AES Philippines, the local unit of US-based global energy firm AES Corp., has signed power supply agreements (PSAs) with seven electric cooperatives (ECs) in northern Luzon to cover their baseload power requirements for 20 years starting in 2019.
The ECs decided last year to aggregate their requirements and conduct a competitive selection process (CSP) to source power from a new facility.
Several generators qualified for the CSP, but AES Philippines ultimately won the bidding by providing the most competitive long-term rate from the planned expansion of its 630-megawatt (MW) Masinloc coal-fired thermal power plant in Zambales.
The aggregated capacity of 92 MW will be supplied from the 300-MW expansion of the Masinloc plant.
AES operates and owns the Masinloc plant as part of a joint venture with Electricity Generating Public Co. Ltd. (EGCO) of Thailand and the International Finance Corp. (IFC).
The electric cooperatives came from Region 1 and the Cordillera Administrative Region (CAR) or the so-called R1+CAR. These include Abra Electric Cooperative Inc. (ABRECO), Ilocos Norte Electric Cooperative (INEC), Ilocos Sur Electric Cooperative (ISECO), Kalinga Electric Cooperative (KAELCO), La Union Electric Cooperative (LUELCO), Mountain Province Electric Cooperative Inc. (MOPRECO), and the Pangasinan III Electric Cooperative (PANELCO III).
Neeraj Bhat, AES Philippines managing director, applauded the ECs’ vision and initiative in organizing the aggregation.
“The design, evaluation, and execution of the entire bid process was competitive, transparent, fair, and conducted with integrity,” said Bhat.
With the result of the aggregation, Bhat said these ECs and their customers will enjoy the most competitive generation rate ever signed for a new power plant in the Philippines.
Egdon A. Sabio, general manager of ISECO and president of the Region 1 Electric Cooperatives Association, said they pursued aggregation “because individually we are small and weak, but as a group, we are strong.”
“The objectives of the aggregation are to secure the supply of electricity for our captive customers, achieve the least-cost price of power through CSP to benefit our consumers, and manage our market risks. Today, we accomplished all these objectives,” said Sabio.
Based on the study of the group’s transaction adviser, the PSAs they have signed will result in reductions of up to 20 to 30 percent in the retail and generation rates for around 3.5 million people in their service areas.
The 300 MW expansion of the Masinloc power plant has secured all key permits to start construction and discussions are under way with lenders and EPC contractors.
The commissioning is expected in 2019 to meet power supply obligations.
In addition to the R1+CAR ECs, the Masinloc expansion has already signed power supply agreements with other customers and is actively marketing its remaining open capacity to additional electric cooperatives, distribution utilities, and contestable customers.
In June 2015, the Department of Energy (DOE) released a circular mandating all regulated distribution utilities to use competitive selection processes to procure their future power supply requirements.
In the circular, the outcome of the R1+CAR aggregation was specifically cited as evidence of the efficiencies brought by CSP.
AES Philippines said it was pleased to be a part of this landmark aggregation and is committed to making it a successful example of the benefits of competition, transparency, and fairness in power procurement.