik Steag GmbH, controls a 51-percent interest in Steag, while listed-firm Aboitiz Power Corp. has a 34 percent stake. La Filipina Uygongco Corp. owns the remaining 15 percent.

Steag’s coal plant is located in the Phividec Industrial State in Misamis Oriental. The facility was completed in 2007 at a cost of $305 million.

Soldevilla said the consortium is evaluating any legal issue that may restrict an expansion because Steag’s plant was built under a 25-year build-operate-transfer arrangement with state-owned National Power Corp. (Napocor).

Under the Electric Power Industry Reform Act of 2001, Napocor is barred from putting up or contracting additional capacity except when government declares a power crisis.

Aside from this restriction, the predominance in Mindanao of cheaper electricity produced by hydro power plants mostly owned by Napocor also has dampened prospects for expanding Steag’s facility.

Erramon Aboitiz, Aboitiz Power president and chief executive officer earlier said the company has been keen on expanding the Steag plant.

He said that Napocor sells power in Mindanao at around P2.30 per kilowatt-hour but Steag needs to charge P4.50 per kilowatt-hour to recover their investment.

Because of the disparity, distribution utilities in the region have been hesitant to sign up power contracts with Steag.

“But the problem if they don’t sign up, they might have shortage of power. It’s the same thing that happened with Cebu. Now they have brownouts and the cost of power is more expensive,” Aboitiz said.

Besides Steag, San Miguel Corp. (SMC) is also mulling over a plan to augment Mindanao’s electricity supply through the construction of a combined-cycle power plant.

Ramon Ang, SMC president and chief operating officer, said that putting up a 600-megawatt combined-cycle generating facility would offer a “quick solution” to the electricity shortfall on the island.

“It will practically solve the problem using bunker fuel,” he said.

The country’s second largest island group, Mindanao is suffering a power deficiency of nearly half of peak demand. Because of this, regular brownouts lasting over half a day have hit parts of the region.

The power deficiency in Mindanao is caused by the inadequate supply from the grid’s main sources—the Agus and Pulangi hydroelectric power plants, whose reservoirs are drying up because of the El Niño. Napocor operate the said facilities.

Ang said a combined-cycle power plant could be put up in a relatively short time compared with other power sources because it is readily available in the market.

He said SMC has begun inquiring from suppliers.

Electricity produced by a combined-cycle plant, however, is costlier than that generated by a hydro facility.

SMC owns a similar facility in Luzon, the 620-megawatt Limay combined-cycle power plant in Bataan.

The Limay plant uses diesel as fuel to produce steam, which in turn generates electricity. This makes the facility a relatively expensive plant to operate compared with hydros, with its practically free fuel source.

The company acquired the Limay plant from the government in an auction last year for only $13.5 million because of its costly operations and run-down state.

Ang said SMC initially planned to convert the facility into a compressed natural gas-fed plant or scrap it altogether so they can put up a coal-fired power plant in its place.

However, the Limay plant had to be run to address a power shortfall in the Luzon grid since the start of the year.

Given the role it plays in the grid, Ang said the company is reconsidering an earlier plan to decommission the Limay facility. –EUAN PAULO C. AÑONUEVO Reporter, Manila Times