Atimonan project costs rise by P15B due to PSA approval delay

By Victor V. Saulon
Sub-Editor
MERALCO Powergen Corp. (MGen) said the continuing delay in the approval of the power supply contract for its Atimonan coal-fired power plant had jacked up the project’s cost by P15 billion.
“If my numbers are correct, I think nasa mga (it’s at about) P15 billion, kasi interest rate na lang (because even only the interest) on a loan of P107 [billion],” Rogelio L. Singson, MGen president and chief executive officer, told reporters last week.
He said the reckoning of the cost is from the filing of the power supply agreement (PSA) in 2016 until September or October this year.
Mr. Singson said even a 2% per annum increase in interest rate would result in raising the borrowing cost for the project.
“Tapos meron ka pang (Then you also have) escalation on EPC (engineering, procurement and construction),” he said, referring to the contract with the builder of the facility.
The EPC contract had to be re-valued after it lapsed because of the delay. A new contract meant costs will go up under new terms.
Mr. Singson also cited foreign exchange costs, which rose with the weakening of the peso against the dollar.
Angelito U. Lantin, Manila Electric Co. (Meralco) senior vice-president, previously said all of the equipment for the project will be imported. He said when the power supply contract was submitted for approval, a dollar costs only about P47. The peso closed at P52.71 to the dollar on Dec. 7.
About a year ago, Manila Electric Co. (Meralco) said its unit MGen had agreed with lenders the terms of a P107.5-billion loan to fund about 70%-75% of its 1,200-megawatt (MW) coal-fired power plant in Atimonan.
MGen is borrowing from eight local banks in Philippine pesos. The company previously placed the project’s cost at P135 billion.
Although there was a lending agreement, MGen unit Atimonan One Energy, Inc. (A1E) could not draw down on the loan amount until the PSA has been approved. The supply contract is pending with the Energy Regulatory Commission (ERC).
Oppositors to the project questioned the timing of filing of the PSA just before rules on competitive selection process (CSP) took effect. The CSP allows challengers to the electricity price forged under the PSA. A case questioning the contract had been filed and is pending at the Supreme Court. The ERC previously said it would await the court’s decision before acting on the PSA.
“I think we will wait for the approval,” said Meralco President and Chief Executive Officer Oscar S. Reyes when asked whether the group would opt to build the plant even without an assured buyer of its power output.
“May oras pa ’yun (There is still time),” he added.
MGen is leading the development of three power plants — all coal-fired. A1E is building a two-unit ultra supercritical coal-fired power plant, each with a capacity of 600 MW in Atimonan.
Another subsidiary, San Buenaventura Power Ltd. Co. (SBPL), is constructing a 455-MW facility in Mauban, Quezon. It will be the country’s first supercritical coal-fired power plant. The plant was targeted to be completed in mid-2019.
The third project, a coal-fired power plant under Redondo Peninsula Energy, Inc., has two units, each with a capacity of 300 MW using the circulating fluidized bed technology.
Of the three, only SBPL secured project financing, through a P42.15-billion omnibus agreement for a senior-term loan with several banks.
Meralco will be the buyer of the Atimonan plant’s entire electrical output. Under a previous schedule, testing and commissioning was expected in December 2020 for unit one, and in May 2021 for unit two. Their respective commercial operation was set in the fourth quarter of 2020 and the fourth quarter of 2025.
Mr. Reyes said the plant is now targeted for completion by 2023, leaving MGen a shorter time to build the power plant that is meant to respond to the expected rise of electricity demand in the coming years.
Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.