Kephilco may expand Ilijan power plant

Kepco Philippines Corp. (Kephilco) is studying the possibility of expanding the capacity of its 1,200-megawatt (MW) Ilijan natural gas fired power plant by another 600 MW.

Industry sources said Kephilco, jointly owned by Korea Electric Power Co. (Kepco) and the National Power Corp. (Napocor), is just awaiting an opinion from the Department of Justice (DOJ) if the Power Sector Assets and Liabilities Management Corp. (PSALM) could transfer or reassign the power purchase agreement (PPA) of the 300-MW San Pascual co-generation plant.

The sources said Kephilco has to ensure that the additional capacity it will put up will have a ready market. "If the San Pascual PPA could be reassigned then the capacity expansion would be justified by a ready client."

The sources added that the failure to attach a transition supply contract (TSC) on every Napocor power plant that would be sold by PSALM discourages potential investors. "The lack of TSC is still a major concern of the market."

Based on initial plans, PSALM intended to transfer the PPA of San Pascual co-generation to Sucat power plant. This proposal is crucial to provide a "sweetener" to the sale of the decommissioned 850-MW Sucat power facility.

In case PSALM will not be able to resolve the legal impediments on the proposed PPA transfer, it can sell Sucat with a TSC.

The San Pascual project was supposed to take up the remaining 300 MW from the 3,000-MW Malampaya deep water gas-to-power project. The 2,700 MW were distributed to the 1,200-MW Ilijan power plant and the Lopez-owned 1,000-MW Sta. Rita and 500-MW San Lorenzo plant.

While the construction of the San Pascual plant did not materialize due to the existing excess capacity in the power system during that time, the proponents of San Pascual have already signed a PPA with Napocor. Thus, it is already part of the renegotiations of PPA contracts with Napocor.

PSALM will buy out the 25-year PPA contract of Napocor with San Pascual and assign the contract to Sucat. The government had been working out the pre-termination of the contract of San Pascual with US-based Edison Mission Energy since September 2002.

Aside from the Ilijan expansion, Kephilco is also pursuing a 200-MW coal power plant in Cebu, which is scheduled for groundbreaking ceremonies today. The Cebu plant is in partnership with Salcon Power.

The coal power plant in Cebu is expected to start operations by 2008 for the first 100 MW and the next phase of 100 MW by 2009. The project is estimated to cost P15 billion.

The plant is designed to utilize a circulating fluidized bed combustion (CFBC) technology and is lined up to use the coal being produced from the Semirara mining facility in Antique province; or those from the coal mines in Malangas, Zamboanga.

The company will also invest $50 million to build the Luzon-Mindoro submarine cable. Kepco is advancing the funding for the construction of the 230-kilovolt (kv) line.