Kepco seeks additional funds for Ilijan plant expansion

Korea Electric Power Corp. (Kepco) is in the market for additional funding for its 1,200-megawatt (MW) Ilijan natural gas-fired power plant in Batangas.

Kepco Philippines president and chief executive officer Lee Gil-Gu said they will work towards either corporate financing or project financing for the capacity expansion of the Ilijan power plant.

Kepco is currently in the early stages of talks with the Philippine government and the National Power Corp. (Napocor).

Lee admitted that their first option will be through the corporate financing route since it could result in lower interest rates from prospective financiers.

"We will take advantage of the better credit rating of our parent company which should result in lower interest rates from lending," he said in an interview during the Power Trends exhibit at the World Trade Center.

On the other hand, if Kepco Philippines will fund the project through project financing, its mother unit will need to issue a guarantee for the project.

"We’ve already announced that for the expansion of the Ilijan power plant we are supporting further the Barangay Rural Electrification project, which will cost us lot of money," Lee said.

He assured that they will support the project as well as the government’s 10-point agenda. Ilijan’s expansion program will be tied up with the electrification of 500 barangays.

Kepco estimates to spend between $10 million to $15 million to provide electricity to barangays in far-flung areas.

"We’re also thinking of 30-to 70-percent equity to debt ratio for this project with 30 percent coming from equity," Lee said.

Apart from Kepco, which has a 51-percent share in the Ilijan plant, other shareholders include Mirant Philippines Corp., Kyushu Electric Power Co. Inc. and Mitsubishi Corp.

Kepco Philippines is still studying on whether or not it will still source the future gas requirements of the 600-MW expansion project from the Malampaya deep water gas-to-power project in Palawan.

The Malampaya gas find can only produce enough natural gas to fuel plants having up to 3,000 MW in capacity and currently provides the gas requirements of Ilijan and the 1,000-MW Sta. Rita and 500-megawatts San Lorenzo plants, also in Batangas.

Taking these current gas supply purchase agreements (GSPA) into consideration, the Malampaya natural gas project’s excess gas production is placed at only 300-MW or only half of the Ilijan expansion project’s requirements.

Kepco is expected to verify within the month if the Malampaya gas will be enough to supply the additional 600-MW requirements of Ilijan.