Philippines: KEPCO-Salcon’s 200MW coal-fired power plant (Naga, Cebu)

In 2008, KEPCO Philippines Holdings (a wholly-owned subsidiary of Korea Electric Power Co or KEPCO) went into joint venture with Salcon Power and formed KEPCO SPC Power Corp (KSPC) to construct and operate a 200MW coal power plant in Naga, Cebu. In June 2008, SPC Power Corp obtained a $100M loan from Korean Export-Import Bank (Korean Eximbank) for the coal-fired project. The Asian Development Bank (ADB) is also set to approve a US$120M loan to KSPC for the construction of the Naga coal-fired plant (“Visayas Base Load Power Project”).
The project is conceptualized under a new scheme of a merchant power plant, on a build–own–operate basis, characterized by the execution of power sales contracts with distribution utilities and electric cooperatives, instead of purchase power agreements with National Power Corporation (NPC). The generating company is responsible for the whole construction, operation, and maintenance of the plant, including fuel supply — without any Philippine government guarantees. Once completed, the Naga plant is expected to supply power to six electric cooperatives that have signed a total 120MW power sales contracts. The proposed ADB loan will also require land acquisition and resettlement due to the construction of new transmission lines. The project is under ADB’s Private Sector Operations Department and was originally set for Board approval in September 2009. ADB’s decision is now postponed indefinitely; environmental, social and economic issues are being raised by local residents, environmental lawyers and electric coop consumers, including a Catholic Bishop who wrote the ADB President to deny KSPC’s loan application.
On or before Oct 27, 2009, ADB uploaded this information at its project website: "The Project's ash disposal plan may be revised to consider alternatives to transport to a nearby cement plant for use as raw material, as reported in the SEIA. While the cement plant remains an option, the Project is also considering use of the ash as land-fill in a pre-approved site provided by Cebu Provincial Government. Whichever alternative is chosen, ADB will review KSPC's formulation and implementation of its Ash Disposal Management Plan, including ash content's testing, collection, transportation, and final placement. ADB will also conduct regular monitoring, to ensure the Project's ash disposal complies with all environmental safeguards requirements. (A Corrigendum to the SEIA will be posted shortly.)"
ADB'S SUMMARY ENVIRONMENTAL IMPACT ASSESSMENT (SEIA) & INITIAL POVERTY & SOCIAL ANALYSIS (IPSA) – The SEIA and IPSA largely glossed over health & environmental risks posed by the coal-fired plant; there is lack of baseline data of any initial studies undertaken.  The project's mitigation plan does not include a targetted health program to monitor health risks related to ash coal residues, but simply CSR-related community work.  There is very minimal mention, if any, of impacts by the coal-fired power plant on coastal communities/fisheries & marine ecosystems.
HEALTH & ENVIRONMENTAL RISKS – In 2004, environmental activists (Cebu Alliance for Renewable Energy/CARE) called on Salcon-KEPCO to stop their expansion plans for coal-fired plants and instead develop renewable energy sources. In 2005, CARE held protest actions at public hearings to block the application for environmental compliance certificate (ECC), urging that a thorough evaluation be undertaken of the current health condition of residents in Naga. CARE believed that without taking blood and hair samples in determining the extent of toxicity of mercury in the blood of Naga residents, no one can predict the future accumulation of this substance in the body of Naga citizens. Salcon contracted the services of a PR firm (PRworks Inc) which succeeded in tilting the balance of media coverage in Salcon’s favor. [A three-month community relations campaign in the communities around the Salcon complex resulted in the mobilization of thousands of residents who expressed support for the construction of the coal-fired plants during the municipal ECC and Cebu Provincial Board hearings.]
CONTROVERSIAL COAL ASH DUMPSITE & MOA – In May 2009, the Cebu provincial government signed a Memorandum of Agreement (MOA) with KPSC where the Province undertook to allow KEPCO to dump its fly ash into a dumpsite for a term of at least twenty-five years, subject to extension. Potential revenue from the coal ash arrangement is estimated at P48 million ($1 million); for each ton of ash dumped by KPSC, the province will be paid $1. Several issues are being raised: (a) The coal ash dumpsite, the 25-hectare Balili resort property purchased in 2008 by the Cebu province, is currently the subject of a pending inquiry by the Visayas Ombudsman; the land classification and titling of the Balili resort land is being questioned by environmental lawyers. (b) 80% of the Balili dumpsite property is submerged; contemplating a coal ash dumpsite along the shores is not only ‘pathetically naïve’ but also ecologically destructive, patently illegal and ‘preposterous’. (c) The lawyers also asked the Ombudsman to look into the ash dumping deal, calling it an “extremely hazardous project, considering that coal ash has radioactive elements and contain hazardous substances harmful to living things and the ecosystem, such as mercury, lead, arsenic, among others.” (d) The MOA is a clear conflict of interest. Environmental lawyers claim that by agreeing to host the dumping of coal ash into the Balili property and assuming KEPCO’s legal responsibility for the proper handling and disposal of its coal ash, the Province of Cebu has effectively bargained away its power and authority to, monitor, regulate and keep KEPCO’s activities compliant with legal environmental standards. Having thus assumed KEPCO’s responsibility for the dumping of its waste, the Province of Cebu would be powerless to hold KEPCO responsible for violation of the law in regard to the proper disposal of its coal ash, as KEPCO could easily shift the blame back to the Province, on the strength of the latter’s undertakings under the MOA.
