May 1, 2018 | 9:19 pm
MERALCO PowerGen Corp. (MGen) said
the Energy secretary’s proposal to subject the company’s power supply agreement
(PSA) to a Swiss challenge runs counter to the forward-looking nature of
government policy.
“Rules that are published,
implementing rules and policies, should always be prospective,” Rogelio L.
Singson, MGen president and chief executive officer, told reporters.
Mr. Singson was reacting to a
proposal by Alfonso G. Cusi, secretary of the Department of Energy (DoE), to
subject the company’s PSA to a Swiss challenge instead of waiting for the
Energy Regulatory Commission (ERC) to decide on the matter.
MGen, a subsidiary of Meralco, is
among those that have committed to build power plants but cannot proceed with
the signing of an engineering, procurement and construction (EPC) contract
ahead of the ERC’s approval of the PSAs. Lenders require an ERC-approved PSA to
ensure that the power plant developers will have a steady stream of revenue to
repay their loans.
Mr. Singson said he was hopeful the
DoE will realize that the company’s power plant projects such as Atimonan One
Energy, Inc. (A1E) had gone through “the full process which was then the prescribed
process adopted by ERC.”
MGen is developing three power
plants — all coal-fired — either on its own or in partnership with other
entities.
Its unit San Buenaventura Power Ltd.
Co. is constructing a 455-megawatt (MW) facility in Mauban, Quezon province. It
will be the country’s first supercritical coal-fired power plant. Now on its 28th
month of development, the plant is expected to be completed in mid-2019.
A1E is building a two-unit ultra
supercritical coal-fired power plant with each unit having a capacity of 600 MW
in Atimonan, Quezon. Its PSA with distribution utility Manila Electric Co.
(Meralco) was submitted to the ERC in April 2016 and had gone through public
hearings, technical working group review and assessment of the tariff.
“A1E is focused on securing approval
of the PSA. Project economics and timeline can only be sustained if financing
close is achieved within Q3 2018 and start of project construction shortly
afterwards,” MGen said on the status of the project.
MGen has signed a mandate letter
with eight domestic banks for financing of up to P107.5 billion. It has also
concluded evaluation of the EPC bids from contractors, and is currently holding
negotiations to finalize agreements with the preferred contractor.
The third project under Redondo
Peninsula Energy, Inc. (RP Energy) is a two-unit coal-fired power plant with
capacity of 300-MW per unit. The plant uses circulating fluidized bed
technology.
A PSA with Meralco for 225 MW, which
was submitted to ERC for approval in April 2016, had gone through public
hearings, technical working group review and tariff assessment as of April
2018.
MGen said the ERC had not resolved
the PSA application as of end-2017, restricting RP Energy’s ability to issue a
“notice to proceed” to the EPC contractor and leading to the company’s
inability to close a financing agreement for the project.
Mr. Singson said the EPC contractor
decided to not honor another extension of the contract, which had lapsed in
2016 and was extended to December 2017, with “some escalation provisions.”
He said the contractor submitted a
new EPC contract in April, which he said contained financial terms that are
“way higher” than the previous one. — Victor V. Saulon
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