PHILIPPINE ENERGY SECTOR



Velvyslanectví ?eské republikyEmbassy of the Czech RepublicPasuguan ng Republika ng Tseko 30/F Rufino Pacific Tower, 6784 Ayala Avenue Makati City, Metro Manila, Rep. of the Philippinestel.: (+63-2) 811-1155 | fax.: (+63-2) 811-1020 manila@embassy.mzv.cz | mzv.cz/manilaPHILIPPINE ENERGY SECTOROverview and Business Opportunities Ver 3.0 / April 2015Content TOC \o "1-3" \h \z \u PHILIPPINE ENERGY SECTOR PAGEREF _Toc406768233 \h 1History, Development and Legal Framework PAGEREF _Toc406768235 \h 1Energy Sector Performance PAGEREF _Toc406768236 \h 3High Cost of Energy PAGEREF _Toc406768237 \h 6Energy Reform Agenda / Philippine Development Plan PAGEREF _Toc406768238 \h 6Key Players in the Energy Sector PAGEREF _Toc406768239 \h 8Energy Opportunities in the Philippines PAGEREF _Toc406768240 \h 11Energy Crisis in 2015 PAGEREF _Toc406768241 \h 11Energy Fairs in the Philippines 2014-2015 PAGEREF _Toc406768242 \h 12191452572389Biddings, Tenders and Projects:Department of Energy PSALM - Power Sector Assets and Liabilities Management CorporationPhilippine Government Electronic Procurement System00Biddings, Tenders and Projects:Department of Energy PSALM - Power Sector Assets and Liabilities Management CorporationPhilippine Government Electronic Procurement SystemHistory, Development and Legal FrameworkThe National Power Corporation (NPC) has, since its establishment in 1936, controlled and monopolized both the transmission and generation sectors. But legislations and presidential decrees have been put in place to put an end to the monopoly. In 1987, the Aquino administration passed Executive Order No. 215 to encourage private sector participation. In 1990, Republic Act No. 6957, more popularly known as the Build-Operate-Transfer Law (BOT Law) was enacted which permitted private contractors under a build-operate-transfer or build-and-transfer (BAT) scheme to construct and operate power generations facilities. But despite the enactment of these laws, the increase in demand for energy wasn’t met and the factors that contributed to it was the suspension of the expected operations of the Bataan Nuclear Powerplant (BNPP) and the fact that investors were said to be discouraged from investing since they were forced to negotiate power supply contracts exclusively with NPC. Republic Act No. 7718 amended the BOT law to include Rehabilitate-own-and-operate (ROO) schemes, as well as the concept of “unsolicited proposals.”Republic Act No. 7468, otherwise known as the Electric Power Crisis Act of 1993 gave the president the power to enter into and negotiated contracts for the construction, repair, rehabilitation, improvement or maintenance of power plants, projects and facilities. This in turn resulted in an increase of investments made by Independent Power Producers (IPP). Despite this, NPC remained in debt. In 2001, NPC owed approximately US$ 16.39 billion to creditors.The Electric Power Industry Reform Act (R.A. 9136), also known as EPIRA Law was created in order to bring down electricity rates and to improve delivery of power supply to end users by encouraging competition and efficiency in the electricity industry. After being in place the NPC will undergo restructuring and there will be a separation of the different components of the power sector, namely, generation, transmission, distribution and supply. NPC’s privatization is also included in the said reforms. The state-owned power firms generation and transmission assets (e.g. power plants and transmission facilities) were put on sale to private investors.Regulation A quasi-judicial regulatory body, the Energy Regulatory Commission is also created to replace the Energy Regulatory Board to promote competition in the power sector, encourage market development and consumer choice.Another change introduced by EPIRA Law is the creation of a wholesale electricity spot market, through which competitive market forces would establish generation tariffs and make costs more transparent. Effects of this scheme were more visible in later years, around 2006. Implementation of EPIRA was severely delayed. Privatization In the end of 2012, the Power Sector Assets and Liabilities Management (PSALM), a?government-owned and controlled corporation tasked to undertake the privatization of the assets of the National Power Corporation (NPC) and the National Transmission Corporation (Transco) as well as the privatization of the management of NPC's IPP (Independent Power Producer) contracts, had managed to privatize 70% of the total capacity of generating assets of NPC in Luzon and Visayas and more than 70% of the total energy output of power plants under contract with NPC to the IPP administrations. The EPIRA also introduced the concept of Retail Competition and Open Access. Retail Competition means that eligible electricity customers or retail customers may themselves contract for the supply of electricity with authorized suppliers, rather than through the franchised distribution utility. Open Access on the other hand is the means by which the Retail Competition is achieved. It means that the retail electricity customers and suppliers of electricity may also contract with the transmission company and the distribution company for the wheeling or delivery of energy/electricity through the transmission of distribution ware. Upon implementation of EPIRA, the government is no longer allowed to build power plants, and it is the private sector that builds power plants. The DOE only assists/facilitates in the timely implementation of the power projects by providing endorsements to other government agencies in securing the documentary/ regulatory requirements.In the event that there are emergency cases of power outage and there is a need for the production of more energy, it is only then that the government may request for emergency powers to address the immediate need. Energy Sector PerformanceThe statistics from the department of Energy provide the 2013 Total Gross Power Generation in MWh at 75,265, 842 MWh (in Luzon it is at 54,819,517, in Visayas it is at 11,099,593, in Mindanao it is at 9,346,731.)When it comes to power generation by plant type, the largest percentage has consistently been through Coal, with a 44% share of total generation as in 2013, there has been 32,081,007 MWh. Natural Gas comes in second at 18,791,266 MWh, Hydro at 9,954,416 MWh, Geothermal at 9,574,598 MWh, Oil based Energy with 4,490,600 MWh, Wind at 65,655,MWh Biomass at 211,973MWh, and solar at 1,414 MWh.The same source provides that out of the 75,266 GWh the biggest portion of power consumption (20,677 Gwh) falls under the Industrial Category and the Residential Use is second at 20,614 Gwh. Commercial use, on the other hand consumed 18,304 within the same period in 2013. Gross Power GenerationPhils by Grid in Mwh20092010201120122013% shareLuzon44,972,10350,250,35149,973,62152,275,58754,819,51772.83%Visayas8,724,2989,075,26410,455,74311,482,71411,099,59314.75%Mindanao8,235,2788,402,7698,702,6489,126,8719,346,73112.42%Total61,931,68067,728,38469,132,01272,885,17275,265,842100%Source : Department of Energy Statistics Source : Department of Energy StatisticsOut of the total energy generation in the Philippines in 2013, local fuel is at 57.92% of the total share, while the rest, the remaining 45.16% is imported. 39% of coal, which is the dominant source for the energy generation as of 2013 statistics from the DOE, is imported, and only 4.99% of this dominant source is locally sourced. Natural gas, which comes in as the second largest source of energy at 25.77% of the total shares, is mostly from local sources.GROSS POWER GENERATIONPhilippines By Plant Type2010201120122013MWh% shareMWh% shareMWh% shareMWh% shareCoal23,301,10534.4025,342,17636.6328,264,86738.7632,081,00743.99Oil Based7,101,00210.483,397,5994.914,254,0155.834,490,6006.16 - Combined cycle1,202,0401.77123,5560.18227,3540.31247,1590.34- Diesel4,531,6886.692,762,3313.993,332,0814.573,805,0785.22- Gas Turbine3,1640.0000.0000.0000.00- Oil1,364,1112.01511,7120.74694,5800.95438,3630.60Natural Gas19,517,85428.8120,591,32329.7719,641,52726.9318,791,28625.77Geothermal9,929,15214.669,942,33014.3710,249,99014.069,574,59813.13Hydro7,803,40511.529,697,53214.0210,252,13414.069,954,41613.65Wind61,7170.0988,2040.1375,3390.1065,6550.09Solar1,2540.001,2120.001,3200.001,4140.00Biomass27,2700.04115,2740.17182,8190.25211,9730.29Total Generation67,742,759?69,175,650?72,922,011?75,170,950?Source: Department of Energy StatisticsGeneration using Local and Imported Fuel?2010201120122013Using Local FuelMWh% Share to TotalMWh% Share to TotalMWh% Share to TotalMWh% Share to TotalCoal1,607,0912.371,859,5102.692,463,2233.383,638,4024.99Natural