'NOTICE TO SUE' KSPC & GOVERNMENT OFFICIALS – In August 2009, local citizens sent a “Notice to Sue” to KSPC and government officials for violation of the 1987 Philippine Constitution and environmental laws (Clean Air Act, Clean Water Act, Ecological Solid Waste Management Act) and Local Government Code. Among the issues being raised are: the indiscriminate dumping of toxic coal ash; disregard of ecological and public health, and safety issues; gross neglect and failure to perform official responsibilities under the laws; onsite inspection to listen to the pleas of the affected community; water contamination and deteriorating ecosystem and concomitant loss of fishing livelihoods; climate change implications; and lack of facilities for testing and monitoring and hard data of national and local government units in assessing the health, safety and ecological implications. The citizens’ group also urged ADB to send an official delegation to conduct inspection and interview the stakeholders of Cebu.
BSIHOP TO ADB: DENY KSPC LOAN TO 'TOXIC' POWER PLANT & DISADVANTAGEOUS POWER DEALS – In a letter dated 9 September 2009 to ADB President Haruhiko Kuroda, Bishop Vicente Navarra of the Bacolod Diocese appealed to the Bank to deny the approval of KSPC’s loan application for the construction of its ‘toxic’ power plant. KPSC will sell and has contracted its electricity supply to Negros electric coops, including the Bacolod-based Central Negros Electric Cooperative (CENECO). The Bacolod Diocese and other NGOs are strongly opposed to the KSPC-CENECO contract on the following grounds: (a) contract was consummated without public consultation; (b) contract violates provisions of EPIRA, or Electric Power Industry Reform Act, particularly on ‘open access and retail competition’; (c) Naga plant is fueled by coal which is carbon-intensive and thus harmful to health and environment; and (d) contract contains highly onerous terms and conditions which are clearly disadvantageous to consumers.
NON-COMPLIANCE WITH CORE LABOR STANDARDS IN KEPCO-SPC – There have been continuous reports of unfair labor practices and violations of trade union rights by the private sector proponent -- Unions were not earlier recognized; Notice to strike due to union-busting allegations threaten industrial peace and reliability of power supply in the province; Libel complaints filed by management against trade union officials for whistle-blowing of ‘silent profits’ earned by the company, in what might be viewed as harassment of trade union officers.
SHIFT FINANCING FROM DIRTY ENERGY TO RENEWABLES – The proposed project will utilize circulating fluidized bed combustion (CFBC) technology which is known to produce about four (4) times more coal combustion waste per megawatt of electricity than conventional coal burning plants, making disposal of toxic coal ash a primordial concern when the power plants operate. In light of ADB’s new energy policy that calls for clean energy, ADB financing – particularly to private sector proponents – must be redirected from existing dirty energy to renewables, including the financing of adaptation and mitigation measures and energy efficiency projects.

NOTICE TO SUE_glacc-26aug09.pdf303.72 KB
Bshp-navarra-2-ADB Kuroda-naga-plant_sep09.pdf392.41 KB
request2sp4ocular_glacc-18aug09.pdf237.54 KB
09.07.01 DENR 7 Memo for Reversion.pdf1.97 MB
links-balili-puchase_gramos_oct09.pdf110.85 KB
phil-kspc-power-naga-labor_vpc-aug09.pdf144.56 KB
phil-kspc-power-naga_vpc-sep09.pdf133.17 KB
letter to ADB-kuroda_fdc&affected-local-people_9dec09.pdf34.81 KB
43906-PHI-IPSA_adb-may09.pdf81.02 KB
20090723 SPRSS PHI Visayas Base Load.pdf66.96 KB
coal ash samples_lab result-19oct09.pdf144.11 KB
phil-kspc-power-naga_adb-rrp_jul09.pdf535.88 KB
DENR2ecowaste-on coal ash disposal_oct09.JPG3.77 MB