MANILA, Philippines -- Publicly listed Aboitiz Power Corp. and its partners at Steag State Power, Inc. have inked an agreement to put up a 150-megawatt unit for their coal-fired power plant in Misamis Oriental?a move seen to help ease power supply in the island within two years' time.

?Mindanao needs a more stable baseload capacity and also needs to diversify its generation sources to be less dependent on hydro,? said APC president and CEO Erramon I. Aboitiz.

The 150-MW unit will form the third unit of the Steag-operated 232-MW coal facility, located within the Phividec Industrial Estate.

Steag State Power is the special purpose company established by APC, Evonik Steag GmbH of Essen in Germany, and the La Filipina Uy Gongco Corp., which currently hold interests of 34 percent, 51 percent and 15 percent, respectively.

According to APC, the partners will establish another corporation that will oversee the operations of the planned additional capacity and have all agreed to maintain their shareholdings in the same proportions as their interests in Steag State Power.

The planned coal facility is expected to be completed by 2013. Certain essential facilities, such as the jetty, coal handling facilities and stockyards and the 138-kilovolt interconnection with the Mindanao grid are to be shared with the existing facilities, thus decreasing project risk and investment.

Whereas Steag sells its electricity to state-run National Power Corp., the new venture will sell power to interested utilities or industries in the form of long-term power sales agreements.

Depending on the interest the market demonstrates, the agreement contemplates the possibility of another unit.

?This addition to STEAG State Power is the logical way to achieve this. This project assures Mindanao of reliable and cost-effective power to fuel its continued economic advancement,? Aboitiz added.

In the first few months of the year, the Mindanao grid, along with the Luzon and the Visayas, had been experiencing power supply shortages, which resulted in brownouts, lasting about two hours to as long as 12 hours daily.

These shortages were due to the unplanned breakdown of facilities, simultaneous maintenance work on power plants that necessitated shutdowns, and the El Niño weather disturbance, which had drastically cut the generating capacities of hydroelectric power plants.

Mindanao, which sources about half of its electricity requirements from hydro resources, was the worst hit by the prolonged drought and had to rely heavily on diesel power plants to supply additional power.