Alcantara-owned power unit inks coal supply deal with Sultan Energy

Alcantara-owned Conal Holdings Corp. (CHC) and Sultan Energy Philippines Corp. (SEPC) have inked a 25-year coal supply agreement for the former’s coal-fired power plant in Mindanao. 

With the deal, CHC, a 60-40 joint venture between the Alcantara group’s Alsons Consolidated Corp. and Egco International,  a unit of Thailand’s biggest power producer, secures a stable source of local coal for the fuel requirements of its power plant which will have an initial capacity of 200 megawatts, expandable up to 900 megawatts. 

CHC will be designing the boilers of its power plant specifically to burn the type and quality of coal to be extracted from SEPC’s mine site. 

The agreement will also affirm the viability of the use of local coal as fuel for power plants. There is now an emerging trend wherein smaller power plants and industrial users have shifted their fuel requirements from the more expensive diesel and bunker fuel to local coal. 

SEPC is aggressively undertaking coal reserve definition with four drilling rigs at its Lake Sebu, South Cotabato mine site where it has an existing coal operating contract with the Department of Energy. 

Coal deposits in the Cotabato basin, the newest frontier area in coal, have the potential for coal resources that are as big as or even bigger than Semirara, on the basis of surface indications. 

Sultan Energy, the largest concession holder in the area, has recently resumed drilling and is substantially expanding its exploration activities to determine the full extent of its coal resources. 

Surface indications and initial drilling activities covering just 35 percent of its property has already led to the identification of at least 211 million metric tons of coal resource—indicating that there is more than enough coal for the CHC plant as well as other greenfield plants that may be put up in the next five years. 

CHC will provide P50 million as an advance to SEPC for supplementary funding in case it is needed by SEPC for its exploration and development activities in the coal site. 

CHC will buy the coal extracted from the site by SEPC at the contracted amount of 700,000 metric tons of coal a year for 25 years starting from the commercial operation of its power plant anytime between Nov. 30, 2011 and Dec. 31, 2012.

SEPC will supply coal at a price indexed on international coal and freight prices with the actual price formula to be made part to the definitive coal supply and purchase agreement to be mutually agreed upon by the parties. 

The agreement also provides for the supply of additional coal in the event of higher coal requirements of the CHC power plant once it expands. Projected demand is seen to rise to two million tons a year by 2014 and up to three million tons once capacity reaches 900 mw. 

As part of the agreement, CHC will build and maintain a coal conveyance system from the coal site to the power plant as well as a pier with a port facility which Sultan Energy can use to ship coal to other buyers.