EWC’s LNG project faces delays
The country could face a severe power crisis if the current administration fails to act promptly to address it. Consider these: Government records show that the country’s current dependable power reserve is very low at five to 10% compared to other Asian countries. Singapore has at least 50% reserve.
The Department of Energy (DOE) forecasts that the Philippines will need 43,765 megawatts (MW) of additional power capacity by 2040, up from today’s 13,877 MW, representing a compound growth rate of 6% yearly. The Luzon grid, which accounts for 70% of the current capacity is expected to triple from 9,726 MW to 29,852 MW by 2040, a growth rate of 5% per annum. Also, the Malampaya Natural Gas is fast depleting.
There is an urgent need to build more power plants. Although the 420-MW Pagbilao plant has been recently put on stream, a more decisive action has to be done.
On the pipeline is another energy project in Pagbilao, Quezon -- the Liquified Natural Gas (LNG) Hub Receiving Terminal -- which is a 650MW combined cycle gas-fired power plant.
Australian-based Energy World Corp. (EWC) said its liquefied natural gas terminal, now 90% complete, is set to become a hub of LNG distribution around the country once it becomes fully operational. But the problem is it has not yet been allowed to tap into the government’s distribution grid.
EWC received an approval from the Energy Regulatory Commission (ERC) to develop a point-to-point transmission facility to connect its 650-MW combined cycle gas plant to the power grid. The government regulatory agency allowed EWC to develop the 1694-million transmission facility to connect its power plant to the New Pagbilao Station of the National Grid Corp. of the Philippines.
It has now reached an advanced stage of construction for both the LNG Hub Terminal and the Power Station. The LNG Hub Terminal, the first of its kind in the Philippines, can process 3 million tons of LNG per annum which is sufficient enough to generate up to 3,000MW of gas-fired power plants, and with the second tank currently being constructed, up to 6,000MW of power. The project costs over US$750 million of direct investment in the Philippines, and has created over 800 direct jobs during the construction period.
But EWC’s (LNG) Hub Receiving Terminal project has been trapped in a bureaucratic quagmire. DOE, National Grid Corporation of the Philippines (NGCP), the National Transmission Corp. (Transco) and the Grid Management Committee (GMC) have yet to act on EWC’s request to tap on the distribution grid, despite its strict compliance with the DENR’s clean energy policy directives. As mandated by the DENR, EWC is not allowed to enter into long-term power purchase agreements, but instead will ensure that all power will be sold through the Wholesale Electricity Market (WESM), with the DBP and Landbank to be given the opportunity to invest in, finance and profit from the project.
Once operational, the LNG Hub Receiving Terminal – which is a 650MW combined-cycle, gas-fired power plant – is set to become a hub of LNG distribution around the country. In a report to the Australian Securities Exchange, EWC revealed that the facility would be capable of handling 3 million metric tons per annum of LNG.
The project represents an investment of over $750 million, of which EWC has already invested approximately $600 million of its own with the balance of $150 million being funded by Philippine banks.
EWC has also provided a full corporate guarantee under the loan facility covering repayment of the loan and interest to lenders on time and in full, even if the project faces unplanned delays.
EWC signed the loan financing for its Power Station in September 2015 with DBP, Landbank and AUB. There were 49 condition precedents to satisfy in order for lenders to release loan funds. EWC says it has now satisfied 48 condition precedents, except for the last which involves EWC tapping transmission to the grid.