Gas19,517,85428.8120,591,32329.7719,641,52726.9318,791,28625.77Geothermal9,929,15214.669,942,33014.3710,249,99014.069,574,59813.13Hydro7,803,40511.529,697,53214.0210,252,13414.069,954,41613.65Wind61,7170.0988,2040.1375,3390.1065,6550.09Solar1,2540.001,2120.001,3200.001,4140.00Biomass27,2700.04115,2740.17182,8190.25211,9730.29Sub-total38,947,74357.4942,295,38561.1442,866,35258.7842,237,74557.92?Using Imported FuelMWh% Share to TotalMWh% Share to TotalMWh% Share to TotalMWh% Share to TotalCoal21,694,01432.0223,482,66633.9525,801,64435.3828,442,60539.00Oil-based7,101,00210.483,397,5994.914,254,0155.834,490,6006.16 Combined Cycle1,202,0401.77123,5560.18227,3540.31247,1590.34 Diesel4,531,6886.692,762,3313.993,332,0814.573,805,0785.22 Gas Turbine3,1640.0000.0000.0000.00 Oil Thermal1,364,1112.01511,7120.74694,5800.95438,3630.60Sub-total28,795,01642.5126,880,26538.8630,055,65841.2232,933,20545.16?Using Local Fuel 38,947,74357.4942,295,38561.1442,866,35258.7842,237,74557.92Using Imported Fuel28,795,01642.5126,880,26538.8630,055,65841.2232,933,20545.16Total 67,742,759?69,175,650?72,922,011?75,170,950?Power Consumption by Sector in Gwh20092010201120122013Residential17,50418,83318,69419,69520,6014Commercial14,75616,26116,62417,77718,304Industrial17,08418,57619,33420,07120,677Others1,5231,5961,4461,6681,971Electricity Sales50,86855,26656,08959,21161,566Utilities Own Use3,5244,6775,3985,3515,959Power Losses7,5427,8007,6808,3607,741Total61,93467,74369,17672,92275,266Source: Department of Energy StatisticsHigh Cost of EnergyThe high cost of energy in the Philippines is one of the biggest issues that the government aims to resolve. The Philippines’ electricity tariff are said to be among the highest in the world. It is important to address considering the fact that it is one of the inhibitors for foreign companies wishing to invest in the Philippines, on the other hand, investments in energy production tend to return quicker than in the rest of the word.Meralco’s (distributing company) average retail tariff pegged at US$0.2026 per kilowatt-hour (kwh) or PhP8.82,4 are ranked ninth highest in the world and the second highest in Asia (next only to Japan). The biggest component of this tariff is the generation component, at 65 percent of the overall retail tariff. This is reflected in a study made by the International Energy Consultants (IEC). IEC points out that Philippine power supply tariffs re?ect actual costs of supply as compared to its neighbors who enjoy government subsidies that reduce their average tariffs.The Philippine Energy Plan and Philippine Development Plan also illustrated the current situation of the Philippine Energy Sector. Philippine Energy Plan 2012-2030 says that the current installed capacity in the country of about 16,250MW is expected to go up to 25,800MW (an increase of about 60 percent by 2030). This is still expected to be short of the projected demand of 29,330MW in the year 2030.ERA - Energy Reform Agenda / Philippine Development Plan Under the administration of President Benigno Aquino, and during the time of then Energy Secretary and now Cabinet Secretary Jose Rene Almendras, the Department of Energy started to formulate the Energy Reform Agenda (ERA). The ERA was also mandated in order to pursue the UN Sustainable Energy for all initiative development, and the ASEAN Plan of Action for Energy cooperation. The energy Reform Agenda is mentioned in the Philippine Development Plan (PDP) 2011- 2016 and includes the following measures:Power Sector Development: Based on the Plan, the government will concentrate its efforts on the completion of committed power projects, as well as attract local and foreign investors to venture into indicative and potential power projects to include electrification projects. B. Fuelling Sustainable Transport Program: PDP will pursue the implementation of the Fueling Sustainable Transport Program (FSTP) which seeks to convert public and private vehicles from diesel and gasoline to compressed natural gas (CNG), liquefied petroleum gas (LPG) and electric power. Under the program, CNG buses are envisioned to ply throughout the country. It also includes the promotion of electric vehicles for public transport and the increase in biofuels blends to 20.0 percent. It also aims to reduce air pollutants in the country.C. Indigenous Energy Development Program: The Plan indicated the energy sector’s intention to pursue all means to develop the country’s indigenous resources. The plan programs the conduct of energy contracting rounds as an effective strategy to bring in critical investments for the exploration, development and production of local energy