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 $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 chair 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.