Langogan 6.8 MW run of the river hydro Palawan, Philippines
The Proposition To develop a portfolio of at least 50MW of small hydro in the Philippines within the next 5 years. To list the portfolio once established. Justification; Experienced and competent team Welcoming investment environment for renewables in the Philippines Proven technology Risks analysis done and mitigation underway Socio ecoomic development factored into the project implementation; Langogan is the first project
The team 60 years experience energy project development inc remote locations in depth hydrology and engineering expertise in depth knowledge of Philippines energy sector 10 years energy project investment appraisal 12 years energy project NGO work Ex Shell, BP, Baker + McKenzie Negotiations Stakeholder relationships Commercial/legal E&P and Gas and Power Project controls/management Investment appraisal Hydrology Community consultation Agricultural engineering Economics and modelling Reporting Development work Land and hydrological Surveying Contracting and procurement Project management Commercial/legal Construction management Design engineering Civil/electrical and controls Project management HSE Management processes Corporate law/ company secretarial Energy law Banking Negotiations Investment appraisal Project management Civil engineering Estimating and cost control Contracting and procurement Construction management Corporate finance Banking Accounting Commerce Investment appraisal
the philippines power sector 7,000 islands, 92 Mln population [ 50 Mln Luzon, 18 Mln Visayas, 24 Mln Mindanao] National Power Corporation, Luzon Grid Power crisis, early 1990’s Dependable capacity 13,205 MW [ 10,028 Luzon, 1,494 Visayas, 1,682 Mindanao] Most expensive power in the World [affordability basis] IMF recommendation led to EPIRA  Privatisation efforts ongoing since then, slow take up and mainly big power Renewable Energy Act  Inadequate power development infrastructure
portfolio establishment & development plan 2009 2010 2011 2012 2013 2014 Langogan Batang Batang Liangan Odiongan 2&3 Pasil
Langogan 6.8mw hydro - project setting Opportunity studied by NPC [with halcrow + kennedy + donkin] 1992 by PNOC [with Soluziona Energia] 2007, promoters 2007/8 Palawan population, 700,000 Base load 10MW, Peak 21.7 MW ERC approved tariff 5.6404Php [0.1175 US Cents]/kWh Currently 100% diesel/bunker powered on short term contracts Frequent power outages [10 incidents/month ave x 1.16 hrs/incident] An environmentally sensitive area A ‘backbone grid’ Real cost of generation - Php 17.58 [0.3662 US cents]/ kWh Generation charge to consumers - Php 5.5501 [0.1156 US Cents]/kWh Electricity charge to consumers - Php 8.023 [ 0.16715 US cents]/kWh
Langogan 6.8MW hydro project – (pre) development history <ul><li>1992 – NPC, feasibility study with Sir W Halcrow + Kennedy and Donkin [World Bank] </li></ul><ul><li>Strong community resistance </li></ul><ul><li>2006/2007 – PNOC feasibility study with Soluziona Energia [Spanish Government] </li></ul><ul><li>8 hour peaking assumption [= marginal economics] </li></ul><ul><li>2007 – promoters invited by NPC to “have another look” </li></ul><ul><li>screening/market assessment, review of previous NPC fs, screening economics </li></ul><ul><li>sourcing pre development funding </li></ul><ul><li>gaining LGU support </li></ul><ul><li>commencement of flow measurement + EIA </li></ul><ul><li>access survey/geotechnical review/design concept validation </li></ul><ul><li>further community consultation </li></ul><ul><li>cost estimate, further economics </li></ul><ul><li>PCSD application </li></ul><ul><li>water rights application </li></ul><ul><li>FEED </li></ul><ul><li>financing, CDM application </li></ul><ul><li>power sales agreement discussions </li></ul><ul><li>development and operating contract application </li></ul>Dec 2008 - RE Act signed
Langogan 6.8MW hydro project – project metrics CAPEX US$20mln Equity (25%) US$5mln Investment-to-Date US$2mln Time FID to Commercial operation 2 years Generation charge Php 5.6404 [$0.1175]/kWh Annual generation 31.7GWh Percentage of Palawan demand 24% NPV 7 (After tax, 25 yrs) US$ 17.6 Mln IRR [E] 20.7% Revenues US$ 3.725/a escalating Economics main assumptions; 25 year life, no residual value Escalated in accordance with ERC approved formula Base load facility - all power sold [RE Act] Debt Equity ratio 75/25 OPEX US$ 1.288/a( escalated at 5.3%)
Philippines investment environment A ‘curate’s egg’ PIATCO NAIA 3 Corruption Vested interests Feudalism Nationalism Peace and order SC38 Malampaya Korean investment Electricity market Educated experienced workforce Renewable Energy Act EPIRA Korean investment: $1.2B of the $3.5B foreign investments in 2006 ( from the Phil chamber of commerce website) Bishop: "I'm afraid you've got a bad egg, Mr Jones"; Curate: "Oh, no, my Lord, I assure you that parts of it are excellent!" "True Humility" by George du Maurier , originally published in Punch , 1895.
langogan 6.8MW hydro project – pre development approach FID [final investment decision ] front end engineering design EPC contracting financing in place all approvals gained ESA ready to sign initial screening and evaluation establish flow measuring market assessment further screening and economics application for permits and approvals hydrology studies scheme concept design initial permits and approvals gained outline scheme design approval of sales terms
challenges & risks to be managed Challenges [incidental] Philippines beauracracy timing lack of exclusivity perceptions of the business culture in the Philippines raising money local EPC capacity Risks to be managed CAPEX Payments
way forward complete Langogan FID requirements and build the facility within 20 months accelerate pre development activities on 2.5MW Batang Batang commence pre development activities on Mindanao opportunities target 50MW in Philippines commercial operation by 2014 own and operate the portfolio review other Philippines opportunities if introduced step out to IndoChina
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