STEAG mulls expansion of power plant in Mindanao

MANILA, Philippines - German-led Steag State Power Inc. is mulling the expansion of its 232-megawatt (MW) Mindanao coal-fired power plant by 100 MW, a company official said.

Jerome Soldevilla, Steag corporate communications officer, said the expansion of the coal-fired facility’s capacity would greatly help alleviate the power shortage in Mindanao.

“The shareholders of Steag State Power Inc. are presently exploring possibilities of capacity expansion in the light of increasing power demand in Mindanao,” Soldevilla said.

Evonik Steag GmbH, Germany’s fifth largest power generator, owns 51 percent of the company, with local partners Aboitiz Power Corp. (APC) holding 34 percent and La Filipina Uygongco Corp., 15 percent.

APC bought its stake in the Mindanao coal project for $91.9 million in 2007.

Soldevilla noted that the Aboitiz Group is currently reviewing all the aspects of the expansion plan, particularly its legality, as Steag built the coal plant under a build-operate-transfer (BOT) arrangement and enjoys a 25-year power purchase agreement with state-owned National Power Corp. (Napocor).

“They are evaluating the proper scheme for the planned expansion. Hopefully the decision will be out within the year,” Soldevilla said.

APL president and CEO Erramon Aboitiz earlier said Steag’s capacity expansion “is something we continue to look at.”

He said they plan to expand the plant’s capacity by an additional 100 MW to 200 MW. The Mindanao coal plant is located at the Phividec Industrial Estate in Misamis Oriental, Nor-thern Mindanao.

He said Napocor sells power in Mindanao at around P2.30 per kilowatthour but STEAG needs around P4.50 per kwh to recover their investment from the expansion.

According to Aboitiz, the higher cost of investment, which will be reflected on the rates, makes its difficult for them to sign up supply contracts with distribution utilities.

“But the problem if they don’t sign up, they might have shortage of power. It’s the same thing that happened in Cebu. Now they have brownouts and the cost of power is more expensive,” Aboitiz said.

Aboitiz said they would start the expansion program if they would be able to corner half of the supply contracts.

“So, we have to wait until we get at least 50 to 60 percent of plant capacity,” he said.