MANILA Philippines — A Filipino-Japanese company is looking to build a coal power plant on Guam to help lower electricity costs for its consumers.

This developed as a Guam lawmaker said he would propose a bill to encourage the Guam Power Authority to choose less expensive power suppliers.

In a presentation before the Mayors Council of Guam and councilors from the Northern Marianas on Feb. 27 at the Heritage Hotel Manila Alto Power Management Corp. a company owned by the influential Alcantara family of Sarangani and Davao provinces in Mindanao; proposed to build a 150-200 megawatt power plant on Guam at no cost to the Guam government.

Joseph C. Nocos vice president for business development for Alto Power; said a coal power plant would also help Guam cope with the anticipated increased demand for electricity when the 8 000 U.S. military troops and their families transfer to Guam from Okinawa. Alto Power is 25% owned by Toyota Tsusho a unit of the automotive-based Toyota Group of Japan.

Nocos said the proposed coal power plant will cost about $350 million and may be funded the way power plants are usually built in the Philippines “via the build-operate-transfer” scheme. The BOT process which the Philippines pioneered in Asia calls for the construction of any big-ticket government project via solicited and unsolicited bids/proposals. The idea is for a private company to underwrite the costs of building the project in exchange for operating it for a period of time about 25 years to enable the proponent to recoup its investments. Thereafter ownership and operation of the project is transferred to the government.

Peter Sgro president and chairman of the International Group Inc.; which is assisting Alto Power’s bid to get the power plant project approved on Guam told the mayors “Alto Power is not looking at government for a penny. Alto will build [the power plant] with their own money … then sell the power to GPA.”

He said in the U.S. 57% of power generation is done by coal power plants.

Nocos said a coal power plant would reduce power costs on Guam by at least 20%. At an average of 17¢ per kilowatt-hour power rates on Guam are higher than most states in the U.S. mainland and higher than Japan which is considered to have the most expensive power rates in the world.

Guam’s power costs are expensive because it is 100% dependent on fuel oil. As crude prices continue to rise so will Guam’s electricity expenses. Nocos said the viable alternative is coal as it costs two-thirds less to build than an oil- or diesel-fueled power plant.

Sgro said the estimated price the coal power plant would be able to sell to GPA is between 10¢ and 11¢ per kwh. “It is important to note that we project fuel cost for power plants to continue to rise over the next 15 to 20 years based on simple supply and demand issues as well as uncertainties within middle eastern governments.” Coal-generated power costs however would remain the same he said.

“In order to keep the Guam coal power plant project fuel cost stable the developer is negotiating the purchase of a coal mine in Indonesia with more than enough reserves to fuel its Mindanao project and a Guam project ” Sgro said. 

Nocos allayed fears that the coal power plant would release toxic pollutants such as sulfur dioxides and nitrous oxides in the air explaining that coal power technology has become so modernized that “we have environmental pollution mitigation measures” to keep the project to a high environmental standard.

According to Sgro if this project proceeds it would be funded by the World Bank which maintains environmental requirements equal to if not more stringent than the U.S. EPA.

He told the Journal the plant will be equipped with a flue gas desulfurizer to ensure that sulfide levels would be kept in check during the plant’s operation. “We intend to adhere to the requirements of the Environmental Protection Agency of both Guam and the U.S. especially of California.” He said California’s EPA requirements are considered some of the strictest among the states.

The quality of the coal Alto Power will use will also determine the cleanliness of the power plant emissions. “We are going to tap coal from Kalimantan Indonesia which is considered ‘enviro-coal’ meaning that it is environmentally safe to use ” Nocos said. Alto Power operates a coal power plant in Indonesia. Although there is coal in Semirara Island in the Visayan province of Antique Philippines “this coal is not transport-grade it has too much water ” he said.

Meanwhile Sen. Rory Respicio told the Journal that the bill he intends to file echoes the Public Utility Regulatory Policies Act of 1978 which is a federal law and intended to encourage more energy-efficient and environmentally friendly commercial energy production. Basically he said PURPA “obligates the government — whenever a power company produces power at a cheaper rate then the government is obligated to buy that.” However PURPA is not recognized on Guam “so coincidentally I told my staff to prepare a bill to do something like that because ultimately it would mean cheaper power for the people of Guam.”

However after Alto Power’s presentation Respicio cautioned the company from approaching the GPA directly because “unsolicited proposals are usually turned away. You would need to get GPA to put out an ad first calling for a ‘solicitation of interest ’ which then could be responded to by companies such as Alto Power.”

Nocos said he would be visiting Guam to call on officials of the GPA and the Guam and U.S. EPA to further determine the power requirements of the island as well as environmental standards imposed by the U.S. and Guam governments for coal power plants. “We would like to meet with GPA to find out how much power they can buy ” he said adding that the military buildup on the island beginning 2009 would definitely push power demand.

Respicio said with Toyota’s interest in Alto Power he foresees a good chance for the company to be tapped by the Japanese government which is partially funding the U.S. troop transfer to Guam. The Japanese government usually requires recipients of its overseas development assistance to use Japanese suppliers and contractors.

Still Nocos said it can build the power plant by issuing convertible notes which upon maturity may be converted to equity into the operator of the power plant; conduct an initial public offering either on Guam or in the Philippines so Guam residents can participate and co-own the plant; as well as other modes of financing available in the market.

Alto Power operates under the aegis of the Alcantara Group of Companies (Alsons) majority-owned by Nicasio I. Alcantara president of the Philippine government’s oil firm Petron Corp. and his brother Tomas I. Alcantara former undersecretary of Trade and Industry and a close economic adviser of President Gloria Macapagal Arroyo. Tomas is the chairman and president of Alto Power.

Aside from the 60-megawatt coal power plant in Pare-Pare in South Sulawesi Indonesia Alto Power also operates Bunker C-fired diesel power stations in Zamboanga City (100 mw) and General Santos City (55 mw) in Mindanao. The 53-year-old Alsons Group has a myriad of interests in logging and the wood industry agriculture and fisheries cement mining and real estate development. It has been in the power generation business since 1992.

Ten years ago it bid on a power plant project in Saipan in the Northern Mariana Islands. While it did not win the bid Nocos said the company is still eyeing to gain a foothold in the territory’s power business. MBJ