Philippine Power Plant Generation Project
Without Financial Closing
May 12, 2015
Seriously Hemorrhaging Power Sector
In 1990, the National Economic Development Authority - NEDA,
asked for the input of the Department of National Defense then under Secretary
Fidel V. Ramos, for the medium term projections of the national economic
development plan.
We drafted the response of Secretary Ramos and one of our more prominent suggestions
was for the Philippines to increase by leaps and bounds its refining capacity
for raw diesel fuel and to make a firm target of building a nationwide power
infrastructure with a generation capacity of 100,000 Megawatts or
even higher.
At the time, the Philippine population, 60,703,206 compared to that of Taiwan
that had only a population of 20,393,628 was 2.97 times as many as Taiwan's or
297% bigger. In that period, Taiwan already had an installed capacity of around 20,000
Megawatts.
The total land area of Taiwan is only 36,000 square kilometers;
whereas, the Philippines has a size of 300,000 square kilometers, nearly ten
times the size of Taiwan.
Yet, the combined installed capacity of all power plants in the
entire Philippines during the year in question was only 5,772 Megawatts. Today, while
Taiwan already has more than double its capacity in 1990 (Taiwan installed
capacity is above 45,000 Megawatts as of end of 2013), the total Philippine
generation capability today is only 17,000 Mega Watts.
If you look at World Bank figures, the Philippines has a capacity of 23,474 kt of oil equivalent or already 27,300.69 Megawatts as early as in 2009. How the World Bank reflects a bigger capacity could mean that some of the power plant projects it supported through loans are mirrored in its statistics, whereas in the Philippines' database, some of the foreign loan-assisted undertakings did not push through because the monies got lost in the traffic. The funds got hijacked by criminals in expensive suits and barongs.
If you look at World Bank figures, the Philippines has a capacity of 23,474 kt of oil equivalent or already 27,300.69 Megawatts as early as in 2009. How the World Bank reflects a bigger capacity could mean that some of the power plant projects it supported through loans are mirrored in its statistics, whereas in the Philippines' database, some of the foreign loan-assisted undertakings did not push through because the monies got lost in the traffic. The funds got hijacked by criminals in expensive suits and barongs.
For a country ten times bigger than its neighbor that has a
power infrastructure capable of generating 45,000 MW, we are able to generate
only less than half of the capacity of Taiwan.
It is no wonder why all the efforts of the present government
and past administrations to prevent the inevitability of the forthcoming
extreme power shortage in many areas of the country are all abject failures.
Be Prepared
Every single sector in the Philippines should brace for the
impact of the power shortage when the month of June and July come around. If
the heat brought about by El Niño will be very severe due to
global climate change, more than 80% of the entire current Philippine
population of over 100,000,000 will be suffering and cursing and blaming the
government, to no avail.
Appeal for Investor
Support
What is needed is for investors all around the world today to
come to the rescue, even before the impact of the power outages will hit the
country. When the stirrings of the outages
takes its casualties by the tens, hundreds and over, affecting both locals and
tourists – young and old, it will have become useless and tenuous to be calling
for "HELP!” when people especially very young vulnerable children as well
as senior citizens are getting ill or dying.
The risks to the population arising from power shortage, to
say the very least, are unpleasant to imagine. The damage will be felt
well unto many, many months after 2015 is gone. It is immensely possible that
the pain and hardship will linger in the Philippines until 2017.
Ready To Go Power Plant Projects
The
application for full government approval of a power generation plant for
Independent, Co-Shared (Government and Private), as well as other types of
these projects on any of the financing schemes available (Build Operate
Transfer, Build Operate Lease, etc.) under normal circumstances takes about
four to five years to complete - with all the requirements already complied by
the applicant.
Some projects with small power capacity for instance, in rare circumstances are completely approved within the span of three to four years.
Some projects with small power capacity for instance, in rare circumstances are completely approved within the span of three to four years.
Under
the dynamics of Philippine setting, the applicant usually exposes itself from a
low of THREE HUNDRED MILLION PHILIPPINE PESOS up to sometimes very high
exposures. In the case of a power facility in Quezon Province, before it became
operational and had all the necessary permits on hand, the project proponent
actually spent billions - some of which went into the hands of high ranking
officials in the Executive Branch and political quislings that claimed
closeness to the Philippine President.
