RP Energy

Redondo Peninsula Energy Incorporated

Why We Need the Power Plant

A rapidly growing demand for power in the Philippines has been recognized by the Department of Energy (DOE), as reported in the 2009–2030 Power Development Plan (PDP). DOE estimates that energy consumption in the Luzon grid will increase at 4.56 percent annually from 2009 to 2018. During 2010, the actual energy consumption increased by more than eight percent.

In addition, the DOE identified a critical period (table below) wherein an estimated 1,200 MW of additional generating capacity, in addition to the plant in construction and committed to be constructed, is required to be built between 2012 and 2015 to meet the projected power demand for Luzon.

With the scheduled retirement of the 650 MW Malaya Oil Thermal plant, dependable capacity of existing power plants in the Luzon grid will decrease to 9,380 MW from 10,030 MW. Within the next 20 years, Luzon grid will require an additional capacity of 12,500 MW, 600 MW in Mariveles,Bataan of which are already committed leaving the balance of 11,900 MW to be filled in from the list of indicative power projects. Based on these capacity requirements, Luzon grid will require the following generic capacities: (i) 5,000 MW base-load plants; (ii) 3,900 MW midrange plants; and (iii) 3,000 MW peaking plants.

Future energy rates will be driven by levels of power supply and demand. Demand will continue to increase as population and economic growth increase, which is expected in a developing country such as the Philippines. In the Subic Bay area, growth in the manufacturing sector would considerably contribute to the additional demand for power. If the energy supply in the country reaches a critical level, i.e., power shortage, as projected by DOE in the next few years, energy rates would inevitably increase. To address this, energy supply must be augmented. The power that will be generated by the proposed plant will contribute to additional supply, and therefore help achieve optimal energy rates in the future.

According to the results of a study done by the University of the Philippines- National Engineering Center, the start of power generation deficiency in the Luzon grid started in 2010. With the lack of new power generation capacity, residents in the country’s biggest island will start experiencing the worst of a power crisis by 2014.

The RP Energy project will provide additional generation capacity that is needed to meet the increasing demand. Hence, its capacity and energy benefits are essential to a reliable supply of electricity to the Luzon grid. The RP Energy project is expected to be operational by late 2014–2015 thereby providing a secure power supply for the SBFZ and the rest of the Luzon grid.

Why locate the RP Energy power plant in the Subic Bay Freeport Zone

Subic as the location of the RP Energy project has the following advantages:

• Industries located in the Subic Freeport Zone can be assured of reliable power supply as the power plant will be next door
• Redondo Peninsula is a relatively unpopulated area
• The location is north of Metro Manila that can diversify electricity supply
• Easy access by sea is important for coal supply and transport
• Subic is relatively close to the load centers in and around Metro Manila which allows for electricity supply reliability and reduces line losses from transmitting electricity from the plant to the load centers

Economic Benefits

As part of its commitment to stakeholders, surrounding communities within the province of Zambales are not only assured of access to a steady source of energy but also to direct and indirect economic benefits brought about by the Project.

During the actual construction stage, more than 2,200 direct and indirect job opportunities will be created. Priorities for hiring are residents of Barangay Cawag, Municipality of Subic and Olongapo City, and other neighbouring municipalities. Other potential minor contract on support services related to the project will be procured through competitive tendering process and can be a source of local opportunities and benefit. Everything will redound to more than Php1 billion in impacts to the local economy every year for the duration of this phase.

427 direct and indirect job opportunities will be generated by the plant after completion. Actual operations will bring over Php324 million pesos in much needed stimulus to the Zambales economy every year.

A summary of benefits is presented below:

• Direct job creation during the three-year construction period and during the 25-year operation phase
• Indirect employment in the community in the:
  • Service industry, construction and electro-mechanical industry
  • Catering and hospitality
  • Residential property utilization
  • Retail
• Investment and development stimulus in the area
• Transfer of technology and livelihood trainings
• Improved power supply reliability to Subic Freeport Zone locators and surrounding towns due to proximity

The Electric Power Industry Reform Act of 2001 also gives the host community a share in the national wealth based on 1% of gross receipts of the preceding calendar year for electrification and livelihood development projects. Under Energy Regulation 1-94, benefits to host communities are also set aside at P0.01/kWh for electrification, development and livelihood. In particular, approximately Php 44 million per year (based on 2011 estimates) will be allocated under ER1-94, and broken down as follows:

• PHP 0.005/kWh (roughly PHP 22 million per year) for electrification
• PHP 0.0025/kWh (roughly PHP 11 million per year) for development & livelihood; PHP 3.85 million allocation for the host town
• PHP 0.0025/kWh (roughly PHP 11 million per year) for reforestation, watershed management, health and environment enhancement; PHP 3.85 million allocation for the host town