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Around the Globe- Asia-Pacific

Philippines liberalization in final stages

Legislation to liberalize the Philippines power sector is in the final stages of passage through Congress, according to trade and industry secretary Manuel Roxas.

The legislation, which will pave the way for the privatization of Napocor, should lead to a rapid fall in power prices. An eight per cent reduction is expected, with bigger cuts realised in the medium term. This is because, as a preclude to privatization, it provides for the government to take over Napocor’s debts. This reduces the interest burden borne by utilities. The Philippine utility’s debts amounted to $18.86bn at the end of 1999.

Under the Senate Bill No. 2000, an executive and legislative committee will “determine the optimal allocation of responsibilities for settling Napocor’s liabilities, whether in the form of equity loans or contracts, to each of the groupings [of Napocor assets].”

Lower electricity prices should attract foreign investors since Philippine power prices are among the highest in Asia, said Roxas. He also said that the country needed to be more attractive to investors before the introduction of the free trade area in 2003. Accordingly, legislation has also been put before parliament to improve tax incentives to foreign investors.

Japanese industry in retail venture first

Major steelmaker NKK Corp. is to supply electricity to trading house Mitsubishi Corp. this summer, making it the first Japanese steelmaker to enter the retail electricity market.

Mitsubishi is expected to resell the electricity – which it gets from NKK’s Keihin plant in Kawasaki and possibly other non-power companies – to other users. In addition, NKK said it is examining making a bulk purchase of power from Tokyo Electric Power Co. and reselling it to an industrial park next to the Keihin plant to earn extra revenue.

In a separate move, US energy company Enron said it has set up a new Japanese subsidiary to engage in energy trading. Enron Japan Corp. will serve as an intermediary for transactions involving energy products and industrial materials.

Enron earlier formed E-Power KK, a joint venture with Orix Corp., to engage in the retail sale of electric power. Enron Japan will join E-Power to use Internet technology to handle power transactions as the nations electricity industry is deregulated.

NHPC to invest in J&K projects

The Central and the Jammu and Kashmir government have entered into an agreement to procure 3898 MW of power in the state in the next seven years.

The National Hydro Power Corporation (NHPC) will invest Rs160bn ($3.6bn) on seven power projects, while Jammu and Kashmir Power Development Corporation (J&K PDC) will take up two projects with an investment of Rs 80bn. NHPC is to take up its projects on a build, own, operate and transfer (BOOT) basis.

Under the agreement, all these projects will be transferred to Jammu and Kashmir after recovery of their investment cost. Jammu and Kashmir is the first state to have this agreement with NHPC and was done in view of the state’s special power requirements.

J&K PDC will execute the 450 MW Baglihar project and the 600 MW Sawalakote project in the state sector. NHPC’s projects include the 280 MW Uri II, 330 MW Kishan Ganga and the 1000 MW Pukhal Dul.

Singapore Power buys PowerNet

Singapore Power International is to acquire GPU PowerNet (PowerNet), a major Australian electricity network in the state of Victoria, from US-based utility General Public Utilities (GPU) Inc. for A$2.1bn ($1.26bn).

The purchase is the largest to date by SP International and is one of the biggest investments by a Singapore government-linked company outside Singapore.

The acquisition will be funded by a combination of non-recourse debt provided by commercial banks and the capital markets and equity from SP International.

It is the second time SP International has bid for PowerNet. It lost out to GPU, when the US utility paid A$2.55bn for PowerNet during the privatization of Victoria’s electricity assets in 1997. Since then, however, asset values have fallen considerably. Chris Brown, managing director of SP International said: “We believe that, at $2.1bn, we have paid a reasonable price for PowerNet.”

The deal focusses on the ‘wires’ part of SP’s business: “PowerNet is of particular interest to us as its core business of transmission fits very neatly into the growth strategy for Singapore Power,” added Brown.

News digest

Malaysia: Industry consultants have warned that unless several power plants scheduled for completion between mid-2002 and mid-2003 are built on time, Malaysia’s effective reserve margin could be less than three per cent. Currently the country has about 30 per cent excess capacity over peak demand but recent record peaks and projections of rapid economic growth have led consultants to issue the warning.

India: The Karnataka government has indicated that no guarantee support would be available for debt financing of two joint venture projects being promoted by the state-owned Karnataka Power Corporation (KPCL) The two projects are the 220 MW Bidadi combined cycle plant and the 500 MW Vijaynagar thermal power plant.

India: According to local media reports, restrictions on foreign investment in power generation, transmission and distribution projects are to be lifted. The existing norm of case-by-case clearance to foreign equity holding of 74 per cent and above in large projects will be lifted. The proposal made by the power Ministry suggests that foreign investments in such project be granted automatic approval by the Central Reserve Bank of India. It also calls for the abolition of compulsory approval from the Federal Cabinet Committee on Economic Affairs for generation and transmission projects involving investment of Rs15bn ($336m) or more.

Japan: The Japan Atomic Energy Research Institute has completed construction of a powerful superconducting coil designed to act as a prototype for the solenoid to be used in the International Thermonuclear Experimental Reactor (ITER). ITER is being built to advance the development of nuclear fusion.

Taiwan: Two out of five IPP projects have been given the go-ahead to begin construction. The projects are: Star Energy’s 490 MW power plant, known as the Chang Bin project; and Sun Ba Power Corp’s 980 MW Fender project. Both plants will run natural gas and are expected to begin commercial operation in April 2004.

Thailand: Small power producer (SPP), Bio-Mass Power Company, has awarded S. T. Fortum Engineering a contract to provide support in finalizing a circulating fluidized bed boiler project. Under the contract, originally signed in April, S. T. Fortum will complete the remaining installation and erection activities as well as commission the plant. Construction of the plant which will burn rice husks had been stopped because of the economic crisis but is now being resumed as the region recovers.

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