Team Energy (TEPCO-Marubeni) in Philippine Power

Team Energy (formerly Crimson Holdings), the 50:50 joint venture of TEPCO-Marubeni, is one of the largest IPPs in the Philippines, with over 2,000MW of installed generating capacity, or 14% of the total. TeaM Energy owns and operates two coal-fired facilities (1,294MW Sual and 728MW Pagbilao) in Luzon, the northernmost and largest of the three island groups that constitute the Philippines, with ECA contracts expiring in 2024-2025. It also own a 20% stake in the 1,270- MW Ilijan natural gas-fired plant in Batangas. In June 2007, Japan Bank for International Cooperation (JBIC) provided a loan of up to US$2.7B and a political risk guarantee to Crimson Power to support its acquisition of Mirant’s assets (100% stake in Sual and Pagbilao, 20% equity in Ilijan). In 1993, Asian Development Bank (ADB) provided a package of US$40M loan and US$10M equity investment to Mirant Pagbilao Corp; other co-financiers included Japan Export Import Bank, US Export Import Bank.

? Tokyo Electric Power Co (TEPCO) – State-run TEPCO is the largest electric utility in Japan and the fourth largest electric utility in the world after the State Grid of China, Électricité de France and Italy’s Enel. TEPCO's transmission and distribution infrastructure is notable as one of the most reliable electricity networks in the world. TEPCO was established in 1951 as an electric power supplier to the metropolitan Tokyo area. TEPCO is currently facing difficulties, mainly due to the surge in oil prices, low power demand and intensified competition between energy suppliers since the liberalization of the retail electricity market. TEPCO is also expected to play a key role in achieving Japan's targets for reduced carbon dioxide emissions under the Kyoto Protocol. In 2007, TEPCO posted its first loss in 28 years; in 2008, TEPCO posted its second loss. In 2002, TEPCO was found guilty of false reporting in routine governmental inspection of its nuclear plants and systematic concealment of plant safety incidents; in 2007, an internal investigation had again revealed a large number of unreported incidents.

? Marubeni Philippines – Marubeni is a Japanese trading company that ventured into power development in the mid-1990s, including IPP projects, EPC-Turnkey power plant construction projects, merchant power plants, power transmission and distribution businesses. Aside from Team Energy, Marubeni also operates the 345MW San Roque hydro (with Kansai Electric Power), and Mindanao I and II Geothermal which were recently turned over to Lopez-owned EDC. Marubeni's other power-related works in the Philippines includes construction and/or rehabilitation works for the following (all with NPC): Batangas II Coal, 300 MW; Limay Combined Cycle A & B, 600 MW; Malaya Gas Turbines, 30 MW; Manila Oil Fired, 200 MW; Tiwi 5&6 Geothermal, 110 MW; Rehabilitation of the Tiwi 1&2,5&6 Geothermal; Malaya Oil Fired, 650 MW; Rehabilitation of the Malaya Oil Fired; Sucat Oil Fired, 850 MW; Rehabilitation of the Sucat Oil Fired; Leyte-Luzon HVDC, Interconnection Converter Station; San Roque-San Manuel 230KV Transmission Line. Marubeni identifies overseas IPP and Engineering, Procurement and Construction (EPC) businesses as the top priority fields of investment, expanding its global asset portfolio. Marubeni has also been expanding its overseas water and sewerage systems sector, with desalination projects in the Middle East.

1,294MW Sual & 728MW Pagbilao Coal-Fired – Sual is located in Pangasinan and is the largest coal-fired power plant in the Philippines; it was built in 1996 to ease the ongoing energy crisis. Sual is the largest per unit generating power plant and was built at a project cost of US$1.2B. Sual was previously owned and operated by Mirant Sual Corporation (Hopewell) or formerly CEPA Pangasinan Electric Ltd. Sual started providing electricity to the Luzon grid in October 1999 through a 1,000 MW Energy Conversion Agreement (ECA) with the National Power Corporation (NPC) under a 25-year build-operate-transfer scheme. Sixty-six percent (66%) of its employees come from Pangasinan. Pagbilao is located at Isla Grande in Pagbilao, Quezon; 76% of the employees are locals.

