PNOC barred from power projects

by Alena Mae S. Flores, 22 June 2015
from Manila Standard Today

Two units of government-owned Philippine National Oil Co. are no longer allowed to go into power generation following a contrary opinion from the Justice Department.

Energy Secretary Carlos Jericho Petilla said the legal opinion had barred PNOC Exploration Corp. and PNOC Renewables Corp. from joining the power generation business.

The Justice Department concurred with the position of Senator Sergio Osmeña that the government, including state-owned corporations, cannot go into power generation.

“Although if you strictly look at the Epira Law, only NPC [National Power Corp.] is not allowed to go into power generation,” Petilla said.

The Electric Power Industry Reform Act of 2001 was passed to stop the financial bleeding of the government in the power sector arising from subsidies extended by state-owned Napocor.

Napocor today is focused only in providing power to missionary or off-grid areas through a partnership with the private sector.

PNOC Exploration president Pedro Aquino earlier said the company would join the planned Isabela and Zamboanga Sibugay coal-fired power plants with a combined capacity of 200 megawatts.

“We are waiting for a third party who is willing to put up the power plant. We will supply the coal,” Aquino said.

Korea Electric Power Corp. and Marubeni Corp. of Japan earlier expressed interest to forge a joint venture with PNOC Exploration to develop the Isabela and Zamboanga Sibugay coal-fired power plants.

Hitachi Ltd. and Sumitomo Corp. of Japan also expressed interest in the two coal-fired power generation projects.

PNOC Exploration has engaged The Lantau Group as transaction advisor for the two projects.

The Isabela power plant will utilize the lignite coal within PNOC Exploration’s coal concession in the area. The proposed power project in Zamboanga Sibugay, meanwhile, will use the bituminous coal reserves from PNOC Exploration’s Malangas coal mines.

Aquino earlier said the company was studying the coal gasification technology, which involves gasifying coal and turning it to electricity for the coal projects.

“Somebody brought up the idea of trying to do a coal gasification. … you convert coal into gas and the gas is now going to be the fuel for the power plant. They say this is going to be environment-friendly because all the pollutants and environmental [concerns] have already been addressed by the gasification,” he said.

Aquino said coal gasification would address the problem of transporting coal to the power plant, a distance of about 12 to 13 kilometers.

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