MGen opposes Swiss challenge for pending power deals
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 ERCapproved 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. —