ACQUISITION AND REHABILITATION OF THE MASINLOC COAL- FIRED THERMAL POWER PLANT ACQUISITION AND REHABILITATION OF THE MASINLOC COAL- FIRED THERMAL POWER PLANT. The Masinloc power plant is a pulverized coal-fired power plant with a designed net capacity of 600 MW located in the town of Masinloc in Zambales province. It is about 250 kilometers (km) northwest of Metro Manila, 110 km northwest of Subic Bay and 30 km north of the provincial capital, Iba. The plant has two 300 MW generating units, which were constructed in phases by Mitsubishi Corporation of Japan under turnkey engineering, procurement, and construction contracts. Each unit has an identical drum-type force recirculation boiler supplied by Mitsubishi Heavy Industries (MHI). The steam turbine and generator systems were also supplied by MHI and the electrical generators were supplied by Mitsubishi Electric. The plant’s onsite facilities include storage tanks for fuel oil, potable and raw water supply, a water-treatment plant, a coal stockyard, a coal crusher house, ash-handling and storage facilities, and the central control building.

ADB provided a public sector loan to NPC of $197 million approved on 13 October 1990 for the construction of unit 1, and another public sector loan of $162 million and a partial credit guarantee of Y12 billion approved on 2 November 199526 to cover additional costs of unit 1, construction of unit 2, and associated transmission facilities and activities. Unit 1 was completed at a total cost of $520 million and began commercial operations on 18 June 1998. Unit 2 was completed at a total cost of $167 million and began commercial operations on 10 December 1998. The plant has been operated to date by NPC. Power from the plant is transmitted to Metro Manila through the northern Luzon transmission corridor. ADB conducted a project performance audit review in May 200227 and concluded that the construction of the Masinloc plant was highly relevant to help address the country’s severe power shortages. Although implementation was delayed, the plant was seen as providing least-cost generation of electricity and at that time was deemed to be maintained in a satisfactory condition.

More recent data, however, indicate that the operating performance of the plant has declined since 2001 because of inadequate maintenance and insufficient capital investments in anticipation of the planned privatization. During 2001–2006, utilization of the Masinloc plant decreased from 76% to 45%. Almost none of its systems can operate at full capacity because of poor maintenance. A lack of spare parts is a major concern for proper maintenance of the the plant. Unit 1 had a major overhaul in 2005 (the first since commercial operations began in 1998) but there has been no major overhaul of unit 2. The plant’s operations have been characterized by low capacity, poor availability, low reliability, and violations of environmental, health, and safety conditions. The plant’s emissions are unable to meet dust emission limits at any load.

Upon takeover, MPPC plans a 2-year rehabilitation of the plant. The current capacity utilization is only 45%, but MPPC aims to raise the net output to 600 MW after the rehabilitation and to run the plant at 89% capacity utilization in ordinary years and 87% in major maintenance years (every 6 years). MPPC is also confident that the heat rate can be improved. The plant’s useful life is 40 years upon acquisition and rehabilitation by MPPC.

The rehabilitation effort will focus on returning the existing plant systems to the original equipment manufacturer (OEM) specifications, particularly the environment-related components of the plant. The plant was originally properly engineered and constructed to meet technical and environmental performance requirements and there is little technological or environmental performance risk involved in returning the facility to its OEM specifications. Major plant operating repairs will be carried out on the safety devices and systems, the ash collection and transport system, and the boiler feed pumps and forced circulation pump. Major OEMs including MHI have already visited the Masinloc plant since MPPC won the bid.