Korean lenders to fund power project in Cebu

Korea Electric Power Corp. (Kepco) and SPC Power Corp. will tap Korea Development Bank and Korea Export-Import Bank to finance the construction of their 200-megawatt coal-fired power plant project in Cebu.

Company sources told reporters that the financing from the Korean lending institutions will constitute bulk of the project cost. The remaining balance will be borrowed through a syndicated loan from Citibank N. A.

“Majority of the project’s financing will be coming from Korean lenders and this will be supplemented by a loan from Citibank,” an industry source said.

The project cost, the sources said, could reach over $300 million due to the increasing cost of materials and equipment.

If funding will be firmed up soon, the two power firms are likely to start the construction of the coal-fueled power plant next month.

Kepco is under pressure to put up the plant since the project is expected to help augment the expected power shortage (ECs) in the Visayas in 2010.

But sources said the company is still awaiting the signing of some bilateral contracts with offtakers, mostly electric cooperatives (ECs) in Negros and Cebu .

If they would be able to complete the signing with at least seven ECs in the next two months, the construction will take about 36 to 42 months before it would be completed.

“We are in the process of signing the contracts with off-takers/electric cooperatives. Without these bilateral contracts, we cannot push through with the construction,” a company official said.

He said they are also still waiting for the approval of the Energy Regulatory Commission (ERC). “We’re still waiting for the ERC’s approval on our contract with our first electric cooperative partner Noceco (Negros Occidental Electric Cooperative).”

The company said it would need to sign at least 180 megawatts worth of supply contracts before proceeding with the project. The contract will last up to 10 years at P4.30 per kilowatthour (kwh).

Kepco broke ground for the Naga coal-fired power plant in 2005. The company took more than a year to get necessary permits and seal the supply contracts.

The Naga project will utilize clean coal technology that limits nitrogen oxide and sulfur oxide emissions at environmentally-friendly levels.