Sual & Pagbilao IPPAs – The government – through Power Sector Assets and Liabilities Management (PSALM) – will auction off NPC’s contracted capacities with IPPs by selecting IPPAs (IPP Administrators), starting with Sual and Pagbilao. A bidder must submit a bid for both Sual and Pagbilao IPPAs, but could only win one IPPA contract to eliminate concerns regarding market dominance; the 1,700-MW combined contracted capacity of Sual-Pagbilao represent 40% of contracted capacities that the government will privatize. PSALM will use the ‘ownership approach’ wherein bidders, when preparing their bid submissions, will factor in the contracted energy that they will assume, including the subsequent ownership of the power plant. On 27 June 2009, PSALM declared the bidding a failure as the two participants (San Miguel Energy Corp/SMEC and Therma Luzon Inc) failed to meet the reserve price. Of the two, SMEC submitted the higher combined bid price at $1.59 billion – $1billion for Sual and $590 million for Pagbilao – while Therma’s proposed price was at $1.46 billion – $812.946 million for Sual and $648.8 million for Pagbilao.

1,270MW Ilijan Natural Gas Combined Cycle – Team Energy holds 20% equity in Ilijan; it began commercial operation in May 2002. Under BOT-ECA until 2022, Ilijan plant in Batangas is operated by KEPCO Ilijan Corp (KEILCO) and fueled mainly by domestic natural gas, produced off Palawan Island in southern Philippines. In November 2000, JBIC provided a US$153M loan to KEILCO, which had joint equity stake of KEPCO, Mitsubishi Corp, Southern Energy Inc (a U.S. corporation), and Kyushu Electric Power Co; this is the first major investment in overseas IPP projects of Kyushu Electric. The JBIC financing was significant in two aspects: (a) it was in support of a Japanese power utility who expands its operations in overseas power business; (b) the participation of Japanese, U.S. and Korean firms and the arrangement in which U.S. and Korean export-import banks joined JBIC in providing financial support for a joint venture undertaken by Japanese and Korean power utilities in a third country, hence promoting international collaboration and a business alliance of Japan and Korea. JBIC had earlier provided a loan to finance the construction of a 53-km transmission line that links Ilijan and the existing transmission network in Luzon, and guaranteed a syndicate loan extended by Japanese private financial institutions to finance the construction of a pipeline for natural gas fuel for the project.

Energy Supply Business (ESB) – Team Energy began expanding its business by developing power facilities in Bataan and Oriental Mindoro. Today, through its ESB, TeaM Energy is able to cater directly to the energy needs of industrial end users in Luzon by selling the excess and uncontracted 218 MW-capacity in Sual, and the 35 MW-capacity in Pagbilao, in partnership with NPC. The company supplies directly to electric cooperatives, private utility companies, economic zones and large industrial end-users in Luzon, including: Benguet Electric Cooperative (BENECO) – 15 MW; Petron Bataan Refinery – 4 MW; Baguio City Economic Zone – 5 MW; Solid Development Corporation (SDC) – 4 MW. These clients meet the minimum criteria: (a) high demand and good growth prospects (b) proven and credible top management (c) excellent credit rating (d) accessibility to the TRANSCO grid. Apart from retail electricity marketing, the ESB also allows Team Energy to stand as a wholesale aggregator (i.e. from RA 9136 EPIRA: a person or entity engaged in consolidating electric power demand of end-users in the contestable market, for the purpose of purchasing and reselling electricity on a group basis); in consideration of the rules and regulations in the Wholesale Electricity Spot Market (WESM), and in the fields of Load Management, Technical and Power Services.

