MGen plans USD 2B gas conversion for Luzon power plants

Manila Electric Company (MERALCO) is shelving plans to build two coal-fired power plants in Luzon, and instead converting them into gas-powered facilities in response to the government’s coal moratorium.

Philippine Star reported that MERALCO PowerGen Corporation (MGen), the utility’s power generation arm, initially proposed a 670-megawatt (MW) plant in La Union and a 660-MW plant in Zambales. 

However, MGen Gas Energy Holdings Inc. (MGas) president and CEO Yari Miralao confirmed that both projects would shift to gas-powered generation.

The La Union and Zambales projects are managed by MGen subsidiaries Global Luzon Energy Development Corporation (GLEDC) and Redondo Peninsula Energy Inc. (RP Energy), respectively. 

GLEDC is 57% owned by MERALCO, while RP Energy is a joint venture with Therma Power Inc. and Taiwan Cogeneration International Corporation, with MGen holding a 47% stake.

MERALCO is now working to secure updated environmental compliance certificates to proceed with the conversion.

However, despite not being operational, the projects are already incurring costs, Miralao said. 

The projects were delayed after the government imposed a coal ban in 2020, which suspended applications for new coal facilities. However, the Department of Energy (DOE) clarified that the moratorium excludes existing, operational, or already-committed coal plants.

MERALCO’s 1,200-MW Atimonan project in Quezon and the 80-MW Toledo plant in Cebu are exempt from the ban. To ensure compliance, MGen sought official confirmation regarding their exemption.

Meanwhile, MGen president and CEO Emmanuel Rubio estimated the cost of converting the two projects to gas-powered plants at USD 1.6 million per MW, amounting to a combined USD 2 billion for 1,280 MW.

Four local banks and two Indonesian lenders have expressed interest in financing the facilities, which will boost MGen’s baseload capacity, currently at 1,395 MW. Baseload power plants provide consistent, uninterrupted electricity supply, with coal traditionally used for this purpose.