A unit of the Manila Electric Co. is now considering to look for a new contractor to build a planned 600-megawatt power plant at the Redondo Peninsula in Zambales as the previous contractor had proposed a new contract that would make the project nonviable.
Rogelio L. Singson, president and chief executive of Meralco PowerGen Corp. or MGen, yesterday said in a briefing that South Korean firm Doosan group had submitted a proposal that pushed up costs “substantially.”
Redondo Peninsula (RP) Energy Inc. — a partnership among Meralco, Aboitiz Power Corp. and Taiwan Cogeneration Corp. through their respective subsidiaries — last March terminated a P46-billion engineering, procurement and construction (EPC) contract with Doosan Heavy Industries & Construction Co. Ltd.
According to Doosan, RP Energy cancelled the contract because “the NTP (notice to proceed) for this project was not issued until Dec. 31, 2017, due to delayed tariff approval for the project by the Energy Regulatory Commission” or ERC.
If RP Energy had not cancelled, the company would have been burdened with commitment fees while its application lingered in uncertainty at the ERC.
Both RP Energy and Doosan subsequently said they were in talks related to a revised contract.
Yesterday, Singson said Doosan’s new proposal had raised the project cost too much.
In a separate interview, Singson said the proposal would push down the projects internal rate of return — a measure of profitability — to below 8 percent.
“With interest rates at 7 percent, that would mean we would just be working for the banks,” Singson said.
He added that Doosan suggested a reconfiguration of the project from a coal-fired power plant complex with two generators at 300 MW each to one with a single generator at 600 MW.
“This would reduce the unit cost, but at a different (financing) price,” Singson said. “So now we’re looking at what would be the best EPC contractor available.”