China investors prefer PSAs – Cusi

Published December 22, 2019, 12:00 AM

by manilabulletin_admin


Chinese investors are not biting the invitation of Energy Secretary Alfonso G. Cusi that they infuse capital for greenfield power projects in the Philippines on a “merchant basis,” or that investment track wherein their capacities may not be covered by prior supply contracts.

Cusi said the prospective Chinese power developers have informed him that they want power supply agreements (PSAs) if they will invest in electricity generating facilities in the country.

“I have written them because they later on told me that they want PSAs,” the energy chief said, with him noting that his tenor of investment-invitation to the Chinese will be to inject capital for new power projects on merchant capacity terms.

Cusi said he had communicated to the Chinese investors via the National Energy Administration (NEA), which is the counterpart agency that the Department of Energy (DOE) has been corresponding with.

With merchant basis of power development, an investor will have to put up a power plant even without yet the benefit of firm power supply contracts – and may instead opt to trade its capacity via the Wholesale Electricity Spot Market.

Back in 2017, Cusi announced to the media that China Energy Engineering Corporation will be coughing up investments for power projects of up to 1,200 megawatts in the Luzon and Visayas grids to help shore up future capacity in the country’s power system.

The energy chief had been confident then that the Chinese firm will enter the domestic power sector on ‘merchant footing” – and he was counting on their prospective investment as capacity addition that the country can lean on for long term power supply.

Two years after, however, Cusi indicated that the Chinese investors had changed their targeted investment course – that they are now seeking PSAs for their prospective ventures in the power sector.

The current DOE has the biggest dilemma of attracting new power projects that will satiate the country’s electricity needs past 2022-2023 timeframe, when capacity is seen to be treading on tight conditions again.

The last big-ticket power capacity that will be added to the Luzon grid is the second unit of the 1,336-MW Dinginin coal-fired power plant project of the Aboitiz-Ayala joint venture.

Beyond that, the DOE can no longer name any new committed capacity aside from the ones that may have yet to be auctioned via competitive selection process by Manila Electric Company (Meralco) and the other distribution utilities.