resources. D. National Renewable Energy Plan: The Renewable Energy Act (Republic Act 9513) was passed in 2008 to fully harness the country’s renewable energy potential such as geothermal, hydro, wind, solar, biomass and ocean. The PDP includes the targets set under the NREP to strengthen its energy security plan. Specifically, the NREP seeks to increase the country’s renewable energy-based capacity by 2030. It provides incentives to private sectors investments in Renewable Energy such as: 7 yrs. tax holiday after the beginning of the commercial operations, duty-free importation of Renewable Energy machinery, zero % value-added tax rate for equipment and materials, cash incentives, tax exemptions, feed-in tariff system rules established by the Philippines Energy Regulatory Commission. E. Energy Efficiency and Conservation Program: The PDP includes the National Energy Efficiency and Conservation Program (NEECP) as one of the centerpiece strategies in pursuing energy security of the country and looks into it as a major solution to the energy challenges of the future. The proposed legislation aims to incorporate policies and measures to develop local energy auditors and energy managers, establish the ESCO industry, encourage the development of energy efficient technologies and provide incentives for the effective promotion of efficiency initiatives in the energy market sector. F. Natural Gas Masterplan: This includes the review and update of the Master Plan Study for the Development of the Natural Gas Industry in the Philippines. It also includes an evaluation of the natural gas infrastructure requirements in the Visayas and Mindanao regions in view of the DOE’s plan to implement a Natural Gas Infrastructure Development Plan in these regions. The Masterplan, with technical assistance from Japan International Cooperation Agency (JICA) and World Bank, evaluates the opportunities, critical infrastructures and required investments for the development of the natural gas industry. The Philippine Development Plan is expected to be updated after the elections in May 2016.***KPMG in its study on the energy sector estimates that there will be an aggregate investment opportunity of about US$25 billion until 2030. The opportunity is big and the sector has the players who could potentially handle that level of investment requirements. The study further mentions that there may be a need for Capacity development for the existing stakeholders to thrive in the changed environment; Potential partnerships across the Generation, Transmission and Distribution sectors; and Possibility for new players to enter the competitive markets in the Philippines to supplement the efforts of the existing players.DOE further says that the Energy Plan or Power Development Plan provides the available opportunities for the private sector to decide which area or sector they want to invest in. In the Power sector, interested power generator may directly decide which Distribution Utility (DU) it may submit offer and both the DU and the investor negotiate for a supply contract subject for approval of the Energy Regulatory Commission. Aside from the registration of their projects, private sectors involved in Energy projects are committed to provide monthly updates on the status of their projects since DOE is considering their projects in our power development planning. On the part of DOE, they also assist private investors in case they have issues on other government agencies such as DENR, NCIP, NWRB, etc. ?Nuclear Energy in the PhilippinesThe Philippine nuclear program started in 1958 with the creation of the Philippine Atomic Energy Commission (PAEC) under Republic Act 206. At present, the Philippine Nuclear Research Institute handles all nuclear related activities, mostly research work related to mutation, radiation, etc. They work closely with the National Power Corporation with regard to the “maintenance” of the sole attempt at establishing a Nuclear Power Plant in the country. The Bataan Nuclear Power Plant (BNPP) was built under then President Ferdinand Marcos in 1973 as a response to the 1973 oil crisis, as the Middle East oil embargo had put a heavy strain on the Philippine economy, with the belief that nuclear power is the solution to meeting the country's energy demands and decreasing dependence on imported oil. The plant was 98% complete when it passed Hot Functional Tests, nevertheless the Philippine parliament never permitted its