President Arroyo Energizes Philippine $7.4 Billion Power Development and Privatization Plans

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The Philippines will need at least $7.4 billion of private sector investments over the next ten years to finance the country's generation capacity expansion, and other power related infrastructure requirements. Addressing power needs at the opening of the San Lorenzo, 500 MW gas-fired power plant in the Batangas province at the end of last month, The Philippines President, Gloria Macapagal-Arrroyo said that her administration would vigorously pursue its power section reform program to ensure dependable electricity for the people and industry.

Historically, the president said, the main companies providing these power related assets have been the National Power Company (Napocor) for power generation, National transmission Corp (Transco) for power transmission and Meralco for power distribution. The president said that the expenditure needs of these three state owned companies had ballooned over the past decades and that now the government subsidies to the power sector of around $700 million should instead be used to fund other services. The privatization of Transco will open the way for the sale of Napocor's generating assets which must be 70% complete by June 2004. The governement has called for bids for state owned transmission assets as part of its efforts to privatize the sector, lower power charges and free itself of the annual subsidies burden.

Prime attention is being given to Panay Island, which has no indigenous energy and is farthest from the geothermal sources in Leyte. Currently, Panay's demand for 190 MW is bigger than its current total dependable capacity of 138 MW. The president promised a power barge to be delivered at the beginning of this month, while the island awaited investments to address the shortage on a permanent basis. She also promised to roll out her power sector program to the Visayas and Mindanao at the same time.

In Luzon the government will fast track the privatization of the Sucat and Limasy power plants to allow investors sufficient time to convert these plants to natural gas. Investors will have the option to use reasonably priced indigenous or imported natural gas. To support these moves the Philippine National Oil Company (PNOC) is to spearhead the development of the Batangas-Manila and the Bataan-Manila gas pipelines and the LNG receiving facilities in Bataan, maximizing private sector participation in these projects. Luzon's future power requirements will be met with additional gas power plants, wind power for northern Luzon and geothermal power from Bicol and Leyte.

The country's department of energy (DOE) and Energy Regulatory Board (ERB) will establish a policy and regulatory framework to create a market bias for renewable energy that will help the Philippines to become the world's premier producer of geothermal power by developing an additional 800 MW installed capacity by 2012.

Hydropower could provide another 1,200 MW and wind, biomass, and other renewable sources can deliver another 224 MW. The president urged the completion of the Danish funded, 25 MW North Wind project by 2004, and the 40 MW PNOC project. Both these projects are in Burgos, Ilocos Norte, and will be the first of the 415 MW projected for wind power in the next ten years.

The $500 million San Lorenzo plant opened by the president is located in Batangas City, 100 kilometers from Manila, and is an extension of the 1,000 MW Santa Rita plant, which has an identical configuration.

Industrialinfo.com first reported on this project in April of 1999 as part of its International Industrial Database. Since 1994, Industrialinfo.com has reported on 63 power plant projects in the Philippines.

The plant consists of one block of 500 MW consisting of two single shaft combined cycle units. Each unit comprises a Siemens V84.3A gas turbine, a high pressure and combined intermediate/low pressure steam turbine and generator, all located on one shaft. The inauguration of San Lorenzo marks the completion of all power generating faculties required for the Philippines gas-to-power project. The project started construction in 2000 and consists of natural gas facilities belonging to Shell Philippines Exploration LSE:SHEL) (London, United Kingdom) including a 504 kilometer sub sea pipeline, the 1,000 MW Santa Rita CCGT plant and Kepco's 1200 Iljon power plant. Siemens (XETRA:SIE, NYSE:SI) (Munich, Germany) are EPC contractors for San Lorenzo and are also responsible for operating and maintaining the project.

Also at the end of last month the completion of the $1.2 billion San Roque multi-purpose dam project was announced. The facility has three turbines with combined outputs of 345 MW that will be channeled to the Luzon grid of the NPC. Commissioning test is now taking place and commercial operation is scheduled for March. The project, which is claimed to be the biggest of its kind in south east Asia, has been the target of ongoing protests by various groups.

The irrigation component of the project is stalled waiting for funding by a foreign lender. Negotiations on the subject are ongoing between the Philippine and Japanese governments.