Meralco sets revised TOR for 1,200MW deal after failed bid

By Lenie Lectura - September 17, 2019

https://businessmirror.com.ph/2019/09/17/meralco-sets-revised-tor-for-1200mw-deal-after-failed-bid/

THE Manila Electric Co. (Meralco) will turn over to the Department of Energy (DOE) on Tuesday the revised terms of reference (TOR) for a power supply contract with 1,200 megawatt (MW) greenfield capacity and publish the bid invite this week.

Meralco President Ray Espinosa said after the signing of power supply agreements (PSA) Monday afternoon that the utility firm will amend the TOR since the September 10 bid auction was declared a failure, with only one bidder submitting bid documents.

“May mga babaguhin [There will be changes]. We will present that to the DOE. Once it is cleared, then we will publish our notice and invite within the week. We want to be able to conclude this well within November or the latest in December,” said Espinosa.

Atimonan One Energy Inc., a wholly-owned subsidiary of Meralco PowerGen Corp., the power generation arm of Meralco, emerged as the lone bidder at the September 10 auction. Panasia Energy Inc. submitted a letter last August 28, informing the Third Party Bids and Awards Committee (TPBAC) of its withdrawal of participation in the bidding process. Mariveles Power Generation Corp. submitted a similar letter last September 10.

First Gen Corp./First Gen Ecopower Solutions failed to arrive and submit its documents.

Meralco will rebid a 20-year power supply contract for 1,200MW greenfield capacity. 

Greenfield power plants are those built from scratch. 

Espinosa said their bidding terms would be enhanced in hopes of accommodating more power generation firms to participate in the auction. “This is a nontechnology issue. We made sure it’s fuel-neutral, so it can be gas or coal. Our only requirement is high-efficiency, low-emission,” or which “gas can easily comply with and cope with the newer technology.”

Meanwhile, Meralco signed Monday PSAs with First Gen Hydro Power Corp., Phinma Energy Corp. and South Premiere Power Corp. (SPPC) for the supply of 500 MW mid-merit capacity for five years, starting December 26, 2019.

First Gen’s contract capacity is for 100 MW with an all-in headline rate (VAT inclusive) of P5.1908/kWh and computed all-in Levelized Cost of Energy (LCOE, VAT inclusive) of P5.3989/kWh.

Phinma Energy’s contract is for 110 MW at all-in headline rate (VAT inclusive) of P5.5858/kWh and computed all-in LCOE (VAT inclusive) of P5.5858/kWh. SPPC’s contract is for 290 MW and has an all-in headline rate (VAT inclusive) of P5.5347/kWh and computed all-in LCOE (VAT inclusive) of P5.7527/kWh.

The auction, via competitive selection process, was held last September 11 in accordance with the DOE Circular requiring distribution utilities (DUs) to procure power through CSP. 

According to Espinosa, “The resulting prices from the CSP are significantly lower than their average generation cost today of around P5.88 per kWh (VAT inclusive).  The results of today’s signing for 500 MW are expected to save consumers P4.4 billion annually for the next five years.  This is equivalent to a rate reduction of around P0.13 per kWh for consumers, starting December 26, 2019.

This is the second CSP for Meralco, which successfully signed 1,200 MW of baseload capacity last September 13.  Earlier, Meralco signed PSAs with Phinma Energy, SPPC and San Miguel Energy Corp. for the supply of 1,200 MW brownfield capacity.

They will supply Meralco starting December 26, 2019, until December 26, 2029.

During the signing, SMC President Ramon Ang said, “Actually we were hesitant to join the bidding. There’s no fuel pass-on, the risk is high.  But I know [Espinosa] was trying to protect the consumer.”

Phinma Energy President Eric Francia added, “The most important thing is that the consumers are benefitting.  So it’s up to us to manage that risk. It’s not easy, but hopefully this sets the new normal. I’m hopeful that the rest of the sector will follow and really deliver very positive benefits to the Filipino consumer.” 

Along with the results of first successful CSP, consumers are projected to enjoy total savings of around P13.86 billion per year, or a rate reduction of P0.41 per kWh.