use. The plant is now conserved and used as a tourism destination. At present, the Philippine government has not yet any issued policy on nuclear power generation. There is also a pending bill in Congress to rehabilitate and operate BNPP, initially sponsored by Rep. Marc Cojuangco and now by his wife, Rep. Kimi Cojuangco.? Congress' deliberation of this bill has undergone moratorium due to Fukushima accident in Japan.Key Players in the Energy SectorLuzon Island (Main island with Manila)San Miguel Corporation (SMC)San Miguel Corporation is a large Philippine conglomerate producing mainly food and beverages. SMEC also controls an aggregate of 2,545MW of capacity. In its portfolio are the 1,200MW natural-gas ?red Ilijan power plant owned by KEPCO Ilijan Corporation, the 1,000MW Sual coal-?red power plant owned by Team Energy (a joint venture between Tokyo Electric and Marubeni), and the 345MW San Roque hydropower plant owned by Strategic Power Development Corporation, all in Luzon First Gen Corporation (First Gen)First Gen boasts a 1,740MW portfolio comprised of the combined 1,556MW Santa Rita and San Lorenzo natural-gas ?red power plants in Batangas City (which are supplied natural gas from the Malampaya natural gas ?eld in offshore Palawan), the 132MW Pantabangan-Masiway hydropower plant complex in the province of Nueva Ecija, and the 52.5MW Bacon-Manito geothermal power plant in Sorsogon.Aboitiz Power Corporation (Aboitiz Group)The Aboitiz Group has an aggregate capacity of 1,704MW. This includes the Tiwi and Mak-Ban geothermal power plants, with an aggregate capacity of 401MW, and the Ambuklao, Binga and Magat hydroelectric power plants, with aggregate capacity of 603MW. The Aboitiz Group is the industry leader in hydropower. The Aboitizes also control the capacity of the 700MW Pagbilao coal power plant in Quezon province.4. AES Masinloc - AES Masinloc has an aggregate capacity of 625MW.5. SEM Calaca - SEM Calaca has an aggregate capacity of 600 MW.Visayas IslandsNPC/PSALM (the National Power Corporation and the Power Sector Assets and Liabilities Management Corporation)They control the capacity of the 700MW Uni?ed Leyte Geothermal complex owned by Energy Development Corporation (EDC, a subsidiary of First Gen and the second largest geothermal energy producer in the world). Global Business Power Corporation (GBPC)GBPC, Metrobank Group’s power generating business venture among GT Capital, First Metro Investment Corporation and Orix orporation. GBPC owns nine power generation facilities in the Visayas region and Mindoro Island, with a combined installed capacity of 627MW. First GenFirst Gen through its EDC-owned 253MW Palinpinon-Tongonan Geothermal power plants.4. Aboitiz Group - Aboitiz Group has an aggregated capacity of 249 MW.Mindanao IslandBy 2015, a new leader in Mindanao is expected to emerge. Upon completion of its planned 100MW Iligan Diesel Power plant in 2013 and its 200MW Saranggani Coal Project in 2015, the Alcantara Group will lead the pack.Foreign Players in the Philippine Energy SectorAES Philippines An American firm that won the bid for Masinloc plant in Zambales. They provide 3.9 of the total installed generation capacity. AES WebsiteEGCO InternationalThailand’s Electricity Generating PCL (“EGCO”) entered into a purchase agreement with Covanta Energy Investments to acquire an additional ownership interest in the Quezon Power Project in the Philippines. EGCO WebsiteSalcon Power Corporation (SPC)A Singaporean firm that won the bidding of the National Power Corporation’s bidding for the Naga Power Plant Complex in Cebu. They provide 3.2 % of the country’s installed generation capacity.SPC InfoKepco PhilippinesThe Korean Electric Power Corporation (KEPCO) expanded its operation in the Philippines in 1995 and since its entry, now provides 12% of the total installed generation capacity in the country.Kepco Philippines WebsiteTeam Energy A Japanese firm that owns and operates coal facilities in Luzon. They own 20_ stake in the natural gas-fired plant in Ilijan, Batangas.Team Energy Website-156845-433705Energy Opportunities in the PhilippinesRepublic Act. No. 9136 or the Electric Power Industry Reform Act (EPIRA) stipulated several reforms in the power industry. One of which is the privatization of the National Power Corporation that involves the sale of the state-owned power generation assets through the PSALM.? This is to encourage greater competition an attract more private-sector