Power plant ready to answer president's call for more power sector investments in Mindanao

Majority and minority shareholders of Steag State Power Inc. (SPI) are ready to support the call of President Gloria Macapagal-Arroyo for additional power sector investments in Mindanao.

Energy Secretary Raphael P.M. Lotilla, who stood in as guest and honor at the inauguration of the Mindanao Coal-Fired Power Plant project Monday (after the president’s plane failed to land due to inclement terminal weather), said the country’s chief executive was inviting Steag to consider the expansion of the Mindanao plant or to build a new plant in Southern Mindanao.

The plant, which began commercial operations last November and now accounts for 16 percent of the power generation mix in Mindanao, has reduced the grid’s utilization of expensive oil-fired generating plants from 26-32% to only 13%. It has also increased the Mindanao grid’s reserve margin from 13.2% to 24.6%, above the required reserve margin of 21%.

We’re confident with our equity in the 25 year supply contract with NPC,” said Augusto C. Lopez-Dee, member of the SPI Board of Directors and executive vice president of State Investment Trust, Inc. (Siti) which holds 11% equity in SPI. “And we will seriously consider long-term supply contracts, especially if its market side

Mr. Lopez-Dee said Siti initiated the Mindanao Coal-Fired Power Plant project by winning the international bidding conducted by the National Power Corporation (NPC) in April 1995 in partnership with international power companies.

SITI acted as the primary project developer, negotiating and obtaining all the necessary government permits and approvals. It later partnered with Steag AG of Germany to construct the power plant.

Right now, the key point is financial viability and at present financial companies want to be conservative in their lending decisions,” Mr. Lopez-Dee said. “But the country’s credit rating has improved tremendously and remember, we managed to get a financial close on this project back when the Philippines credit rating was quite shaky.”

Siti is one of the country’s first and leading investment houses. Besides its investment banking and power plant businesses, Siti under chairman Allen C. Roxas is now developing a 75 hectare, high-end residential commercial project along Daang Hari road adjacent to Ayala Alabang Subdivision. SPI Chairman Washington Sycip is also chairman of State Properties Corp., a SITI subsidiary that is developing this particular project.

Mr. Lopez-Dee also said Siti has no objections to Steag’s planned divestiture of a portion of its 89% stake in SPI.

Electricity producer First Gen Corporation vice chairman and chief executive officer Peter Garrucho disclosed during the company’s latest annual shareholders meeting last March, the firm plans to bid for a portion of Steag AG’s majority stake in the Mindanao Coal-Fired Power Plant, following Steag AG’s earlier announcement it will sell 38% of the project. First Gen is the largest Filipino owned private power producer.

Dr. Alfred Tacke, chairman of the Steag AG management board, and state secretary in the German Federal Ministry of Economics and Labor since October 1998, echoed their local partner’s sentiments on the planned expansion and divestiture.

If there is a need for future energy in Mindanao, we’re very interested in expanding energy provision in the future,” he told media shortly before the inauguration.

We are very proud of this project, and the past five years of successful Filipino-German cooperation,” Tacke said. “The Philippines has a very good business environment, and we kept our commitments, commitments we’re ready to keep for another 50 years.”

However, Dr. Tacke echoed other company officials’ earlier statements that long term security is a requisite for their additional exposure. “Considering the risks we have to manage for 25-50 years, we will definitely need the legal framework to guarantee the long-term stability for all projects.”

In his welcome remarks, SPI president and chief executive officer Andreas Rubin cited the Mindanao Coal-Fired Power Plant project as a “shining example of a successful project jointly undertaken by the Republic of the Philippines and the Federal Republic of Germany.”

This power plant is a towering symbol of unity amidst diversity. Albeit the diversities in the culture, beliefs and nationalities of people behind this project – we were united by our common goals. We succeeded and delivered on the promise to the people of Mindanao.

For as long as we continue to work together, we will realize our vision of a prosperous Mindanao and a prosperous Philippines – that is a promise.”

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