None
of the payouts composing the bigger share of those billions spent by the Quezon
Province power project are recorded on any ledger in the country, with the
possible exception of the very private diary of the paymaster or fund comptroller
of the company project proponent.
Financing
the securing of a power generation plant permit to construct and operate and
the appropriate license or franchise for the operator forms part of the
horrendous hidden costs of the total budget for building the facility and
running it.
Over
the years, projecting enormous income from owning and operating power
generation facilities, many entrepreneurs or even public institutions, began
their dreams of installing power facilities. The types of these facilities
includes the non-renewable (mostly diesel-dependent) and renewable power
sources, such as biogas, hydro, solar, wind and ocean, among others.
More
than 600 of these startups and big proponents were able to secure licenses and
permits from the proper authorities and the consent of the stakeholders. Out of
a total 648 power projects, there around 90 power projects that no longer have
any money to proceed with the construction and eventually, the operation of
their proposed power plants.
Financial Support
In
the case of more than 90 power plant projects out of a total of 648 power
generation projects all in all around the Philippine Archipelago, there are no
investors to fund added activities beyond the securing of the government
permits and approvals.
Therefore
because of lack of capability of the applicant holding the final government
approval to start the building phase of the power generation facility, the
project is stalled indefinitely instead of being able to hit the ground
running. Thanks to the bribes and gifts that top officials extort out of power
project proponents, by the time the project is due to break the ground, much of
the initial funds allocated for the project have already gone down the drain.
Out of
the remaining 558 projects of the 648, a large percentage will not push
through, also because of the confusing position of the government vis-a-vis the
private sector on the parameters to be used in categorizing projects as having
financial closing or not.
In
the summations of the projected capacities alone, the power sector states that
90 power projects without financing will produce 12,170 Megawatts of
electricity for the combined areas of Luzon, Visayas, Mindanao.
However,
surprisingly, according to the government report as of March 2015, the total
capacity in terms of electric power that will be produced by these 648 power
plants - nearly 100% of which is initiated by the private sector, is only more
than 10,000 Megawatts. We need to clarify further with the Department of
Energy how their figures appear to be very topsy turvy.
All
in all, these 90 power projects require more than UNITED STATES DOLLARS SIXTY
BILLION SIXTY MILLION ( $60,600,000,000 ) to build up to Start Up Commissioning.
Thereafter,
the unfunded 90 power projects will need token augmentation funding for
continuous operations since the facility's capacity is badly required in the
area where it is situated.
The
need is doubly emphasized for the current year 2015 when the summer season
compounded by the El Niño phenomenon will geometrically amplify the consumption
of power in the Philippines. God forbid, if the solar maxima or solar super storm happens, goodbye power problems. Also, goodbye Philippines!
Estimates
coming from the Department of Energy state that, broken down into capacity, the
following are the required investments for the major areas of the Philippines:
Luzon
10,000 Megawatts - 40 Units - $15,000,000,000.00
Visayas
470.00 Megawatts - 11+ Units - $705,000,000.00
Mindanao
1,700 Megawatts - 30+ units - $2,550,000,000.00
Negotiations Talking Points
For the fully approved and ready to start power generation projects, the required capacity of the interested investor who seeks to buy out any one of the unfunded approved 90 power generation plant projects is:
1. Agreement of assignment, transfer of the Power Project between original project owner and the Investor.
2. Reimbursement for the original project owner on case to case basis of cost of three-to-five year workout for approval of project at minimum or floor rate PHP300,000,000.00 to a higher amount, to be specified by the owner of approved project.
3.
Proof of Capability to fund at minimum of USD5,000,000 per Megawatt of the
power generation plant project being taken over or funded by the investor.
4.
Retention of the original owner of 15% share in the resulting spin off entity
that will operate the power plant and pro-rated income from sales and marketing
after deductions of the power plant.
Any
investor has to be fully transparent and must submit verifiable proof of fund
prior to commencing any formal negotiations with the original project owners to
ensure the closing of the deal.
Any
inquiries related to this article may be forwarded to
asiacommunications@msn.com, telephones +632-904-1950, +632-5033966; mobile
phone +639162726638 and +639288389444.
GREENGOLD
CYBERPARKHOLDINGS CORPORATION
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