Meralco hikes long-term capacity

MANILA, Philippines - Power distribution giant Manila Electric Co. (Meralco) is increasing its long-term power generation capacity target to 3,000 megawatts (MW) to support increasing demand in the Luzon grid.

The company plans to start commercial operations of two coal-fired power plants in 2017 to avert power shortage, Meralco CEO Oscar Reyes said.

“(The target is) 2,700 MW with a potential upside. If demand really grows, we have to bump it up,” Reyes said.

Reyes said Meralco, through its wholly-owned subsidiary Meralco PowerGen Corp., is prepared to put up more power plants with an aggregate generating capacity of 3,000 MW.

“We need to be part of solving our own requirements. If we build our own (power plants), it gives us comfort that we are not exposed to any changes in the timetable of other generators,” Reyes said.

Meralco, which is indirectly controlled by Hong Kong-based First Pacific Co. Ltd. and partly owned by diversified conglomerate San Miguel Corp., is pursuing electricity generation projects to ensure long-term supply given continuous demand growth in its franchise area.

Reyes said the company will pursue partnerships for the construction of power plants.

Last week, Meralco PowerGen signed a joint venture deal with New Growth B.V., a subsidiary of the EGCO Group of Thailand, to develop a 460-MW coal-fired power plant in Mauban, Quezon.

“It’s a range of probably $1.5 million per MW to maybe around $2 million per MW,” Reyes said.

The power plant, which will make use of the latest technology to ensure efficiency, reliability and availability, will require an investment of around $690 million to $920 million.

Financing will be 70 percent debt and 30 percent equity, Reyes said.

“We will shoot for early 2017 operations just to ensure that it is responsive to the needs of the Luzon grid and the Meralco franchise area,” Reyes said.

The engineering, procurement and construction contract is currently under the tender process.

Despite an ongoing legal process due to environmental concerns, Meralco is still hoping to start operations of a 600-MW coal-fired power plant at the Subic Bay Freeport Zone in Zambales through Redondo Peninsula Energy Inc. in 2017.

“We’re hoping that when we clear [the court case], we’ll try to shoot for 2017,” Reyes said. Redondo is Meralco’s partnership with Aboitiz Power Corp. and the local unit of Taiwan Cogeneration International Corp.

Aside from coal-fired power plants, Meralco PowerGen also plans to build four 375-MW liquefied natural gas plants in the country.

Reyes said Meralco is trying to move forward with its power generation projects as fast as possible “because there is concern that the demand and supply situation, which is now getting tight, will be tighter.”

“You’ll see the tightening or the potential for higher electricity prices if we have to increasingly require on high cost oil-fired power plants,” Reyes said.

Demand for power continues to expand amid robust growth in the Philippine economy, which rose 7.6 percent in the first half driven by the service sector.

Outside of Luzon, Meralco is looking at power requirements in Visayas and Mindanao, Reyes said.