Chinese power firms eye merchant plants in PHL

By Lenie Lectura - October 25, 2018

https://businessmirror.com.ph/chinese-power-firms-eye-merchant-plants-in-phl/

POWER firms from China have expressed interest to put up merchant plants in the Philippines, according to Energy Secretary Alfonso G. Cusi.

“They came here because we are inviting [them] to put up merchant power plants. They are doing the study.  They are looking at one in Luzon and in the Visayas.  I hope if Xi Jinping will arrive in November, he will have good news for us,” said Cusi.

He was referring to the trip to the Philippines of the Chinese leader, announced several months ago. The agenda of that trip is expected to firm up the slew of projects that Beijing had earlier promised to help Manila with, especially those related to its massive infrastructure program.

Merchant plants are power plants that sell their output to the wholesale electricity spot market (WESM). “These are merchant power plants. They will do it without the PSA [power supply agreement]. We have a spot market. What is the use of the WESM if all the supply is already contracted,” said Cusi, adding that the agency is also aiming to increase the volume of the spot market to 20 percent.

Cusi said he is aware of the challenges for a power firm to put up a merchant plant.  “It is difficult to put up a merchant plant without a power supply agreement because of bankability,” said Cusi. Most banks require a PSA before granting the loan applications of power firms.

“With the hope, the aspiration that our demand is increasing, there will be some percentage of that capacity to be contracted. Mahirap kasi magtayo tayo ng power plant kung kelan nandyan na ang demand [It will be difficult for us if we start building the power plants only when the demand becomes urgent],” added Cusi.

The energy chief also said that China may prefer to construct a merchant power plant rather than provide grants.

Cusi said the merchant power plants would be coal-fired and ultra supercritical, meaning, they would require less coal per megawatt-hour, leading to lower emissions.

Once plans for the power plants are finalized, the projects could be declared as energy projects of national significance, the DOE chief said.