NOTES:
http://www.psalm.gov.ph/news/archives%202008/NewsItem20080061static.html

http://www.teamenergy.ph/

This is JBIC’s third project finance loan provided to support Japanese companies in the acquisition of interests in existing IPP projects; the previous two loans financed: (1) CBK Power Project in the Philippines (March 2005); and (2) Paiton 1 Coal-Fired Power Plant Project in Indonesia (March 2006). http://www.jbic.go.jp/en/about/press/2007/0607-03/

In May 1993, ADB provided a package of US$40M loan and US$10M equity investment to Mirant Pagbilao Corp (formerly Southern Energy Quezon Inc / formerly Hopewell Power Corp) for the Pagbilao base load coal-fired power plant. Other co-financiers are Japan Export Import Bank, US Export Import Bank and Commonwealth Development Corporation. Under an Energy Conversion Agreement (ECA) entered into with NPC, Mirant (Hopewell) will build, own & operate the plant for 25 years after completion; thereafter ownership of the plant will be transferred to NPC at no cost. All power generated will be sold to NPC for distribution. Pagbilao commenced commercial operations in 1996. In August 2004, the Pagbilao Power Station was recognized by Power Magazine as among the Top 12 Plants of 2004 chosen from over 100 nominations. Mirant Corporation, the ultimate owner of the Project is one of the largest foreign investors in the Philippines and was the first company to respond to the Philippines' request for private sector assistance to meet growing electricity demands in the country. In July 2006, US parent company Mirant Corp decided to sell its international businesses in the Philippines, prompted by the bankruptcy of its operations in the US; its operations in the Philippine plants remained very profitable. http://www.adb.org/Projects/project.asp?id=26716

http://money.cnn.com/magazines/fortune/global500/2009/industries/38/inde...

The liberalization of retail sector for high-demand customers commenced in March 2000; in April 2005, the scope of the liberalization of retail power sales extended to all customers who receive high-voltage electricity. Earlier in January 1997, TEPCO determined the successful bidders to supply power during the three-year period from fiscal 1999, when IPP supply begins (eight companies for 1,100 MW). http://www.tepco.co.jp/en/index-e.html

http://en.wikipedia.org/wiki/Tokyo_Electric_Power

Marubeni is involved in the handling of products and provision of services in a broad range of sectors. These areas encompass importing and exporting, as well as transactions in the Japanese market, related to food, textiles, materials, pulp and paper, chemicals, energy, metals and mineral resources, iron and steel products, and transportation machinery, and includes offshore trading. Marubeni’s activities also extend to power projects and infrastructure, plants, ships and industrial machinery, real estate development and construction, and finance, logistics and information. Additionally, Marubeni conducts business investment, development and management on a global level. www.marubeni.com

Energy Development Corp. assumes ownership of 2 geothermal plants in Mindanao, June 20, 2009, http://www.tradingmarkets.com/.site/news/Stock%20News/2381520/

http://www.marubeniphil.com/power.htm

www.marubeni.com

http://www.jcmiras.net/surge/p174.htm

http://www.teamenergy.ph/

http://www.psalm.gov.ph/news/archives%202009/2009.html; http://www.psalm.gov.ph/documents/itbs/NoticesItem20080063.html
http://www.psalm.gov.ph/news/NewsItem20090025static.html

RP rejects San Miguel, Aboitiz power plant bids, 06/26/2009 http://www.gmanews.tv/story/165974/RP-rejects-San-Miguel-Aboitiz-power-p...

http://www.mhi.co.jp/en/power/news/sec1/2002_sep_02.html

http://www.jbic.go.jp/en/about/press/2000/1110-01/index.htm

http://www.teamenergy.ph/about04.php

FROM:
Team Energy (TEPCO-Marubeni) in Philippine Power Sector
By Violeta P. Corral, PSIRU-Asia www.psiru.org, July 2009

AttachmentSize
teamEnergy_vpc-july09.doc66.5 KB