Map Ta Phut Coal Plant Faces Review Over Pricing

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MAP TA PHUT

Map Ta Phut coal plant faces review over pricing

Watcharapong Thongrung

The Nation

RAYONG: -- Energy authorities have a big decision to make involving BLCP Power, the operator of a coal-fired power plant in Rayong.

At stake here are the future of the plant, the nation’s energy security and the price of power for consumers.

BLCP's trouble stems from its coal supply contract with Rio Tinto Group, the world's third largest coal miner, which last year suffered major setbacks in the aluminium business. Rio threatened to terminate its long-term supply contract with BLCP unless it agreed to an increase in the coal price from US$50 (Bt1,544) to $90 per tonne.

The Thai company has submitted letters to the Energy Ministry and the Energy Regulatory Commission (ERC) asking for an adjustment in the price of power the firm sells to the Electricity Generating Authority of Thailand under a 25-year power purchase agreement.

"If BLCP is to get what it wants, it needs consent from several parties. First, the energy minister needs to bring this up with the National Energy Policy Council, as this demands the creation of a policy specifically to assist the company, for the sake of national energy security," said a source at the Energy Ministry who asked for anonymity.

He added that the ERC, which is in charge of setting power tariffs, would then decide how much the price could be raised. Finally, the Office of the Attorney-General would be required to verify that the move was legal.

"BLCP won the IPP supply contract bid by quoting the lowest price to Egat. It remains to be seen whether raising the price at a later date is legal," the source said.

He put the blame on the company, saying it is still unclear whether the firm took any steps to hedge against fuel price risks.

The burden should not be pushed on to consumers, he said, adding that Egat would need to clarify how it will penalise the company and how it would affect national energy security if BLCP's power supply was halted.

Energy Minister Arak Chonlatanon is said to have assigned the ERC to find a solution that is fair to all and forward it to the minister.

ERC chairman Direk Lawansiri said it should take one or two months to come up with a solution.

BLCP is owned equally by Banpu and Electricity Generating Plc. Located in Map Ta Phut, Rayong, the 1,434 megawatt power plant is fuelled by low-sulphur bituminous - dubbed as a clean coal that promises lower environmental impacts - from Australia and Indonesia. BLCP said on its website that the power plant, designed for bituminous only, cannot be modified for other types of fuel and that its major shareholder, Banpu, was incapable of securing sufficient supplies of such quality coal for the power plant.

According to the Energy Ministry source, Gulf JP, an

IPP bid winner that once succeeded in revising up the power price following its forced relocation from Chachoengsao to Ayutthaya, is now looking to help BLCP. To him, should Gulf JP take equity participation in BLCP, its experience could increase the chance for a power-price increase. In return, Gulf JP - which operates gas-fired power plants - would for the first time build a presence in coal-fired power generating.

Banpu chief executive Chanin Vongkusolkit told the company's shareholders earlier this month that in the supply contract, the coal price was fixed at $50 a tonne compared to the current long-term contract price of $80-$90 and spot prices of $110.

He admitted that demand for coal was projected to rise in the latter half of this year as China has started importing new coal, and this will push up prices. Banpu itself set an average selling price of $100 for 2012.

He admitted that without a coal supply, BLCP would be shut down. That would reduce Banpu's earnings by 10 per cent. Egco Group's earnings would be affected by 14 per cent, a stock analysis showed.

-- The Nation 2012-04-23

[sparebox2]

Coal is a dirty fuel.

Best close it down.

[samran]

silly article as far as i can figure.... every man and his dog have been aware of this issue for years, especially after coal price surge around 2007.

the Rio-BLCP contract is water tight as far as I am aware. If Rio were to cancel it, they'd be looking at some sort of compensation for BLCP - after all, it is a LONG TERM supply contract.

Edited April 23, 2012 by samran

[samran]

Coal is a dirty fuel.

Best close it down.

to be replaced with what exactly?

The coal used is high CV, low sulphur and in terms of emissions, heaps better than most other coal types out there.

[PattayaParent]

Coal is a dirty fuel.

Best close it down.

to be replaced with what exactly?

The coal used is high CV, low sulphur and in terms of emissions, heaps better than most other coal types out there.

And the plant includes a FGD to reduce the emissions further.

I guess now the decision for phase 2 to use gas will be easy for them, unless they go combined cycle.

[sandrabbit]

combined cycle is gas, they just tag boilers on the exhaust of the gas turbines. modern combined cycle plants have a pretty good thermal efficiency and makes sense in Chonburi/Rayong where the gas comes ashore and I know there is one project coming off in Rayong with 2 gas turbines and 12 around Bangkok. the problem with coal is the exhaust and even with flue gas desulpherisation doesn't make them green as energy has to be expended extracting and transporting lime plus depending on the coal can leave you with sulphuric acid to get rid of. a byproduct is gypsum which then can be used to make plasterboard for the building industry.

[monty1412]

silly article as far as i can figure.... every man and his dog have been aware of this issue for years, especially after coal price surge around 2007.

the Rio-BLCP contract is water tight as far as I am aware. If Rio were to cancel it, they'd be looking at some sort of compensation for BLCP - after all, it is a LONG TERM supply contract.

Cmon Samran, RIO certainly arent stupid, there contract would have in it a cancellation clause whereby if they are unable to receive prices on a world parity basis then without penalty they could cancel the contract or reduce the allocation to the plant.

RIo wont pay a cent of compensation here....

The real fool here is the company that won the quote on a lowest price bid without having some sort of clear mechanism to charge extra on the contractual price based on low sulpur coals mean quarterly price movements.

[samran]

silly article as far as i can figure.... every man and his dog have been aware of this issue for years, especially after coal price surge around 2007.

the Rio-BLCP contract is water tight as far as I am aware. If Rio were to cancel it, they'd be looking at some sort of compensation for BLCP - after all, it is a LONG TERM supply contract.

Cmon Samran, RIO certainly arent stupid, there contract would have in it a cancellation clause whereby if they are unable to receive prices on a world parity basis then without penalty they could cancel the contract or reduce the allocation to the plant.

RIo wont pay a cent of compensation here....

The real fool here is the company that won the quote on a lowest price bid without having some sort of clear mechanism to charge extra on the contractual price based on low sulpur coals mean quarterly price movements.

Look, you might be right, and I would have expected the same. However......while I am not privvy to the contract, I have spoken broadly to a couple of people that are, and the knowing smile that comes across their faces when you mention the contract says something about BLCP's position. I knew in 2007 they were getting the coal for $50/t. Seems from the article that price hasn't change.

So you would have thought that that there would have been some sort of adjustment mechanism based on Newcastle FOB adjustment factor, but there doesn't seem to be the case. So strike one against this being a 'normal' contract.

This is an issue that has been going since 2007. It isn't as if BCLP is a small client. I think they have a contract for 2Mtpa of high CV, low S coal (which is in demand all over Asia...and increasingly hard to get). BLCP is also 50% owned by Banpu, hardly an insignificant coal player in Asia, and their council on this is one of the Magic Circle law firms on this matter.

All I know is that BLCP have gotten a very, very, good deal, and that it is hard to change.

Edited April 23, 2012 by samran