Korean firms eye coal tie-up with PNOC-EC

MANILA, Philippines - Six South Korean firms have expressed interest to partner with state-run Philippine National Oil Co.-Exploration Corp. (PNOC-EC) for the construction of two coal-fired power plants valued at $400 million.

The companies include Korea Electric Power Corp. (Kepco), one of the world’s top power producers, a PNOC-EC executive said.

“Six are interested, of which two are highly interested,” Silvestre Punsalan III, vice-president of PNOC-EC, said in a briefing.

He said PNOC-EC officials recently visited South Korea and met with a number of power firms.

“Kepco is interested despite the size of the project,” Punsalan said.

PNOC-EC plans to put up a circulating fluidized bed, coal-fired power plant in Zamboanga Sibugay and another in Isabela.

Each power plant, which will need a joint venture partner, will have a capacity of 100 megawatts and require an investment of $200 million each.

“We are very much interested in South Korean companies because of their technology,” Punsalan said.

“We can go 30- percent minimum to 49-percent maximum,” he added.

However, selecting the joint venture partner that will take a majority stake in the two power plants will be subject to a bidding.To date, the state-led firm is looking for a technical advisor, which will be paid by PNOC-EC by as much as P26.95 million, to help the company find a partner.

“On Sept. 11, the next board meeting, we will be recommending to the [PNOC-EC] board the transaction advisor for the two coal projects,” Punsalan said.

In July, PNOC-EC scheduled a presentation for KPMG Manabat Sanagustin and Co., FTI Consulting and The Lantau Group (Hong Kong) Ltd., all bidding as the transaction advisor.

The transaction advisor will help create the terms of reference for the bidding for the joint venture partner.

“We hope to identify the joint venture partner in the second quarter next year,” Punsalan said.

“We are not a power company that is why we will be minority [shareholder in the power plants],” Punsalan said.

PNOC-EC is looking to start commercial operations of the power plant in 2016.

Potential buyers for the output of the new power plants are utility firms or the grid.

PNOC-EC targets to start mining operations in its Lumbog coal property in Zamboanga Sibugay in the fourth quarter this year.

The coal project is within its - Malangas coal contract located in Zamboanga Sibugay. Based in drilling works, recoverable coal resources in the mine is at 2.1 million metric tons.

Profits of PNOC-EC, which has a minority stake in the Malampaya natural gas project in Palawan, are expected to hit P3.022 billion this year, down 0.17 percent from P3.027 billion last year but still higher than the P2.476 billion recorded in 2010.