Friendfeed is becoming a hub of [inter]activity for me online. Join the Asian Energy Sector room or subscribe to its RSS feed (at bottom of its page).
I’m also streaming all the news items (that I bookmark through Google Reader) through the room, along with blog posts from others related to Philippine energy, so it’s a good place to keep up to date on those stories. And, of course, you can add to the stream. Just add a comment or link.
New Rules.
I no longer do $300/hour, 60 minute calls for you to pick my brains on “non-confidential and publicly available information” for your equity and hedge fund clients related to the Philippine power sector.
But if you have that sort of question, put it up in a comment to any blog post here and I will be more than happy to address it – for free – out in the open, where you can get push-back from the crowd and where I can correct the record as necessary.
Or if you wish anonymity – which I fully understand – send it by email. I’ll probably still put it on the blog, with your identity redacted, of course. And if you’re serious about a more substantial engagement, I’m quite happy to keep things completely off the public record.
Reminder to local reporters: I don’t do phone interviews (but you can call to confirm my identity – though it’s a silly rule you have there). However I’m happy to iterate back and forth with email exchanges, if you like, and you can use that for your interview.
I’ve updated my calculation of the Long Range Avoidable Cost (LRAC) for the Visayas that is based on the mechanisms specified in the ERC’s final Decision on Kepco-Salcon contract with CENECO.
The ERC based their permitted pricing to Kepco on a January 2008 Base Date for estimates and permitted certain items to be indexed from that date. The Base Tariff was P4.2511/kWh (based on January 2008).
One of the allowed pass-throughs is the movement in coal prices from that date. Interestingly, coal skyrocked from that date and even more interestingly have settled back to a price (January 2009) that is actually slightly below the January 2008 benchmark. So if the Kepco plant went on-line today, would they be permitted to charge a rate that is approximately P4.2511?
Nope. They would be able to charge a prices that is about 32% higher than that – about P5.61/kWh.
I’ve updated my LRAC model to track prices on a monthly basis, based on actual historical indices, and it can be found (and downloaded) online here.
There are three reasons why the price has gone up over the past 12 months.
#1 – There is an O&M component that is permitted to increase at inflation – a mix of U.S. and Philippine inflation indices.
#2 – Even though coal pricing in January 2008 is about the same as January 2009, there is a currency exchange adjustment permitted and the movement of the Philippine peso vs. the U.S. dollar allowed a 15% increase in both the fuel price and in the capital cost recovery price (that otherwise would be flat except for the currency adjustment).
#3 – Kepco-Salcon can pass on a 12% VAT.
So my model is showing that with all the adjustments, if the Kepco plant went commercial today, the ERC mechanism would permit them to charge a rate that is approximately P5.61/kWh, or about 32% higher than the base price of P4.2511 allowed in the decision.
So when someone tells you the Kepco price is P4.25/kWh, don’t buy it. Or rather, if you can buy power at that price, you better.