Kepco to pay $38.4-M for delay in construction of Ilijan power plant

The Korea Electric Co. (Kepco), the contractor for the 1,200-megawatt (MW) Ilijan natural gas power plant, had agreed in principle to pay the government at total of $38.4 million (P1.9 billion) in liquidated damages for the delay in the commercial operation of the $800-million gas-fired facility.

"There has been an agreement in principle which was already approved by the board of the National Power Corp. (Napocor) on the settlement of the liquidated damages," Energy Secretary Vincent S.Perez, told reporters over the weekend.

But Perez said the penalty will be paid by Kepco in the form of "free energy."

"They (Kepco) will allow us to get free power from the Ilijan plant until they have offset the liquidated damages," he explained.

The energy chief said they are currently drafting a compromise agreement to be signed by Napocor and Kepco.

He said the free energy is retroactive to June 1, 2002, the date when the Ilijan plant started its official commercial operation after a six-month delay.

Based on the contract signed by Kepco, and Napocor, the Ilijan plant would commence commercial operation by January this year.

But due to some technical problems which involved some gas turbines of the power facility, the commercial operations was moved to June 2002.

The natural gas-run power plant is a project of Kepco, Napocor and other power firms which include Mitsubishi, Mirant (formerly Southern Energy of the US) and Kyushu Electric. The United Engineers International Inc., Raytheon-Ebasco Overseas Ltd. and Mitsubishi Heavy Industries were hired by Kepco to build the power plant.

The Ilijan project is one of the downstream power plants that would be fueled by the Malampaya natural gas.

Aside from the Ilijan power plant, Malampaya gas, which could fire some 3,000 MW power plant, was sold to Santa Rita (1000 MW) and San Lorenzo (500 MW), which are both owned by the Lopez group.

Santa Rita started operating commercially in October 2001 while San Lorenzo started dispatching power last April. —Donnabelle L. Gatdula