Government accepts Danish offer to fund P6.4-B power project ofNapocor

Government has accepted the offer of the Danish government to finance the P6.4-billion power project of the National Power Corp. (Napocor) that would interconnect the major grids to the main power grids of Luzon, Visayas and Mindanao.

The Presidential Committee for Flagship Projects and Programs (PCFPP) announced yesterday that the Philippine government will tap the financing package that would cover the conduct of a feasibility study and the entire capital requirement for the project.

PCFPP chairman Roberto Aventajado said the Danish government had offered to finance 100 percent of the project under the Danish International Development Assistance (Danida) at zero percent interest rate with up to 15 years repayment period.

Danish Ambassador to the Philippines Peter U.W. Rosting said the commissioning period for the project would be about two and a half years to three years from the time the contract is signed.

With the concessional and liberal terms and conditions of the financing package, Roster said the Philippine government should be able to immediately realize the project without any cash outflow until after the commissioning period.

According to Aventajado, the project would allow excess power from the main power grids of Luzon, Visayas and Mindanao to be transmitted to the power grids of smaller islands using submarine power cables.

Aventajado said Napocor has so far identified eight islands for interconnection, namely: Mindoro, Catanduanes and Marinduque in Luzon; Bantayan in Cebu and Basilan, Samal, Camiguin and Dinagat in Mindanao.

At present, Aventajado said these islands operate on diesel generators with high production cost due to low demand, limited indigenous power resources and high maintenance costs as a result of high fuel prices and expensive spare parts.

"As a result, the National Government ends up subsidizing these small islands to the tune of P1 billion a year," Aventajado said.

By interconnecting these small islands to the major power grids, he said government would be able to reduce power production costs and save billions of pesos in power subsidy.

However, the interconnection would effectively displace small island electric cooperatives that have been providing and distributing power to areas that could not be supplied by Napocor.

According to Aventajado, President Estrada had instructed Napocor to coordinate with the PCFPP, the National Economic and Development Authority and the Department of Finance in studying the Danish offer in preparation for the sighing of a memorandum of understanding with the government of Denmark.

Once finalized, Aventajado said the feasibility study that would include the detailed engineering design study, financial projections and implementations schedule.