Kephilco allots $400M for Ilijan power plant expansion

Kepco Philippines Inc. is planning to spend more than $400 million to expand its Ilijan natural gas-fired power plant by another 330 megawatt (MW) from its existing capacity of 1,200 MW.

"We submitted an unsolicited proposal for the expansion of the Ilijan power plant by 330 MW using the banked gas that was not used by Ilijan and stored in Malampaya. The utilization of the said gas will depend on PSALM’s approval of the proposal," Kephilco president and CEO Gil Gu Lee said.

Lee said Kephilco has committed to help the government in expanding the country’s power capacity.

"We signed with the Department of Energy (DOE) and Power Sector Assets and Liabilities Management Corp. (PSALM) for the expansion of Ilijan in end-2005. From 2011, power shortage is expected, because even if we start now it will take another five years, including the gestation period," he said.

Industry sources said Kephilco is still waiting for a Department of Justice (DOJ) opinion that would allow PSALM to transfer the purchased power agreement (PPA) of the 300-MW San Pascual co-generation plant to any project approved by PSALM.

The DOJ has reportedly responded favorably to the query, prompting Kephilco to keenly revive the expansion plan and bring up the proposal to PSALM last month.

According to the sources, Kephilco does not want to proceed with the project without the PPA of San Pascual. "If the San Pascual PPA will not be included, it will not make the proposal attractive."

It was noted that Kephilco is willing to put up a generator with 330 MW capacity even if the supply contract will only be at 300 MW.

Last February, Kephilco initially indicated keen interest to expand the capacity of the Ilijan plant by 600 MW. However, sources said Kephilco wants to be assured 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 said.

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 as follows: the 1,200-MW Ilijan power plant; the 1,000-MW Sta. Rita; and 500-MW San Lorenzo.

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

Based on the plan, PSALM will buy out the 25-year PPA contract of the Napocor with San Pascual and assign the contract to Sucat power plant which is to be converted into a gas-fired power facility.

The government had been working out the pre-termination of the contract of San Pascual with US-based Edison Mission Energy since September 2002.