RP Energy renegotiating EPC contract with South Korea firm

MANILA, Philippines — Redondo Peninsula Energy Inc. (RP Energy) is renegotiating its engineering, procurement and construction (EPC) contract with its South Korean contractor to build the first phase of its 2x300-megawatt (MW) coal-fired power plant in Subic, Zambales.

RP Energy is a consortium composed of Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. and Taiwan Cogeneration International Corp.

In a statement, RP Energy said it sent a letter of contract termination to its EPC contractors, Korean firm Doosan Heavy Industries & Construction Co. Ltd. and local company Azul Torre Construction Inc.

Under the terminated contract, the validity of the price expired at end-December 2016 “because RP Energy was not able to issue a Notice-To-Proceed to Doosan without the PSA (power supply agreement) approval from the ERC (Energy Regulatory Commission).”

RP Energy signed a construction contract with Azul Torre and a supply contract with Doosan on Oct. 13, 2016. Azul Torre is a local construction company based in Subic, Zambales , in which Doosan has a stake in.

To move the power plant forward, RP Energy said it is in discussions with Doosan on a new EPC arrangement.

“We are waiting for a revised EPC from Doosan which they said they would submit end of April,” MGen president and CEO Rogelio Singson said.

Last week, Doosan’s parent firm, Doosan Co. Ltd. last week disclosed to the Korea Exchange that it received the cancellation letter from RP Energy.

“Notwithstanding the contractor’s cancellation notice of the contractor’s project, the contractor and the contractor are in negotiations for the resumption of the project,” Doosan said.

RP Energy said it remains committed to building a new power plant that would boost the baseload power supply in the Luzon grid and support the government’s Build Build Build program.

“The project is classified as a committed project by the Department of Energy (DOE) and is approved and registered with the Board of Investments,” it said.

However, pushing for the development of coal-fired power plants would only result in consumers paying higher electricity rates, according to energy research institution Center for Energy, Ecology, and Development (CEED).

CEED executive director Gerry Arances said coal spells out higher electricity prices since coal is already more expensive than wind and solar energy.

Under the seven coal PSAs, the average rate of coal electricity is P3.65 per kilowatt-hour (kwh), while wind and solar are at a lower rate of P3.50 per kwh and P2.99 per kwh, respectively.

Arances said what is usually left out in Meralco and other coal giants’ pressure for more coal is the global transition away from coal, which puts facilities like coal-fired power plants at risk of becoming stranded assets.

He cited a study conducted by the Institute for Energy Economics and Financial Analysis (IEEFA) and the Institute for Climate and Sustainable Cities (ICSC) which showed that stranded coal assets are a growing material risk that is inevitable in the Philippines.

According to the IEEFA and ICSC study, Arances said trends in the coal-fired electricity generation sector, such as the overbuild of coal-fired power plants, “may leave rate payers at risk of having to pay above-market prices.”

“If Meralco and its coal affiliates have their way in the approval and operation of their coal plants, Philippine electricity consumers are to be locked into not only 20 more years of dirty and steadily increasing electricity prices, but also into paying for stranded asset costs of obsolete coal plants,” Arances said.