investments in power generation. Several requirements have to be complied before a private investor could build a power plant depending on the fuel to be used.? For reference, here is the link to the Energy Investors’ Guidebook. For power plants utilizing renewable energy resources, a company should have a 60% (Foreign) and 40% (Local) partnership.? However for a power plant utilizing coal as fuel, a 100% foreign company is allowed.? For the details of the procedure, kindly refer to the Energy Investors' Guidebook.For the bidding opportunities on NPC’s power plants, the Power Sector Assets and Liabilities Management Corporation’s (PSALM) website provides the updates on the power plants for bidding out. Sources: PSALM Website DOE WebsiteEnergy Crisis in 2015Department of Energy predicted a major energy deficiency and subsequent brownouts during the spring months of 2015 (the hottest months in the Philippines) , most probably in April 2015. The DOE has lined up projects that should mitigate the expected brownouts. One of them is the Interruptible Load Program, where large private companies with own generating sets participate to take their load off the grid and run their own generators when there is insufficient supply in the grid. ?These companies will be compensated based on the rates approved by the ERC. Another measure should be the so called Additional Capacities, these are the capacities that are no longer running, but the owners are willing to rehabilitate them to be available in 2015.A Joint Resolution (House Joint Resolution 21) to grant emergency powers to President Aquino to address an impending energy crisis has been approved in the Philippine Congress. The special powers for Aquino will allow the government pay extraordinary payments to large industrial and commercial establishments which would disconnect from the grid and use their own generators during peak hours to free up power for use by households. The ILP and other measures take effect from March to July 2015 unless terminated earlier by Congress. The resolution also requires Aquino to submit a monthly report to Congress.The grant of emergency power to the President will also entail the fas tracking of putting up power generation projects, and there are talks on compensating the ILP by using the Malampaya funds but this is not yet final. Emergency power was granted by Congress on November 18, 2014. The President’s emergency powers will last until July, 2015.Sources:Department of Energy WebsiteKPMG 20113-2014 Energy Report Philippines PSALM WebsiteElectric Power Industry Management Bureau, Department of EnergyInvestment Promotion Office, Department of EnergyEnergy Fairs in the Philippines 2014-2015Event / FairDateVenueDescriptionTel noFax NoEmailWebsiteGreen Energy PhilippinesTBCTBC, ManilaForum on Renewable Energy in the Philippines+63 2 750 8588750 8585info@Website Power trendsTBCTBC, ManilaInternational Exhibition and Business Forum on Energy Trends and the Power Technologies+63 2 818-6828810-1594Website Philippine Energy Efficiency ForumTBCTBC, ManilaForum bringing together top energy efficiency professionals to discuss topics on Energy Efficiency. It is also a venue for leading companies and solutions providers exhibit their products and services. (+632)?845.1324 / (+632) 759.6680?jrunez@, elaine.evasco@WebsiteEnergy Smart Cebu ForumTBCCebu CityForum bringing together top energy efficiency professionals to discuss topics on Energy Efficiency , this time held in the Visayas Area(+632)?845.1324 / (+632) 759.6680?jrunez@, elaine.evasco@Power & Electricity PhilippinesTBC TBCIt delivers the most comprehensive overview of the Philippines’ electricity market and the government’s plans for a sustainable energy future. The conference will bring together representatives from the power generation, transmission and distribution companies, local and foreign investors and policy regulators to discuss the immense opportunities in the competitive electricity market in the Philippines.+65 6508 2477groups@.sgWebsiteEnergy Investment Forum December 4, 2014Hotel IntercontinentalForum conducted by the Investment Promotions Office of the Department of Energy to provide opportunities in the Energy SectorThe Department of Energy provides a list of Private Sector Initiated Projects in Luzon, Visayas and Mindanao. It is further sub-divided into committed and indicative. ................
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