World Bank says reforms should be ‘bottom up’

The World Bank has suggested that the restructuring of the Indian power sector should start with the reform of the distribution and revenue collection mechanisms.

Unless the supply end of the market is sorted out with losses reduced, the power sector would never become financially viable, according to the bank.

The World Bank also said that privatization was essential to force utilities to make the behavioural changes needed to achieve financial viability and improve their services.

The Electricity Bill 2000, legislation proposed to reform India’s power sector and reduce state participation, seeks to achieve full metering of power supply in the country by the end of 2001. It also calls for the state electricity boards (SEBs) to unbundle their generation and transmission operations, and will also allow private firms to trade power between regions.

San Roque hydro ‘unfeasible’

The $1.1bn San Roque Multipurpose Project in the Philippines has been deemed economically unfeasible in a study undertaken by a US consultancy. Dr. Wayne White of Foresight Associates concluded that the project will only result in the government paying P400m ($9.64m) per month to the private consortium developing the project “regardless of whether there is sufficient water available to generate power”.

The project includes a dam and 245 MW power plant on the Agno River in Pangasinan. Under a power purchase agreement, the state-owned National Power Corp. (Napocor) will buy power from San Roque for P13-21/kWh, and will sell it to end-consumers for P3/kWh. The project is being developed by a consortium of Marubeni Corp., Sithe Philippines Holdings, and Kansai Electric Corp.

The report noted that “the project is a public subsidized construction contract which will compensate the developer… even in the event of low generation. The reliance on subsidy suggests that the project is not feasible in its own right.”

Foreign investors favoured

South Korea has released a revised version of its preliminary privatization plan for Korea Electric Power Co (Kepco) that favours foreign investors over local large conglomerates known as chaebol.

The new plan involves the division of Kepco’s 42 thermal and hydroelectric power plants into five companies for sale through auctioning and share issues. Korea’s 30 largest chaebol will be barred from acquiring any of these assets unless they complete corporate restructuring reforms. Foreign investors will be able to buy up to 30 per cent of Kepco, including management control of two of the five Kepco units.

The nuclear assets and transmission networks will remain under state control. The five thermal and hydropower companies are expected to be valued at between $2.5bn and $4bn each.

National Power nets Synergen

UK-based utility and international power developer National Power has successfully bid A$35.6m ($20.64m) for the Synergen business in South Australia, which owns a total of 359 MW of peaking capacity. The sale is part of the privatization process undertaken by the South Australian government in September last year.

The acquisition by National Power is in line with the company’s plans to expand in Australia. It is developing the 500 MW Pelican Point combined cycle plant in South Australia, and also has a 72 per cent shareholding in the 1600 MW Hazelwood station in Victoria.

The South Australian electricity market has a tight supply-demand balance, with peak demand forecast to grow at up to 4.5 per cent per year.

Kelanitissa contract signed

The largest combined cycle power plant in Sri Lanka will be operating by September 2001 following the signing of a contract for the plant by the state-owned Ceylon Electricity Board and a joint consortium of Marubeni and Alstom. The plant will add 165 MW of capacity to the hydropower-dominated grid which has in the past suffered severe blackouts during period of low reservoir levels.

Work on the plant is expected to start in June 2000. During the first phase, a 110 MW gas turbine will be installed, and will be commissioned in late 2001. The second phase will involve the addition of a heat recovery boiler and a 55 MW steam turbine, and will be complete by June 2002.

The plant will use naphtha as its main fuel, supplied by the Ceylon Petroleum Corporation from its Sapugaskanda refinery. The cost of the project is estimated at Rs10 616m ($142m).

News digest

Australia: Rolls-Royce is to strengthen its Australian operations with the creation of an energy division to take advantage of growing power generation opportunities in the region and to support demand for the company’s products and services in southeast Asia. The new division will provide tendering and project management services for gas turbine and diesel projects in the Asia-Pacific region.

Bangladesh: The Japanese government has offered to expand Bangladesh’s only hydropower plant to raise its capacity from 230 MW to 330 MW. The Kaptai plant in the Rangamati hill district consists of two 40 MW units installed in 1962 and three 50 MW units installed in 1998. The project would be financed by the Japan Bank for International Cooperation (JBIC).

India: Alstom Power has been awarded a a80m contract to supply and erect two 125 MWe circulating fluidized bed boilers at a lignite-fired power plant being developed by Gujurat Mineral Development Corporation near Bhuj in Gujurat state. The new plant will burn lignite from nearby mines and will sell power to the Gujurat State Electricity Board (SEB).

India: The Karnataka government has turned down a request by Enron to construct the proposed Vijaynagar power plant as a gas fired plant instead of a coal-based plant. Enron is one of three inter-national bidders that were short-listed for the final bidding round of Stage One of the 500 MW plant. The State government in Bangalore said that there would be no change in the technical configurations, and that while the project lead time for a gas-fired power plant would be much shorter, the integrated costs would be higher.

Japan: An industrial consortium led by Toyota is to set up a company in July to build a cogeneration plant that will supply power to the new Nagoya international airport which opens in July 2004. The other members of the consortium are Central Japan International Airport Co., Chubu Electric Power Co. and Toho Gas Co.

Pakistan: The Asian Development Bank (ADB) has said that Pakistan must resolve its tariff disputes with foreign IPPs if it is to receive a $250m loan for restructuring its energy sector. The government has successfully concluded negotiations with 12 IPPs but the dispute with Hubco has continued.

Philippines: President Estrada has asked the leaders of congress to pass into law the controversial bill to privatize National Power Corp. (Napocor) as soon as possible. Estrada believes that the move is needed to attract foreign investment to the sector and make it more efficient.